Climate Change - Elcano Royal Institute empty_context Copyright (c), 2002-2018 Fundación Real Instituto Elcano Lotus Web Content Management <![CDATA[ Policy pathways for Spain’s energy transition ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari63-2019-caldes-escribano-lazaro-lechon-kiefer-delrio-thonig-lilliestam-policy-pathways-for-spains-energy-transition-mustec 2019-06-04T04:24:01Z

It is important to describe current and future Spanish energy policy decisions in order to assess a set of policy pathways for Spain’s energy transition.

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Elcano Royal Institute - MUSTEC Policy Briefs

Theme

It is important to describe current and future Spanish energy policy decisions in order to assess a set of policy pathways for Spain’s energy transition.

Summary

This paper describes and quantifies three different energy policy pathways for Spain’s energy transition: government-centred, represented by the socialist party (Partido Socialista Obrero Español, PSOE); market-centred, represented by the conservative party (Partido Popular, PP); and grassroots, represented by Unidas Podemos.

Analysis

A recent MUSTEC, H2020 report1 describes the Policy pathways for the energy transition in Europe and selected European countries. It analyses current and potential future policy decisions in Germany, France, Spain, Italy, Switzerland and the European Commission, bundling them into sets of policy pathways that describe the energy transition trajectories of countries and the EU as a whole. Each pathway is centred around a certain logic: a worldview, or belief, about the type of policies that are (to its proponents) acceptable and beneficial, leading to a distinct type of electricity (and energy) future.

The paper takes the future as given. Current, past or future policy decisions may or may not be cost-optimal, or even useful, but we assume they are implemented, as the dominant political force in Spain (which, depending on the pathway, is the PSOE, PP or Unidas Podemos, respectively) deems it appropriate at a point in time. These pathways depend both on hard facts and ideological factors which are exogenous to the energy system (eg, fundamental views on market vs state, economic efficiency vs equity, etc). Because there are so many possible decisions, there are theoretically a myriad of decarbonisation pathways that could materialise between today (2019) and 2030, 2040 or 2050. In order to produce a meaningful and manageable analysis, it is key to reduce the number of possible energy-policy pathways.

This paper describes and quantifies three different energy policy pathways for Spain’s energy transition: a government-centred pathway represented by the PSOE, a market-centred pathway represented by the PP and a grassroots pathway represented by Unidas Podemos. There are for sure other political parties in Spain with interesting energy worldviews to analyse, but it could be argued that the selected ones are representative of the energy transition policy space. Additionally, PP, PSOE and Unidas Podemos have prepared law proposals,2 allowing a better specification and quantification of their pathways.

Each of the three decarbonisation pathways (government-centred, market-centred and grassroots) can include elements that would theoretically fall within two other decarbonisation pathways. For instance, the new socialist government’s Climate Change and Energy Transition Law proposal includes bidding and other market mechanisms but, on the whole, it tends to assume energy transition requires tough, mandatory measures such as phase-outs, deadlines, bans and ambitious targets. Similarly, Unidas Podemos sets the most ambitious decarbonisation targets and argues for state (and local) intervention, but its key differentiating factor lies in its grassroots-centred logic, focused on small-scale and local action, seeking decarbonisation through decentralisation of the energy system. Finally, the Popular Party self-stated market-centred logic is based on carbon pricing and letting the market identify the most cost-efficient way to meet energy and climate targets.

Nevertheless, the following pathways represent consistent, clear and the best specified set of alternatives for Spain’s energy transition. Their implicit strategies are presented as ‘narratives’ or ‘scripts’.3 They tell the story from the perspective of 2050, ie, looking back, of how medium and long-term decarbonisation targets were (hypothetically) reached through different means and policy measures, depending on the pathway Spain took (using the past tense, ie, as if they had materialised according to the draft legislative proposals of each of the parties). The three pathways are also presented in a quantitative manner with the support of their respective tables, with the dominant (government-centred) pathway including the key elements of Spain’s draft Integrated National Energy and Climate Plan (INECP) presented to the EC in February 2019.

The State-centred pathway: Partido Socialista Obrero Español(PSOE)

By 2050 Spain had achieved net-zero emissions, both economy-wide and, in particular, in the electricity sector, which was fully renewable. The government’s ‘Target Scenario’ materialised as envisaged in the INECP for 2021-30. The INECP operationalised the long-awaited Climate Change and Energy Transition Law that was finally approved in 2020, along with the development of a Long-Term Strategy and a Just Transition Strategy.

Several international and domestic factors drove Spain’s shift to a lower carbon development model. These included: (1) the entry into force and ambitious implementation of the Paris Agreement; (2) the adoption of increasingly stringent targets for renewables and energy efficiency in the EU; (3) the implementation of the EU’s Long-Term Strategy, that set out to achieve net-zero emissions by 2050; (4) the continued reduction in the cost of renewable energy technologies; (5) the banning (in sales and registration) by 2040 of internal combustion engine (ICE) vehicles in Spain’s main car markets (eg, the UK and France); and (6) an increasing concern for climate-change impacts by Spanish citizens, who ranked climate change as the top foreign-policy priority concern from 2016 onwards.4

A set of laws and policy measures guided the radical decarbonisation of the electricity sector, and of society as a whole, under tight government control. For the power system, this included decisions such as an orderly phase-out of nuclear power between 2025 and 2035, the phase-out of coal by 2030,5 a ban on new fossil fuel subsidies6 from 2020 onwards, the centrally planned phase-out of existing fossil-fuel subsidies, the banning of internal combustion engines in cars, mandatory low-emission zones in municipalities and mandatory renovations and building retrofitting.

By 2030 Spain’s economy had reduced its GHG emissions by 21% compared with 1990 levels. By 2050 Spain’s GHG emissions were 90% lower than 1990 levels, with the remaining 10% being offset by Spain’s carbon sinks, making the Spanish economy carbon neutral by mid-century, in alignment with the INECP and with the Spanish Climate Change and Energy Transition Law.

Overall, Spain’s INECP was initially considered very ambitious, even too ambitious for some energy and emission intensive sectors, as the implementation of Spain’s INECP meant a reduction of over a third of Spain’s 2017 emissions in little over a decade, an unprecedented decarbonisation effort for Spain. The INECP was, however, criticised by other sectors (mainly Civil Society Organisations, CSOs)7 as showing limited ambition compared to other EU countries that adopted more stringent emission reduction targets.8 Although the government initially set out to reduce its GHG emissions by 40% compared with 1990 levels by 2030, which would have aligned its ambition with most EU countries, it scaled down its ambition and settled for a 21% goal in its INECP, arguing it was a fair, achievable and balanced goal.

By 2030, the INECP’s 42% renewable energy target was achieved in Spain’s final energy consumption, supported by an electricity system that was largely renewable (74% of the electricity consumed in Spain). Among other measures, the objective was met through a steady stream of auctions that added at least 3,000 MW of new renewable capacity annually between 2019 and 2030. Throughout the 2021-30 period, 57,000 MW of new renewable capacity was added to the system, supported by auctions. Solar and wind were the bulk of the auctioned power between 2019 and 2030. During this decade, 5 GW of concentrated solar power (CSP) were auctioned and constructed, restarting the expansion of this technology in Europe.

The overall target for renewable capacity installed in Spain was determined by the INECP. The government took a technology-neutral approach to decarbonisation but the ‘Target Scenario’ materialised by 2030. That scenario considered the expected evolution in technologies and costs and strived for a cost-efficient realisation of the decarbonisation pathways. In the ‘Target Scenario’ Spain’s 157 GW of installed power capacity included, among other issues, 50 GW of wind, 44 GW of solar (37 GW of solar PV and 7 GW were CSP),9 27 GW were combined gas cycles, 16 GW were hydro, just under 7 GW of pumped hydro, 2 GW of oil and 3 GW were nuclear.10 The INECP envisaged a very significant uptake of renewables so integrating them into the system was key. In order to achieve integration, demand-side management measures were fostered to change consumption patterns. Additionally, storage capacity was increased, adding 3.5 GW of pumped storage and 2.5 GW of storage capacity in batteries.11

By 2050 Spain’s power sector was fully (100%) renewable. After the Climate Change and Energy Transition Law was approved in 2020, the integration of renewables in the power system continued to be supported by the Spanish government through priority dispatch, subject to the requirements and limitations enshrined in the Energy Union regulations.

Most new fossil fuel subsidies12 were banned by the Spanish government as of 2020. Given, amongst others, energy poverty problems, the government introduced Article 9 in the Climate Change and Energy Transition Law, allowing new fossil subsidies if justified on social grounds, to protect Spain’s economic interests or due to the lack of adequate technological alternatives.13 Initial concerns regarding these exemptions to new fossil fuels were assuaged as a robust control mechanism was put in place by the Spanish government to prevent loopholes through which undue subsidies could have been granted. Existing subsidies (consisting of tax exemptions and deductions) in 2017 (amounting to €2.3 billion for oil, €756 million for gas and €2.9 million for coal)14 were progressively phased out following the government’s calendar to do so. New exploration and extraction of hydrocarbons by conventional and new techniques such as hydraulic fracturing were also banned in Spain as of 2020. Existing permits for exploration and extraction of hydrocarbons were not extended.

Half of Spain’s coal power15 was phased out by 2020, with the rest having been phased out completely by 2030. Nine out of the 15 coal power plants in Spain were already closed in 2021 as the necessary adaptions to limit atmospheric emissions to comply with the Industrial Emissions Directive were not carried out. As regards the remaining coal phase-out, the government took a market-based approach, allowing power plants to burn coal until the drop in the cost of renewables and the price of a tonne of CO2 in the EU-ETS (€35 in 2030) pushed coal power out of Spain’s electricity mix.

The Spanish government furthermore divested (sold its shares and other financial instruments) from companies that extracted, refined or processed fossil fuels, following a divestment plan that was drafted by 2021, in accordance with the Climate Change and Energy Transition Law.16 Government divestment provided incentives for other social agents to follow suit.

The government reached an agreement with utilities so that nuclear phase-out became a reality in Spain by 2035, with nuclear power being phased out when nuclear power plants reached a maximum of 46 years in operation. The government’s initial plans of not extending nuclear power plants’ useful life beyond 40 years were adapted after negotiating with utilities. CSO’s that had historically advocated early closures (calling for nuclear power plants to be decommissioned after 40 years in operation, at most) implicitly accepted the phase-out agreement.

Overall investment needs for the implementation of the INECP in Spain for 2021-30 amounted to €236.12 billion, most of which were disbursed by the private sector. There were initial concerns about whether the private sector would indeed be able and willing to invest 80% of the needs for the INECP, but the private sector recognised the economic opportunity of the low-carbon transition and invested accordingly, meeting the government private-sector investment figures in 2021-30. Investments in energy efficiency amounted to €86.48 billion. Estimated investment in updating power networks and electrification to meet the 2030 decarbonisation goals amounted to €41.84 billion, with an overall investment in renewables of €101.63 billion. Concerns about a potential crowding-out effect were dispelled as empirical data showed large investments in low-carbon transition need not automatically lead to investment reductions in other economic sectors.17

Spain’s interconnections with France, Morocco and Portugal remained very limited until 2020, amounting to <5% of Spain’s generation capacity in 2019, half of which were interconnections to France. This made Spain the only European country that failed the EU target of 10% interconnection capacity in 2020. Hence, Spain developed new interconnections with Portugal (reaching 3,000 MW in 2030) and France (reaching 8,000 MW in 2030, up from 2,800 MW in 2019). A ratchet-up mechanism for interconnections, renewables and energy efficiency goals was included in the INECP for 2023, coinciding with the Global Stocktake enshrined in the Paris Agreement. Spain’s INECP’s target of reaching 15% interconnection of installed capacity in 2030, in alignment with the EU’s interconnection goal, was met. From 2019 Morocco was a net electricity exporter to Spain, but new rules were introduced to prevent coal and gas-generated electricity being exported to the EU. Meanwhile, increasing domestic demand in southern Mediterranean partners continued to put pressure on local installed capacity, including the deployment of renewables.

As for the transport sector and electric mobility,18 Spain banned the registration and sale of internal combustion engine (ICE) vehicles in 2040 as stated in the Climate and Energy Transition Law, despite initial resistance from the car manufacturers’ association. By 2050 only zero-emission privately-owned vehicles were allowed to circulate. By 2030, 5 million Electric Vehicles (EVs) were in use in Spain, with a significant impact on electricity demand. Charging infrastructure for EVs in Spain was small in 2018, but from 2020 onwards the Spanish Climate Change and Energy Transition Law required petrol stations across the country selling more than 5 million litres of fuel annually to present a project to install charging stations of ≥22 kW, reaching 9% of petrol stations across Spain. The Ministry for Ecological Transition regulated which petrol stations had to have charging points and when they had to be operational. For smaller petrol stations the deadlines for projects and operation of charging points was more flexible. Additionally, municipalities of ≥50,000 inhabitants established by law low-emission zones by 2023 (at the latest) and fostered the deployment of public and private EV charging points.

Spain’s INECP included a 32.5% energy efficiency goal vs. a trend scenario, in alignment with the EU goal for 2030. However, Spain achieved its ‘Target Scenario’ energy efficiency goal of 39.6% primary-energy intensity improvement in 2030 (3.6% primary-energy efficiency gains per annum from 2021 to 2030). Energy efficiency goals were achieved through reductions in both primary and final energy consumption (-16.16% and -6.22%, respectively) in 2030 compared with 2015 levels. Electricity consumption in final energy consumption increased 8,16% from 2015 to 2030 (from 19.951 ktoe to 21,579 ktoe), but electricity consumption in final energy consumption was reduced in the residential sector by 12% (from 6,025 ktoe in 2015 to 5,301 ktoe in 2030), essentially through improvements in the thermal envelope of buildings and improvements in district heating and domestic hot water (DHW). Energy efficiency goals achieved, in line with the government’s ‘Target Scenario’, were highly ambitious, as Spain’s energy efficiency improvements in 2000-16 period showed (see Figure 1 below).

Figure 1. Evolution of primary and final energy intensity, 2000-16
Figure 1. Evolution of primary and final energy intensity, 2000-16

In accordance with the updated Energy Efficiency Directive of 2018 the Spanish government increased energy efficiency in buildings by improving the thermal envelope of 1.2 million homes from 2021 to 2030, renovated heating, water heating and air conditioning in 300,000 buildings per year and renovated 3% of publicly-owned buildings. The government also promoted an increase in the use of renewable electricity sources in retrofitted buildings and new buildings. Demand-side response policies were actively developed by the government to nudge consumers into lower carbon consumption patterns that would allow a greater penetration of renewables and greater stability in the power system. Smart metering allowed raising awareness of energy consumption, helping consumers shift energy use in heating, cooling and domestic hot water. Financing mechanisms were fostered by the government to ensure retrofitting of the existing building stock and the construction of near-zero energy buildings. Subsidies were also given to low-income families to allow for retrofitting investments, based on energy savings audits and performance. Public-private partnerships were established to reach retrofitting goals.

Figure 2. Spanish State-centred dominant policy pathway according to Spain’s INECP ‘Target Scenario’ according to the PSOE government, 2016-50
ES: Dominant 2016 2020 2030 2040 2050
GHG reduction targets. Economy-wide (baseline year) 283 Mt CO2eq 327 Mt CO2eq -21% (1990)   -90% (1990)
ETS sector reduction targets 229 Mt CO2eq (European annual emission allocation)

219 Mt CO2eq (European annual emission allocation)

-21%
-60%    
Non-ETS sectors emission reduction targets (baseline year)   -10% (2005) -38% (2005)    
GHG reduction targets (electricity sector)          
Renewables targets (energy; % of final energy consumption)   20% 42%    
Renewables targets (electricity; % of final energy consumption) 39%; 108 TWh; 49 GW   74%   100%
Intermittent renewables 57 TWh; 28 GW 36.3 GW 87.3 GW ≥ 2030 ≥ 2040
Wind onshore 49 TWh; 23 GW 27.9 GW 50.3 GW    
Wind offshore Included above Included above Included above    
Solar PV 8 TWh; 5 GW 8.4 GW 37 GW > 2030 > 2040
Dispatchable renewables 51 TWh; 21 GW     ≥ 2030 ≥ 2040
Biomass 5 TWh; 1 GW 1.6 GW 2.4 GW    
Hydro 40 TWh; 14 GW 15.8 GW 16.3 GW    
CSP 6 TWh; 2 GW 2.3 GW 7.3 GW 2030 2040
Other renewables (year of data when different to column heading) 1 TWh; 0.2 GW (2015 0.2 GW 0.3 GW    
Net traded renewables (year of data when different to column heading) -3 TWh (2015) 11 TWh 6.7 TWh    
Nuclear 59 TWh; 7.4 GW 7.4 GW 3.2 GW 0 0
Fossil fuels 108 TWh; 48GW 45.1 GW 32.5 GW    
CCS 0 0 0 0 0
Lignite 0 TWh 0 0 0 0
Hard coal 36 TWh 10.6 GW 0 0 0
Gas 54 TWh 31.2 GW 30.2 GW    
Petroleum 16 TWh 3.4 GW 2.3 GW    
Other non-renewables 1 TWh 0 0    
Storage          
Battery     2.5 GW    
Pumped Hydropower 3.3 GW 4.4 GW 7.9 GW    
Other storage          
Cross-border interconnection NTC < 5% of installed capacity 10% of installed capacity 15% of installed capacity    
Electrification of additional sectors          
Total heating demand incl. non-electric heating          
Heating with electricity (energy supplied by heat pumps)

4.1 TWh
353 ktoe

7.6 TWh
651 ktoe

47 TWh
4,076ktoe

   
Total cooling demand incl. non-electric cooling          
Cooling with electricity          
Electric mobility    

22% RES (electrification & biofuels)
5 million EV

>> 2030 Ban on ICE sales & registrations >> Ban on ICE circulation
EV chargers (year of data when different to column heading) 4,974 (2017) > 2017 >> 2020 >> 2030 >> 2040
Gross electricity consumption (year of data when different to column heading) 232 TWh (2015) 234 TWh 251 TWh    
Final energy consumption (year of data when different to column heading) 84,542 ktoe (2015) 88,994 ktoe 79,279 ktoe    
Source: the authors

Market-centred pathway: Partido Popular19

By 2050 Spain had achieved an 80% decarbonisation of its economy in a manner that was economically efficient, hence not only meeting international commitments but also in a way that was ‘beneficial to our families and companies’. To achieve this, the government, to the extent possible, avoided interfering with market rules except where necessary to correct market failures associated with environmental externalities and where international climate commitments were at stake. Hence, the few measures taken were market-based, such as a carbon tax (for the non-trading sector), the EU emission trading scheme and auctions for renewable power, leading to efficient levels of decarbonisation.

While all types of actors were enabled to carry out the transition, the private sector and particularly large corporations remained important players over the entire period given their ability to engage in large and cost-efficient investments. Besides renewable generators (especially utility-scale plants with lower specific generation costs), nuclear and fossil fuels with CCS played an important role in the energy transition towards a decarbonised economy. Increasing the interconnection capacity always ranked high in the agenda as a pre-requisite for a cost-optimal exchange of electricity and balancing in the internal European electricity market.

Spain has always followed the trajectory prescribed by the EU, neither lagging behind nor rushing ahead, in order to achieve a coordinated, cost-efficient decarbonisation of Europe together with the other EU Member States. Hence, the Spanish economy is expected to be 80% decarbonised by 2050 (compared with 1990), following the accomplishment of a 26% reduction of emissions in the non-trading sector by 2030. The key enabler to this was the implementation of the National Strategy for a Low-Emission Economy by 2050, which guided the transition to a low-carbon economy. Among other measures, this strategy was based on cost-efficient measures to increase energy efficiency and deploy a mix of low-carbon technologies leading to a cost-optimal mix of renewables, nuclear power and fossil fuels with CCS.

In order to make use of the most cost-efficient decarbonisation measures, the Spanish government did not define specific renewable energy or electricity targets beyond the 2030 renewable energy target (32% renewable energy); in the electricity sector, this led to the deployment of the renewables with the lowest system cost both in Spain and abroad (to the extent allowed by the interconnectors). Already in the period before 2018, renewable electricity deployment was promoted through technology-neutral auctions and the relative increase in competitiveness through carbon price measures.

While there was no specific target for intermittent renewables, PV and onshore wind power became the main pillars of the Spanish system given the lower cost compared to other renewables and the technology-neutral design element of the renewable auctions. Similarly, dispatchable renewables-biomass (with and without CCS) hydropower and CSP never had explicit targets and their expansion occurred at the time and location where they proved cost-efficient from a system perspective as a way to balance PV and wind power.

Similarly, both physical imports or statistical transfers of renewables (through cooperation) were important measures both for balancing the Spanish power system and to meet the EU-mandated renewables targets in a cost-optimal manner. This was further supported by the expansion of new interconnectors. The latter was one of the key Spanish priorities, both to facilitate the completion of the internal electricity market and to allow increased electricity trade, including cross-border renewables trade under the cooperation mechanism. To this end, the government both met and exceeded the EU-mandated interconnector targets.

Nuclear power continued to play a non-trivial role in the Spanish power system, as the old reactors extended their economic lifetime provided their technical characteristics allowed operation in safety conditions. Yet fossil-fuelled CCS and renewables were expanded to become the main pillars of decarbonising the Spanish power system . Consistent with the focus on cost-efficiency, there was no mandated closure of any power station, including coal power; however, the increasing carbon price (within the EU ETS) gradually forced older coal/lignite power stations off the market from the 2020s onwards. The government also promoted gas interconnections in order to strengthen the European internal gas market through access to the gas pipelines from North Africa and LNG.

Several measures were aimed at promoting the deployment of distributed generation and electric self-consumption. As a result, an increased use of decentralised batteries followed. The increased penetration of renewable energies required an increase in the use of electricity storage technologies in the form of grid-scale batteries and pumped hydropower installations.

In the residential, institutional and commercial sectors, various measures were put in place to improve and promote energy efficiency, zero emission buildings, distributed generation, electricity self-consumption, low emission heating and cooling systems, and smart metering. A sustainable transport sector was promoted with a special boost to rail transport. The promotion of the use of electric vehicles was limited by the expansion of a network of charging points, enabling but not directly supporting an expansion of the EV fleet. When it comes to public procurement, public tenders for new vehicles only allowed for alternative-fuel vehicles, except for those vehicles that could not perform public duties or for unjustified economic costs. Electrification of other sectors was pursued to the extent that it supported a cost-optimal decarbonisation of society as a whole, but no specific targets or support measures for heating were introduced.

Figure 3. Quantification of the Spanish market-centred minority policy pathway as described by the Partido Popular, 2016-50
ES: Market 2016 2020 2030 2040 2050
GHG reduction targets (economy-wide) 283 Mt CO2eq 10% (GHG-2005) Non-ETS 26% (GHG-2005) > 2030 80% (GHG-1990)
ETS sector reduction targets 229 Mt CO2eq (European annual emission allocation) 219 Mt CO2eq (European annual emission allocation)      
Non-ETS sectors emission reduction targets   10% (GHG-2005) 26% (GHG-2005)    
GHG reduction targets (electricity sector)          
Renewables targets (energy; % of final energy consumption)   20% 32%    
Renewables targets (electricity; % of final energy consumption) 39%; 108 TWh; 49 GW > 2016 > 2020 > 2030 > 2040
Intermittent renewables 57 TWh; 28 GW        
Wind onshore 49 TWh; 23 GW > 2016 > 2 020 > 2030 > 2040
Wind offshore Included above > 2016 > 2020 > 2030 > 2 040
Solar PV 8 TWh; 5 GW > 2016 (mainly centralised) > 2020 (mainly centralised) > 2030 (mainly centralised) > 2040 (mainly centralised)
Dispatchable renewables 51 TWh; 21 GW > 2016 > 2020 > 2030 > 2040
Biomass 5 TWh; 1 GW        
Hydro 40 TWh; 14 GW        
CSP 6 TWh; 2 GW        
Other renewables 1 TWh        
Traded renewables          
Physical import of renewables (cooperation)   > 2016 > 2020 > 2030 > 2040
Statistical transfer of renewables (cooperation)   = 2016 2016 2016 2016
Explicit trade of CSP or hydropower          
Nuclear 59 TWh 7 GW = 2016 = 2016 = 2016 = 2016
Fossil fuels 108 TWh; 48 GW        
CCS 0 > 2016   > 2030 > 2040
Lignite 0 TWh ≤ 2016 ≤ 2016    
Hard coal 36 TWh ≤ 2016 ≤ 2016    
Gas 54 TWh ≥ 2016 ≥ 2016 ≥ 2016 ≥ 2016
Petroleum 16 TWh        
Other non-renewables 1 TWh        
Storage          
Battery   > 2016 > 2020 ≥ 2030 ≥ 2040
Pumped Hydropower   > 2016 > 2020 ≥ 2030 ≥ 2040
Other storage          
Cross-border interconnection NTC   ≥ 10% of yearly power production ≥ 15% of yearly power production ≥ 2030 2030
Electrification of additional sectors          
Total heating demand incl. non-electric heating          
Heating with electricity          
Total cooling demand incl. non-electric cooling          
Cooling with electricity          
Electric mobility          
EV chargers   > 2016 > 2020 > 2030 > 2040
Gross electricity consumption 275 TWh        
Final energy consumption          
Source: the authors.

Grass-roots-centred pathway: Unidas Podemos 20

Spain almost achieved a full decarbonisation of the entire economy by 2050. In the electricity sector, this was achieved through strict phase-out policies for fossil-fuel power and emphasising the role of citizens and communities in building up a new and renewable power system. The needs of the citizens were at the core of all climate and energy policies, supported by institutions such as the State Climate Change Agency and the Citizen Climate Change Commission. Through active policy, citizens were empowered to have a more pro-active role by supporting the decentralisation of the energy system and encouraged to become prosumers. The re-communalisation of electricity provision was approved in subsequent local referendums following the example of Barcelona Energy in 2018, when a public metropolitan electricity operator started supplying renewable electricity to the city so that, over time, control over the entire system became communal.

Regarding interconnections and EU cooperation mechanisms, the emphasis is on decentralisation and re-communalisation instead of cross-border mega-projects and further market integration. As a consequence, by 2050 interconnections remain at the 2030 15% goal or slightly higher while virtual and physical cooperation mechanisms remain marginal: the maxim was and remains ‘Spanish renewables for and by Spanish citizens’. Another key aspect of the Unidas Podemos strategy was an emphasis on energy efficiency: the targets of 40% less primary energy demand by 2030 and 50% less by 2050 (compared to 1990) were achieved in part with efficiency measures and in part through electrification of additional sectors, primarily transport.

When it comes to greenhouse emissions, compared with 1990 levels, in 2030 emissions had fallen by 35%, by 70% in 2040 and by 95% in 2050. This was accomplished through the combination of reducing primary energy consumption (40% less energy consumed by 2030 and a 45% reduction of energy consumption by 2040 compared with 1990 levels) as well as the strong deployment of renewables to fill the gap of the phased-out fossil and nuclear generators. The transition was facilitated by two broad energy programmes: (a) the Energy Efficiency National Plan that targeted the housing, transport and industrial sectors; and (b) the Renewable Energies National plan that focused on deployment of renewable power generation (solar, wind, geothermal, small hydropower and low-emitting biomass).

To implement these plans, 1.5% of GDP was mobilised annually over 20 years, comprising both public and private resources, to drive the necessary investments in generation and infrastructure. For example, a Green Finance Fund for mitigation and adaptation was created and the Law for Energy Transition also provided funds for a fair transition in part raised through new environmental taxes and the abolishment of subsidies and tax exemptions for the fossil-fuel industry and for consumption. New measures to prevent oligopolistic practices (including vertical integration) in the electricity market were implemented to prevent large energy corporations concentrating too much power and to support the small-scale actors entering the system. Finally, measures were put in place to decouple the ownership and management of the distribution system. Aligned with a grassroots political party ideal, both plans were implemented in a way that ensured most electricity generation and distribution phases remained in the hands of public entities (especially municipalities), consumers or small enterprises and not large corporations.

With respect to renewable power, the power system has been 100% renewable since 2045, following the achievement of the interim renewable power target of 80% in 2030. Besides targeted support measures for small renewable power plants, the municipalities granted soft loans through the Green Finance Fund (Fondo de Financiación Verde). Furthermore, there was a green procurement strategy by which all public administrations were obliged to consume 100% renewables on their premises so as to reduce the life-cycle environmental impacts of energy use. Finally, the government divested funds from fossil-fuel related companies to incentivise private consumers to invest in renewable energy through subsidies.

Intermittent renewables, especially PV, experienced a great expansion as a result of the support measures included in the Renewable National Plan, including dedicated support for onshore wind power (> 6 MW). A special emphasis was put on special support mechanisms for investments in renewable generators smaller than 1 MW. Furthermore, a new regulatory framework was implemented already in 2018 and maintained since, to support self-consumption, which included the following features: (a) self-consumption was not taxed; (b) electricity fed into the electricity system was remunerated in a fair manner by the distributor company; and (c) quick and simple administrative procedures were established. Consequentially, all renewables grew continuously from 2018 onwards, but decentralised PV grew particularly fast.

As for dispatchable renewables, research, development and innovation plans were specifically designed for the development of new dispatchable technologies, including measures to improve the flexibility of renewables. As the performance of these technologies improved, their deployment grew from 2020 on. As a result, a diverse fleet of dispatchable renewables was deployed over time, including both CSP, hydropower and biomass. When large hydropower plants private ownership came to an end, they became state-owned. As a result, the role of large hydropower plants changed from providing bulk power to being providers of back-up capacity to complement variable solar PV and wind-power generation. Similarly, the growing biomass power fleet was used mainly to balance the system, and not merely to generate bulk energy.

Accompanying the rise of renewables was the decline of nuclear and fossil power. Following the phase-out decisions in 2019, all nuclear and coal power plants were shut down progressively until the last power plants were closed in 2025. The existing gas power stations were allowed to continue operating beyond 2025 insofar as they provided back-up capacity to the system and contributed to guarantee supply. Throughout the whole period, fracking was forbidden and  natural gas production in Spain was practically banned; further, as CCS was not supported, there was no expansion of CCS stations at any time. In all these phase-out cases (especially nuclear and coal plants), the abandonment of the plants followed a fair transition approach for workers so that they have found new employment opportunities.

Given its focus on small-scale, local and distributed electricity, Unidas Podemos limited the development of new interconnection capacity to the minimum necessary to support the further deployment of renewables in Spain (in accordance with EU targets). Instead of developing new transmission infrastructures, Unidas Podemos supported the development of micro- and other local networks, minimising the need for transmission. Consequently, there was no explicit trade with renewables, dispatchable or fluctuating, and Spain has not made use of cooperation mechanisms.

In order to support the balancing of fluctuating renewables, and to minimise the need for further electricity grids, the government supported early on the development and deployment of new storage technologies. This included both batteries and hydrogen, initially through R&D support and later on through deployment support, so as to keep the power system stable and minimise the need for new national and cross-border grid infrastructure. Through various support measures (such as the provision of special tariffs), the law for the energy transition and climate change supported the electrification of certain consumptions such as industrial, heating and transport.

As to the decarbonisation of the transport sector, Unidas Podemos: (a) promoted the use of bicycles in many ways (for example, by facilitating bicycle access to other public transport modes); (b) revised public transport services provision contracts; and (c) promoted electric vehicles. Thanks to the various support measures in place, Spain achieved a 25% share of EV in sales of new cars by 2025, 70% of new cars were EV by 2030 and all new vehicles were EVs by 2040. Furthermore, a programme was developed to promote the use of electric vehicle chargers.

Figure 4. Quantification of the Spanish grassroots-centred minority policy pathway as described by Unidas Podemos, 2016-50
ES: Grassroots 2016 2020 2030 2040 2050
GHG reduction targets (economy-wide) 283 Mt CO2eq   35% (1990) 70% (1990) 95% (1990)
ETS sector reduction targets 229 Mt CO2eq (European annual emission allocation) 219 Mt CO2eq (European annual emission allocation)      
Non-ETS sectors emission reduction targets   10% (GHG-2005) 26% (GHG-2005)    
GHG reduction targets (electricity sector)   > 2016 45% 60% 100%
Renewables targets (energy; % of final energy consumption)   > 2016      
Renewables targets (electricity; % of final energy consumption) 39%; 108 TWh; 49 GW > 2016 80%   100% (by 2045)
Intermittent renewables 57 TWh; 28 GW > 2016 > 2020 > 2030 > 2040
Wind onshore 49 TWh; 23 GW > 2016 > 2020 > 2030 > 2040
Wind offshore Included above = 2016 = 2016 = 2016 = 2016
Solar PV 8 TWh; 5 GW >> 2016 (mainly decentralised) >> 2020 (mainly decentralised) >> 2030 (mainly decentralised) >> 2040 (mainly decentralised)
Dispatchable renewables 51 TWh; 21 GW > 2016 > 2020 > 2030 > 2040
Biomass 5 TWh; 1 GW > 2016 > 2020 > 2030 > 2040
Hydro 40 TWh; 14 GW > 2016 > 2020 > 2030 > 2040
CSP 6 TWh; 2 GW > 2016 > 2020 > 2030 > 2040
Other renewables 1 TWh        
Traded renewables          
Physical import of renewables (cooperation)          
Statistical transfer of renewables (cooperation)          
Explicit trade of CSP or hydropower          
Nuclear 59 TWh 7 GW   0 (by 2025) 0 0
Fossil fuels 108 TWh; 48 GW        
CCS 0        
Lignite 0 TWh << 2016 0 (by 2025 0 0
Hard coal 36 TWh << 2016 0 (by 2025 0 0
Gas 54 TWh < 2016 < 2020 < 2030 < 2040
Petroleum 16 TWh < 2016 < 2020 < 2030 0
Other non-renewables 1 TWh ≥ 2016 (Waste) ≥ 2016 (Waste)    
Storage          
Battery   > 2016 > 2020 > 2030 > 2040
Pumped Hydropower          
Other storage   > 2016 > 2020 > 2030 > 2040
Cross-border interconnection NTC   ≥ 10% of yearly power production ≥ 15% of yearly power production = 2030 = 2040
Electrification of additional sectors          
Total heating demand incl. non-electric heating          
Heating with electricity          
Total cooling demand incl. non-electric cooling   > 2016 > 2020 > 2030 > 2040
Cooling with electricity   > 2016 > 2020 > 2030 > 2040
Electric mobility   3% EV (by 2020), 25% EV (by 2025) 70% (EV) 100% (EV)  
EV chargers   >> 2016 > 2020 > 2030 > 2040
Gross electricity consumption 275 TWh        
Final energy consumption          
Source: the authors.

Conclusions

The pathways described, depicted in this paper as if they had materialised, are not the only ones proposed by political parties for Spain’s energy transition. However, they illustrate the continuum of options in the energy transition policy space and constitute the best-specified set of energy transition alternatives for Spain. As expected, they do not represent ‘pure’ State, market or grassroots-centred closed models, but rather ‘scripts’ for energy transition with different combinations of elements present in other logics. For instance, the socialists’ State-centred logic includes auctions, the Popular Party’s market approach includes some command and control measures, and the Unidas Podemos’ grass-roots approach comes with significant State intervention. Nevertheless, they constitute coherent, all-encompassing alternative stories on how to achieve the energy transition in three different ways, following three distinct decarbonisation logics and leading to three very different (more or less) climate-friendly energy futures.

For the Socialist Party, the decarbonisation of the Spanish power system is driven by targeted measures enacted by the government, in addition to having economy-wide decarbonisation targets for 2030 and 2050. Some of the key measures included a mandatory and gradual nuclear phase-out between 2025 and 2035, a largely market-driven coal phase-out ahead of 2030 (fostered by EU regulation), banning internal combustion engines and (most) new fossil fuel subsidies, a gradual phase out of existing fossil-fuel subsidies, mandatory deployment of recharging infrastructure for EVs and mandatory retrofitting of buildings, among others. Interconnections were promoted by the government in this pathway, in line with EU requirements, to prevent blackouts during dry years and to support the expansion of renewables.

Under the Popular Party’s market-centred logic, the Spanish energy transition is mostly driven by private actors under an economy-wide decarbonisation target. The government took a few high-level, strategic decisions to ensure the alignment with EU energy and climate objectives and ambition and, whenever needed, the government used market-based instruments (carbon tax, technology neutral auctions for renewables, etc) to correct market failures and get the transition going. The government also put a special emphasis on increasing interconnections as a way to transition to an integrated and cost-efficient EU electricity market.

Unidas Podemos is aligned with the grassroots logics. The key for enabling the Spanish energy transition is empowering citizens and local communities as the main actors of the transition strategy, while progressively abandoning fossil and nuclear technologies. As a result, a highly decentralised small-scale and smart local community-owned power system was achieved. New technologies were developed as a result of R&D programmes (technology push) as well as market pull policies (support policies in the form of subsidies and other incentives). Regarding interconnections and cooperation mechanisms, the local and community logic has limit interconnections to compulsory EU targets and intra-EU renewable exchange remains small.

Despite the differences across energy transition pathways Spain embraced a low(er) carbon development model from 2020 to 2050. The acrimonious political debate that had stalled the drafting and passing of the Climate Change and Energy Transition Law between 2011 and 2019 was finally resolved in 2020. The response from the EC, and from civil society, to Spain’s draft INECP made its content the benchmark across political parties that avoided defaulting on Spain’s energy and climate commitments, albeit relying on different policy instruments to ensure targets were met. This meant a more command-and-control (CAC) based approach from socialist governments, more use of market-based instruments (MBIs) by conservative governments and greater emphasis on both CAC and moral suasion, coupled with bottom-up initiatives, from left-wing governments.

However, the INECP had to be strengthened over time to align Spain’s targets to the goals of the Paris Agreement. Key elements in robust climate laws were gradually included in Spain’s climate actions by governments from across the political spectrum. Among these elements were an independent committee on climate change à la UK, national and sectoral carbon budgets, parliamentary oversight of climate and energy goals, transparent and regular stakeholder engagement, and the requirement to disclose exposure to climate risks by investors and asset managers, following France’s lead.

Natalia Caldés
CIEMAT

Gonzalo Escribano
Elcano Royal Institute | @g_escribano

Lara Lázaro
Elcano Royal Institute | @lazarotouza

Yolanda Lechón
CIEMAT | @YLechon

Christoph Kiefer
CSIC

Pablo del Río
CSIC

Richard Thonig
Institute for Advanced Sustainability Studies | @RThonig

Johan Lilliestam
Institute for Advanced Sustainability Studies | @JLilliestam


European Commission. H2020 The MUSTEC project has received funding from the European Union’s Horizon 2020 research and innovation program under grant agreement No 764626.

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1 Lilliestam, J., R. Thonig, L. Späth, N. Caldés, Y. Lechón, P. del Río, C. Kiefer, G. Escribano & L. Lázaro Touza (2019), Policy pathways for the energy transition in Europe and selected European countries, Deliverable 7.2 MUSTEC project, Deliverable 1 SCCER JA IDEA, ETH Zürich, Zürich.

2 Grupo Parlamentario Popular en el Congreso (2019), “Proposición de Ley de Cambio Climático y Transición Energética”; Ministerio para la Transición Ecológica (2019), “Anteproyecto de Ley de Cambio Climático y Transición Energética”; Grupo Parlamentario Confederal de Unidos Podemos-En Comú Podem-En Marea (2018), “Proposición de Ley sobre Cambio Climático y Transición Energética”.

3 Lawrence Freedman (2013), Strategy: a History, Oxford University Press, chapter 38.

4 It should be noted that increasing concern about climate change affected policies and implementation across the three decarbonisation pathways (State-centred, market-centred and grassroots).

5 It should be noted, however, that the socialist government did not mandate a coal phase-out by 2030 but rather relied on EU legislation and on market factors (continued cost reductions in renewables, price of the tonne of CO2 of €35 in 2030) that forced coal out of the Spanish electricity mix. The INECP, however, stated that phasing out coal was key to achieve the decarbonisation goals. Hence the Spanish government reserved the right to undertake ‘any appropriate measures deemed necessary’ to meet the RES electricity target (74% by 2030).

6 Article 9 of the current draft proposal for the Climate Change and Energy Transition Law presented by the socialist government states that new fiscal benefits for fossil fuel products will only be allowed under special circumstances detailed below.

7 ‘[CSOs] can be defined to include all non-market and nonstate organizations outside of the family in which people organise themselves to pursue shared interests in the public domain. Examples include community-based organisations and village associations, environmental groups, women’s rights groups, farmers’ associations, faith-based organisations, labour unions, co-operatives, professional associations, chambers of commerce, independent research institutes and the not-for-profit media’ (UNDP, undated).

8 Czech Republic (-30%), Germany (-55%), Ireland (-40%), France (-40%), Latvia (-40%), Lithuania (-40%), Hungary (-40%), the Netherlands (-49%), Portugal (-45%), Romania (-50%) and Sweden (-63%).

9 Most of the new CSP capacity (5 GW) had nine hours of storage capacity as modelled in Spain’s PNIEC.

10 Note that nuclear phaseout took place in 2025-35, which explains the 3GW of nuclear in 2030.

11 See page 42 of the INECP.

12 Defined in Article 9 of the draft Climate Change and Energy Transition Law as fiscal benefits and other support mechanisms or measures that foster the use of fossil fuels.

13 The potential loophole in the drafting of Article 9 (effectively allowing fossil fuel subsidies to continue) gave rise to several comments in the public consultation process prior to the passing of the Climate Change and Energy Transition Law. These comments were taken into consideration by the government to ensure appropriate monitoring of subsides, effectively restricting new fossil fuel subsidies to vulnerable families and small-scale farmers whose livelihoods could be significantly affected by higher fuel prices.

14 These figures are available from page 206 of the INECP and are based on information provided by Spain’s tax agency.

15 Which amounted to 10,4 GW of installed capacity in 2018. See IIDMA (2019), ‘Un oscuro panorama. Las secuelas del carbón’, (accessed 18/V/2019).

16 See the second additional provision of the draft Climate Change and Energy Transition Law for further details.

17 Pollit & Mercure (2018) argue that Computable General Equilibrium (CGE) models assume crowding-out effects as a result of climate policies. The authors argue that macro-econometric models based on non-equilibrium economic theory do not necessarily lead to crowding out effects and can even serve as an economic stimulus.

18 Whose emissions amounted to 25% of total emissions in 2015 and 48% of of diffuse sector emissions in 2017.

19 Partido Popular (2015), ‘Seguir avanzando. Programa electoral para las elecciones generales de 2015’, Partido Popular, Madrid; Partido Popular (2018), ‘Proposición de Ley sobre Cambio Climático y Transición Energética’, Grupo Parlamentario Popular en el Congreso, Boletín Oficial de las Cortes Generales, Madrid; Público (2018), ‘El PP es el único partido que está a favor del “fracking”, del almacén nuclear y del “impuesto al sol”,(accessed 07/V/2019); SNE (2015) ‘El Partido Popular promete mantener las centrales nucleares y terminar el ATC’, Sociedad Nuclear Española (SNE), (accessed 07/V/2019); Partido Popular (2019), ‘Elecciones generales, autonómicas y municipales 2019. Programa electoral’, Partido Popular, Madrid.

20 Podemos (2018), ‘Proposición de Ley sobre Cambio Climático y Transición Energética’, Grupo Parlamentario Confederal de Unidos Podemos-En Comú Podem-En Marea, Boletín Oficial de las Cortes Generales, Madrid; Podemos (2019), ‘Programa de Podemos para un nuevo pais. Programa Electoral elecciones 2019’.

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<![CDATA[ Legislating for a low carbon and climate resilient transition: learning from international experiences ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/policy-paper-2019-legislating-low-carbon-climate-resilient-transition 2019-03-11T08:06:24Z

The study in particular aims to contribute to the current debate in Spain on a draft climate change and energy transition law, as well as aid other countries currently working on climate legislation

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Read the Executive Summary (835KB - PDF)

Leer resumen ejecutivo Legislando para una transición baja en carbono y resiliente al clima: aprendiendo de las experiencias internacionales (664KB - PDF)

Summary

The objective of this working paper is to inform policy experts, legislators and decisionmakers on the recent trends in climate change policy-making around the world and to draw lessons learnt from the experiences with designing and implementing climate change legislation. The study in particular aims to contribute to the current debate in Spain on a draft climate change and energy transition law, as well as aid other countries currently working on climate legislation.

Contents

Introduction and acknowledgements

Executive summary

Part 1. Drivers and global trends in low carbon and climate resilient transition
1. Key drivers of the low carbon and climate resilient transition
2. Global trends in legislating for low carbon transition
3. Building blocks for climate legislation and national governance frameworks

Part 2. Case studies on climate and energy transition laws and executive frameworks
4. The UK’s Climate Change Act of 2008
5. Mexico’s General Law on Climate Change and the Energy Transition Law
6. France’s Energy Transition for Green Growth Law
7. Climate change frameworks in China, Chile, Germany and the US

Part 3. Learning from experiences with climate and energy transition laws and executive frameworks

Recommendations for Spain and other countries for designing framework legislation on climate change

Introduction and acknowledgements

The objective of this working paper is to inform policy experts, legislators and decisionmakers on the recent trends in climate change policy-making around the world and to draw lessons learnt from the experiences with designing and implementing climate change legislation. The study in particular aims to contribute to the current debate in Spain on a draft climate change and energy transition law, as well as aid other countries currently working on climate legislation.

The report is structured in three parts. Part 1 provides an overview of the overall drivers for low carbon and climate resilient transition and the global trends on climate action and identifies the key building blocks of the climate governance frameworks that are important in the design of climate legislation. Part 2 reviews country experiences with designing and implementing climate change and energy transition laws and the executive frameworks in Chile, China, France, Germany, Mexico, the UK and the US. Part 3 draws lessons learnt from the comparative analysis of the case studies on the key elements of a comprehensive climate change law and provides recommendations for policy-makers. Through comparing the insights from each of the case studies the paper draws conclusions on the key considerations that should be addressed in the development of framework climate change and energy transition legislation.

The analysis draws on the latest existing studies assessing the experience with and performance of the legislative instruments in question complemented by assessing the texts of the laws. In this context the study has benefited from the author’s previous work on the UK’s Climate Change Act in collaboration with Sam Fankhauser and Jared Finnegan, and on Mexico’s General Law on Climate Change in collaboration with Sandra Guzman. The case study on France draws upon a recent an in-depth analysis conducted by Andreas Rüdinger.

The author is grateful to several policy experts who have kindly provided contributions on Chile’s climate change policy through informal interviews; to Gonzalo Escribano, Lara Lázaro and Dimitri Zenghelis for detailed review comments. The author also thanks Francisco Trincado for designing the visuals and Miguel de Avendaño, Juan Antonio Sánchez, Virginia Crespi de Valldaura, Luis Lázaro and María Dolores de Azategui for editing the paper. Finally, the author would like to gratefully acknowledge the support and contributions of José López-Tafall and his team at Acciona.

Executive summary

The urgency of action. Climate change is one of the most pressing issues for global and national development agendas. With the last 19 years having contained 18 of the warmest ones on record globally, the urgency to address both the causes and impacts of climate change is clear. According to the Fifth Assessment Report (AR 5) by the Intergovernmental Panel on Climate change (IPCC) for a likely chance of more than 66 per cent of keeping the global mean temperature increase below 2°C, global emissions of all greenhouse gases need to be net zero by 2100.

The economic and commercial case for accelerated low carbon transition is strong. Reaching the target of net zero emissions globally by the end of the century is technically and economically feasible but requires urgent action. The rapid technological change and the falling costs of the key low carbon technologies over the past two decades provide a solid foundation for accelerated decarbonisation. Ambitious action on climate change could yield direct a economic gain of US$26 trillion in 2018-2030 period compared with a business-as-usual scenario according to recent analysis by the New Climate Economy project. Most of the policy and investment decisions shaping the next two decades will be taken over the coming 2-3 years, which makes it a critical period for adopting appropriate policy frameworks.

Scaled-up action requires overcoming barriers to the low carbon transition. Barriers to low carbon investments can be addressed through price and policy signals, as well as mitigated through lowering or sharing the investment risks. Carbon pricing instruments, which now cover around 20 per cent of global greenhouse gas emissions in over 46 countries2, have been shown to be particularly effective in improving viability of low carbon investments. The growing development of new financial instruments, such as green bonds, and the recent advances in the financial regulation on sustainable finance and risk disclosure, are further driving investment towards more sustainable technologies.

Shifts in the international policy landscape require ambitious national action. The adoption of the UN Sustainable Development Goals and the Paris Agreement on climate change in 2015 have set the goal for the global transition to net zero emissions in the second half of this century. Achieving these goals requires not only successful domestic implementation of the current emission pledges, but also a major political transformation in how countries approach climate action and define their ambition. Domestic framework climate change legislation comes to the forefront as the key means to consolidate political support for the climate agenda, to provide the framework for implementation of the Paris Agreement and for assessing progress, as well as to enable ratcheting-up of ambition going forward.

National climate change legislation and policies have grown twenty-fold over the past 20. years, with a remarkable growth in developing countries in recent years. Over time the attention has shifted from putting in place framework climate legislation or strategies for the articulation of greenhouse gas emission targets. In 2017 over 70 per cent of global greenhouse gas emissions were covered either by nationally binding climate legislation or by executive climate strategies with a clearly designated coordinating body, while climate legislation alone covered 44 per cent of emissions and 36 per cent of the population (Lacobuta et al. 2018).

Domestic laws and policies are not yet consistent with international commitments. Most countries need to align their domestic emission targets, enshrined in domestic legislation, and those committed through the nationally determined contributions (NDCs) to the Paris Agreement. In order to meet these targets and to be able to ratchet them up in the future, countries need to put in place strong domestic institutional frameworks and policies.

Framework legislation can help maintain policy continuity and enable implementation. The examples of countries considered in this study demonstrate a variety of approaches to national climate change policy and that there is no one size fits all. Putting policy into law with a strong Parliamentary oversight for implementation helps reduce the scope for backtracking and provides a mandate for policy-makers to advance action. The case studies on Mexico and the UK show that climate legislation has improved the quality of the political debate and helped maintain and strengthen the political consensus on and commitment to the long-term climate objectives through turbulent political times. The case of the US demonstrates how the lack of climate legislation can make climate policy extremely vulnerable to a change of leadership. There are clear advantages for embedding the core elements of the national climate change framework into a legislation for countries like Spain, with a long democratic tradition and limited scope for centralized policy-making by the national government.

The adoption of climate change legislation requires building political support. Developing a positive narrative around the benefits of climate change legislation and creating political momentum are key for passing a law. A positive narrative also helps avoid polarisation of the political debate as was the case in the US. Integrating climate change objectives with economic and social ones and linking the legal framework with a country’s self-interest, development priorities and opportunities or co-benefits of climate action, such as in the example of China, have shown to be effective in getting political and public support for climate policy. Furthermore, following an inclusive process of cross-party development of the key features of the legislation and strong ownership by civil society through stakeholder consultation, as well as personal leadership from the country’s leader, have shown to be effective in getting political buy-in for the legislation in Mexico, the UK, California, France and Germany. Consecutively cross-party and citizen support are the best shields against the risk of reversal of the legislation.

Scope of the law and the level of specificity in prescribing policies is one of the first critical decisions that need to be taken when developing a new legislation. A flexible approach, as in the UK and California, that delegates the choice of specific policies to meet the targets to the government could offer greater political acceptability for the law and flexibility to adjust the course based on changing economic conditions and lessons learnt. However, this model requires that clear institutional processes and statutory timelines for how and when the government should develop the detailed policies are specified in the law backed by strong parliamentary oversight and provisions for an independent review by an advisory body.

Alina Averchenkova
Distinguished Policy Fellowand the lead for the Governance and Legislation research theme at the Grantham Research Institute on Climate Change and the Environment and CCCEP at the London School of Economics
| @averchenkova

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<![CDATA[ Three reasons to be ambitious with the Climate Change and Energy Transition Law ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/commentary-lazaro-three-reasons-ambitious-climate-change-energy-transition-law-spain 2018-06-27T01:33:20Z

Spain’s ratification of the Paris Agreement, the opportunities opened up by a gradual and orderly energy transition, and a public opinion increasingly demanding action on climate change, are three compelling reasons for the approval of an ambitious law.

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Original version in Spanish: Tres razones para ser ambiciosos en la Ley de Cambio Climático y Transición Energética

Spain’s ratification of the Paris Agreement –with the government now committed to developing a Climate Change and Energy Transition Law–, the opportunities opened up by a gradual and orderly energy transition, and a public opinion increasingly demanding action on climate change, are three compelling reasons for the approval of an ambitious law in alignment with international climate commitments.

(1) International commitment and litigation for inaction

Since 1994, legislative and executive initiatives taken on climate change have multiplied 20-fold globally.1 There are currently more than 1,300 climate-change laws around the world, proof of a growing concern for the effects of climate change. The Paris Agreement is expected to lead to an increase in international climate legislation. This is because many countries made the commitment in Paris to introduce new climate legislation. Since the 1990s there has also been a significant rise in the number of climate litigation cases around the world, and it is to be expected that improvements in the science of attribution2,3 might result in more climate-related litigation. Inaction on climate change, and a failure to align with the objectives of the Paris Agreement, could land governments and companies in court.4

How do the two trends affect Spain? At the beginning of 2017, Spain ratified the Paris Agreement. The agreement’s aim is to limit increases in the average global temperature to well below 2ºC above pre-industrial levels –and to make efforts to limit the increase to no more than 1.5ºC–. The Paris Agreement also sets out to achieve net zero carbon emissions (that is, a balance between emissions and the absorption of GHG emissions) sometime during the second half of the century.

To comply with Spain’s international climate commitments would require aligning the Climate Change and Energy Transition Law (which Spain committed to approving before the end of the legislature) with the Paris Agreement. Therefore, the objective of limiting average global temperatures and the objective of achieving carbon neutrality should be incorporated into the laws that –like Spanish legislation– are currently being developed or updated. Other countries are already including the carbon neutrality goal in their climate-change legislative frameworks. A good example is Sweden, the first country to include the goal of achieving carbon neutrality by 2045. Other countries that have incorporated the net zero carbon goal include France, Iceland and New Zealand.

On the other hand, the Paris Agreement calls on countries to take action based on the best available scientific data. The Intergovernmental Panel on Climate Change (IPCC) and the United Nations Environmental Programme (UNEP), along with other institutions, provide information to facilitate international climate negotiations. Furthermore, independent scientific institutions at the national level have been advising their governments on decarbonisation goals for over a decade. For instance, the Committee on Climate Change in the UK proposes emission reduction targets to the government,5 reports on progress towards achieving objectives, analyses risks stemming from climate change and suggests adaptation strategies. The means to achieve the objectives are then determined at a political level.

Although Spain does not have a strong tradition in developing these types of independent institutions, the creation in Spain of a body like the UK’s Committee on Climate Change (sufficiently resourced and adequately budgeted to carry out its mandate and to which the government would be obliged to respond) would be very useful for devising decarbonisation strategies that are scientifically sound and capable of minimising the potential politicising of decarbonisation transition processes.

(2) Opportunities for action and the risk of inaction

When they presented the Report of the High-Level Commission on Carbon Prices, Joseph Stiglitz and Nicholas Stern claimed that the economy of the 21st century would be dynamic, innovative and low-carbon. Hence, their suggestion was to decide where we should be in such an economy in the future and what the risks would be of being left behind in the sixth wave of innovation.6 The latter involves sustainability, resource efficiency, the biomimetic (or biologically-inspired) design of goods and services (to successfully implant a development model based on the circular economy), and the development of renewable energies, among others.

More than a mere climate accord, the Paris Agreement and the climate legislation that it develops and fosters –and in a broader sense, the transition to a lower emission economy– is a change in economic model unseen since the Industrial Revolution... but only if action is taken swiftly and decisively. The change would benefit countries and companies with less exposure to carbon risk and that manage the low-carbon transition in a gradual and orderly way.

In Spain, many companies recognise the opportunities created by the transition to a low-carbon economy. In a recently published manifesto, 32 companies7 in the Spanish Green Growth Group asked the government to approve without further delay an ambitious Climate Change and Energy Transition Law. They want a fiscal framework that follows the polluter-pays principle and the gradual elimination of fossil-fuel subsidies. They also want decarbonisation targets for 2030 and 2050 that provide some certainty to investors and that are aligned with the Paris Agreement. They additionally call for an independent body, similar to the Commission on Climate Change in the UK, to guarantee compliance with Spain’s climate commitments. In addition, the signatories want financial flows to be aligned with climate objectives and transparency measures to be established for private-sector carbon-risk exposure.

Both (1) the adoption of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFP)8 and (2) the adaptation of article 173 of the French Law for Energy Transition to the Spanish economic context and its integration into the future Climate Change and Energy Transition Law would facilitate the reorientation of financial flows towards low-carbon investments. The recently-published European Commission Action Plan on financing sustainable growth also focuses on the same aim. Specifically, the EC action plan’s four-fold objective entails reorienting capital flows to sustainable investments, integrating sustainability into risk management, increasing transparency and fostering long-term decision-making. To meet these objectives the Commission will: (a) develop a taxonomy of sustainable assets and projects; (b) devise labelling and certification schemes for green financial products; (c) clarify the obligations of both investors and asset managers; and (d) incorporate sustainability considerations into prudential requirements, for which the use of Green Supporting Factors or Brown Penalising Factors, among others, are being considered.

(3) Public opinion

Finally –and perhaps of political significance for the local, regional and European elections of 2019–, concern for climate change as one of the greatest threats to the world is rising at the globalEuropean and Spanish levels. Furthermore, as shown by the analysis of the Elcano Royal Institute (2017), climate change is the second most important foreign policy priority for German, French and US public opinion, right after combating international terrorism. Among the Spaniards surveyed, climate change is the top foreign policy priority, over and above the fight against jihadist terrorism (Elcano Royal Institute, 2018).9

Figures 1, 2 and 3 show a breakdown of the foreign policy priorities of Spanish respondents from November 2015 (just before the COP21 in Paris) to November 2017 (Figure 1), with a breakdown by age in 2017 (Figure 2) and by political preferences in 2017 (Figure 3).

Figure 1. The foreign-policy priorities of Spanish public opinion, 2015-17

As shown in Figure 1, climate change as a foreign-policy priority has steadily grown in importance for Spaniards between 2015 and 2017, a year marked by extreme weather events.

Figure 2. Foreign-policy priorities of Spanish public opinion by age (2017)

Figure 2 shows that for all age groups the fight against climate change is the top foreign-policy priority except for those aged 30 to 44, for whom fighting climate change is the second priority after combating jihadist terrorism.

Figure 3. Foreign-policy priorities of Spanish public opinion by political preference, 2017

The data from Figure 3 reveal that for both voters at the centre and the left of the political spectrum, the fight against climate change is the top foreign-policy priority. For voters on the right of the political spectrum, climate change is the third most important foreign-policy priority.10 In summary, public opinion is much concerned about climate change as a global threat and wants the foreign policy focus on climate change to be a top priority.

To be a credible partner, who complies with international climate commitments, Spain needs to take up the opportunities offered by the low-carbon economy to respond to business and public opinion concerns about climate change and to an increasing demand that it prioritises combating climate change in its foreign policy. It must therefore approve the announced Climate Change and Energy Transition Law in accordance with the Paris Agreement and as soon as possible.

Lara Lázaro
Senior Analyst, Elcano Royal Institute
 | @lazarotouza


1 A. Averchenkova, S. Fankhauser & M. Nachmany (2018), Trends in Climate Legislation, Edward Elgar, Cheltenham.

2 The science of attribution analyses the variation in the likelihood and seriousness of two meteorological phenomena due to human-induced climate change, assigning them a degree of statistical confidence. See S. Marjanac, L. Patton & J. Thornton (2017), ‘Acts of God, human influence and litigation’, Nature Geoscience, nr 10, pp. 616-619.

3 National Academy of Sciences, Engineering and Medicine (2016), ‘Attribution of Extreme Weather Events in the Context of Climate Change’, Committee on Extreme Weather Events and Climate Change Attribution Board on Atmospheric Sciences and Climate, Division on Earth and Life Studies.

4 H. Covington, J. Thornton & C. Hepburn (2016), ‘Shareholders must vote for climate-change mitigation’, Nature, nr 530, p. 156.

5 The five-year carbon budgets are approved sufficiently in advance to avoid the short-term thinking imposed by the political cycle.

6 S. Nair & H. Paulose (2013), ‘Emergence of green business models: the case of algae biofuel for aviation’, Energy Policyhttp://dx.doi.org/10.1016/j.enpol.2013.10.034i.

7 The 32 signatory companies are ABERTIS, ACCIONA, ASOCIACIÓN FORESTAL DE SORIA, BANKIA, BBVA, CLIMATE STRATEGY, CONTAZARA, ECOACSA, ECOALF, ECOEMBRES, ECOTERRAE, ENDESA, EULEN, FERROVIAL, FRATERNIDAD-MUPRESPA, IBERDROLA, IKEA, INCLAM, INECO, LAFARGEHOLCIM, LOGISTA, MAPFRE, NH HOTEL GROUP, OHL, REE, SICASOFT SOLUTIONS, SIEMENS GAMESA, SINCE02, SUST4IN, TEIMAS, TELEFÓNICA and WILLIS TOWERS WATSON.

8 A working group on financial communication and climate change in the G20’s Financial Stability Council.

9 It should, however, be borne in mind that historically the CIS barometer registered environmental concerns as only marginally relevant. One of the reasons for the apparent discrepancy between the CIS survey data and that of the PEW analysis (Poushter y Manevich, 2017), the European Commission (Eurobarometer) and the Elcano Royal Institute is that the latter surveys ask about ‘threats to the world’ (Eurobarometer), ‘threats to the country of the person surveyed’ (Pew) or ‘foreign-policy priorities’ (Elcano Royal Institute). The CIS asked about ‘the three main problems facing Spain today’, highlighting unemployment, corruption, politicians and healthcare, among other issues.

10 After combating jihadist terrorism and fighting against the self-proclaimed Islamic State.

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<![CDATA[ Climate change in 2018: from post-Trump global climate governance to Spain ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari30-2018-lazarotouza-climate-change-2018-post-trump-governance-spain 2018-03-05T06:04:16Z

What climate change developments are foreseeable in 2018 at the global level, in the EU-28 and in Spain?

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Original version in Spanish: Cambio climático en 2018: de la gobernanza climática global post Trump a España

Theme

What climate change developments are foreseeable in 2018 at the global level, in the EU-28 and in Spain?

Summary

The year 2018 promises advances in the development of the implementing guidelines for the Paris Agreement and in the evaluation of progress towards the objective of limiting average temperatures to well below 2-degrees Celsius above pre-industrial levels. The EU will push the development of the Energy Union, and it is expected to raise the ambition of its renewable energy and energy efficiency targets for 2030, among other actions. Spain will present the first draft of the Climate Change and Energy Transition Law.

Analysis

Global climate governance in 2018

This year will be key for global climate governance. During 2018, the Talanoa Dialogue will take place –the first formal evaluation by the international community of its progress towards the objective of limiting the increase in global mean temperatures to well below 2-degrees Celsius above pre-industrial levels–. The importance of the Talanoa Dialogue, and of the reports and contributions which inform it,1 resides in its potential to influence the new round of emissions reduction commitments to be presented in 2020 by the Parties to the Paris Agreement.

In addition, 2018 is the deadline agreed for designing the implementation guidelines for the Paris Agreement. The will guide the transition towards a low-emissions economy, ensuring that the Paris Agreement objective is met, while leaving no one behind. The negotiation texts that came out of the Bonn Climate Summit (COP23) in 2017, under the presidency of Fiji, are technical texts that include the positions of all the Parties. In 2018 the negotiation texts will need to be condensed and, therefore, the proposed options within these texts must be narrowed to reach a consensus version of the implementation guidelines. This is a herculean task that will require an additional negotiation meeting beyond the typically planned-annual programming, if such implementation rules are to be agreed in time for the COP24 in Katowice, Poland, at the end of 2018.

Trump, year II

After announcing his intention to withdraw the US from the Paris Agreement and launching the dismantling of Obama-era federal energy and climate policies, it seems likely that Donald Trump will continue to pursue his isolationist and denialist policy turn in 2018. This is likely to be the case as none of the developments in 2017 made Trump reflect at all –not the existing scientific consensus on climate change, nor the extreme weather events of 2017 which cost the US a handsome US$ 306 billion, not the consideration of the Department of Defense (at least until December 2017)2 that climate change constituted a threat to national security, nor the concerns of the citizenry.

What is more, at the end of 2017 and the beginning of 2018, the US Department of the Interior rescinded the regulation pertaining to hydraulic fracking on public land, revised the security regulations for offshore exploration and proposed allowing oil exploration in practically all US coastal waters. For the energy-climate nexus, perhaps the most important developments in 2018 at the federal level (apart from those already underway) will be the replacement of the Clean Power Plan, a review of water regulation and the organisation of a debate on climate change that Scott Pruitt presents as ‘necessary and centered upon the needs of the present, avoiding speculation on what might occur in the future’. A debate that seems to ignore the scientific and political consensus that made possible the Paris Agreement.

The reaction of US states, business communities and citizens could hold the line against some of the retreat in climate policy that Trump will in all likelihood keep pursuing in 2018, similarly to what happened in 2017. One should also expect to see more fossil fuel divestment initiatives and an increase in climate litigation along the lines of the actions taken early on in 2018 by the Mayor of New York, Bill de Blasio, or the proposal forwarded by the city councillors of Los Angeles, Mike Bonin and Paul Koretz, that oil companies compensate for damages derived from extreme weather events which are aggravated by climate change.

Europe

In 2018 the EU is expected to make some important decisions with respect to the transition to a low carbon development model. Among other objectives, the work programme of the Commission in 2018 includes the task of completing the Energy Union. During the first half of the year, the trilogues will also take place (these are ‘informal tripartite meetings attended by representatives of the European Parliament, the Council and the Commission’) on the Renewable Energies Directive, Energy Union Governance, the Energy Efficiency Directive and Electricity Market design. With texts already in progress and Member State positions still in conflict, negotiations in 2018 are expected to be intense. Other important decisions expected in 2018 include the establishment of a carbon budget for the decarbonisation of the economy by 2050, on increasing the renewables target to 35% for 2030 and on increasing the energy efficiency target to 35%, as well, for 2030. In addition, this year the Member States must present their Integrated Energy and Climate Plans with a time horizon to 2030 which, according to the Commission, must be ambitious and coherent enough in their contribution to regulatory stability to foster investment in the low carbon economy.

Regarding the two main instruments of European climate policy, 2017 saw the conclusion of the 6th trilogue on the reform of the European Emissions Trading System (EU ETS) and with a provisional proposal for the Effort Sharing Regulation (ESR) to reduce emissions in diffuse sectors. On January 17 2018 the permanent representatives of the Council of the EU approved a provisional agreement on the ESR, reached by the Estonian Presidency and the European Parliament in December 2017. The agreement includes mandatory emissions reduction targets between 2021 and 2030 in the diffuse sectors not yet included in the EU ETS (like the commercial, residential and transport sectors).

On institutions and actors, the European Parliament, almost as a matter of habit, is typically a more ambitious actor on climate change than the Member States, many of which are more reticent in their approach to the energy transition, and this is expected to continue in 2018. Angela Merkel must try to recover part of her country’s climate leadership credibility, which has been damaged by the announcement that Germany is not likely to meet its climate objectives for 2020, and by an address at COP23 in which German dependence on coal and the social costs of transition were emphasised more than decarbonisation goals. Regaining German climate leadership could occur as a result of continued efforts by Angela Merkel at the G20 to limit the impact of Trump’s actions and subject to the expected formation of a coalition government between the CDU/CSU and the SPD, if such an eventual coalition were to push ambitious climate and energy transition objectives. Although it seems clear that Germany will not meet its objective to reduce emissions by 40% from 1990 levels by 2020, the government agreement between the CDU/CSU of Angela Merkel and the SPD of Martin Schulz maintains the objective to reduce GHG emissions by 55% below 1990 levels by 2030. Furthermore, the partners have also committed to developing a law in 2019 to meet their sectoral climate targets. An ambitious version of this legislation would include targets for 2050 aligned with the Paris Agreement.

Emmanuel Macron, on the other hand, emerged in 2017 as an icon for the Europe that wishes to lead the fight against climate change. He is expected to strengthen this climate leadership profile during 2018. In 2017 he launched a programme to finance grants for climate scientists, launching an open call for US scientists to live and work in France; he also ensured that the IPCC would receive all the necessary funding for its work, and he commemorated the second anniversary of the adoption of the Paris Agreement with a high level event (the One Planet Summit), centred on one of the key components of the energy transition: climate finance. Furthermore, at the beginning of February 2018 the Minister of Foreign Affairs, Jean-Baptiste Lemoyne, said that the US and the EU would not reach a trade agreement if Trump effectively pulls the US out of the Paris Agreement, raising the tone of the debate.

Spain and the Climate Change and Energy Transition Law

In 2017 Spain began to work on the development of the Climate Change and Energy Transition Law, following the commitment of Mariano Rajoy. Expert meetings were held to reflect upon the basic elements that the law should contain. The first round of public consultations on the legislation was also launched. Finally, a committee of experts was established to design energy transition scenarios and the contributions from the public consultation organised by the Spanish Office on Climate Change have been analysed. It is likely that the first draft of the Climate Change and Energy Transition Law will be published in 2018; it will be followed by reports to various institutions, a second round of public consultations and the parliamentary process for the law’s approval.

Although it is too early to speculate on the legislation’s content, it is likely to be a ‘framework law’ with targets for 2030 and 2050 aligned with the Paris Agreement. A Committee on Climate Change, similar to the one in the UK, could also be part of the future law. Such a committee could include climate scientists and specialists in the economics of climate change to advise on emissions reduction targets (ie, propose carbon budgets), provide advice on adaptation and evaluate the progress made towards climate targets. Furthermore, the Spanish Climate Change and Energy Transition Law could include an adapted version of Article 173 of the French Law on Energy Transition for Green Growth, under which the private sector’s exposure to climate risks would have to be explicitly acknowledged.

It would also be important for the law to incorporate clear provisions for compliance with the international climate finance commitments of the government. Therefore, the Climate Change and Energy Transition Law would ideally include the obligation to plan for Spain’s contributions to this international climate finance at least five years out, perhaps coinciding with the anticipated five-year reviews under the Paris Agreement. At the Paris Summit (COP21) Rajoy committed Spain to contributing €900 million annually in international climate finance as of 2020; he reiterated this commitment at the One Planet Summit, organised by Emmanuel Macron at the end of 2017. On the other hand, while respecting the General State Budget Law, it would be necessary to ensure the approval and effective disbursement of these quantities of committed international climate finance.

Also, to include particular criteria within the law to count as international climate finance, only those projects which demonstrably help to reduce GHG emissions or to adapt to the consequences of climate change would help to project Spain as a committed partner in energy transition, and as rigorous both in analysis and action. Internally, such an inclusion of climate criteria in the Administration’s process of public procurement and subsidy disbursement would send clear signals to the market with respect to the demand for low carbon goods and services.3

With respect to the instruments of international climate finance, Spanish contributions to both the Global Environmental Facility (GEF) and to the Green Climate Fund (GCF), among others, are currently restricted by barriers that are theoretically solvable. In the GCF, for example, there are a limited number of climate projects in the pipeline, and only projects presented by accredited agencies are eligible for GCF finance, underlining the need to accelerate the accreditation of Spanish institutions so that Spanish mitigation and adaptation solutions can be implemented.

Casting a backward glance: what we said in 2017

As anticipated in our previous document surveying the prospects for energy and climate policy at the beginning of 2017, the support of the international community for the Paris Agreement was consolidated further with the ratifications of countries like Syria and Nicaragua, leaving the US isolated from the energy transition to a low carbon economy. The process of global climate governance (through the Talanoa Dialogue) has also further developed the Paris Agreement guidelines and begun the first evaluation of progress to limit the average temperature increase to well below 2-degree Celsius above pre-industrial levels. Nevertheless, the agreement over a Roadmap for Sustainable Electricity Trade between Morocco and the EU, announced at COP22, and expected to be signed by COP23, did not materialise.

The earlier projections of Trump’s impact on US national and international climate policy have generally been confirmed. Trump has announced his intention of withdrawing the US from the Paris Agreement as soon as possible, and he has begun dismantling the existing federal climate policy. Given Trump’s isolationism, various non-federal US actors have reacted by redoubling their climate commitments and aligning themselves with the objectives of the Paris Agreement, in line with what we had expected. In addition, in our document last year we posed the possibility of a slowdown in the energy transition as a result of the Trump effect. Although it is still too early to reach conclusions on this potential slowdown of the transition, the data available for 2017 for renewable energy (RE) investment, and for falling RE and battery costs seem to suggest that the transition will continue apace. However, the current pace of renewable energy deployment remains insufficient to limit dangerous interference with the climate system.

With respect to EU climate policy and Brexit, 2017 has failed to clarify doubts that have been raised about the ambition and negotiating capacity of the EU-27. While there are now more ambitious EU proposals for renewable energies and energy efficiency than there were in 2017, these proposals are not as ambitious as some actors demand. In this context, there are an increasing number of voices suggesting a distributed climate leadership among the Member States, with the support of China,4 among other countries. As expected, in 2017 the EU continued to work on the dossiers for the reform of the European emissions trading system (the EU ETS) and for the Effort Sharing Regulation (ESR), as well as on the dossier for Land-use, Lands-use Change and Forestry (LULUCF).

Finally, as foreseen, in 2017 Spain began work to develop the Climate Change and Energy Transition Law. However, as was the case last year, the green fiscal reform, the coordination and integration of climate (and environmental) policy with other public policies, and the inclusion of climate change in foreign policy remain pending issues. In this respect, it is interesting to mention that according to the last public opinion Barometer of the Elcano Royal Institute, the Spaniards polled said that the fight against climate change should be the top priority of Spanish foreign policy,5 a clear reason to fulfil our international commitments and to lead, within the limits of our possibilities, the fight against climate change in the EU.

Conclusions

The year that has just begun will be key in the fight against climate change. The evaluation of collective progress to the goal of limiting average temperature increases to well below 2-degrees, now proceeding through the Talanoa Dialogue, and the expected finalising of the implementation guidelines for the Paris Agreement, will be the most noteworthy items on the global climate governance agenda.

The EU will arrive at COP24 with advances on the Energy Union in hand. The reform of the ETS, progress on the ESR and advances towards new renewable energy and energy efficiency targets for 2030, among other goals –likely to be more ambitious than current efforts– would lend more credibility to the EU’s leadership by setting an example and by continuing to fill its historical role as mediator. Nevertheless, the uncertainties surrounding Brexit, and the doubts emerging around German leadership on climate change, could complicate European climate efforts in 2018.

Spain is expected to present the draft of the Climate Change and Energy Transition Law. If the law is sufficiently ambitious and all-encompassing it could provide a road map for the transition to a low carbon economy that limits the exposure of businesses, public institutions and Spanish society to physical, transition and litigation risks. It will therefore be necessary to produce a law that establishes long-term objectives based on scientific criteria.

Lara Lázaro Touza
Senior Analyst, Elcano Royal Institute
| @lazarotouza


1 The Talanoa Dialogue will be supported by reports like the IPCC Special Report on the impacts of a world 1.5 degrees Celsius warmer than the pre-industrial era, and the potential paths for limiting temperature increases to that level.

2 In mid-December 2017, however, Trump eliminated climate change from the National Security Strategy and indicated that energy independence is the key to the country’s security.

3 In this respect, the recent creation of an Inter-Ministerial Commission for the incorporation of ecological criteria into public procurement undertaken by the Council of Ministers is very interesting.

4 Nevertheless, despite Chinese leadership in renewable energy investment, it has not clearly taken on a leadership role within the framework of international climate negotiations.

5 It should be borne in mind that climate change had been the second foreign policy priority between 2011 and 2016, behind the fight against Jihadist terrorism. Also, 2017 is the first year in which climate change has figured as a higher priority for the Spanish public than Jihadist terrorism with respect to Spanish foreign policy.

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<![CDATA[ Climate change & COP23: urgency, exams, rules and the Talanoa spirit ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari1-2018-lazaro-climate-change-cop23-urgency-exams-rules-talanoa-spirit 2018-01-12T04:41:20Z

International resolve to address climate change infused COP23 with an inclusive spirit that resulted in enough progress to take us through to negotiation crunch-time at COP24. The well-below 2ºC degree guardrail, our collectively agreed temperature goal, is still however stubbornly out of reach.

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Theme1

International resolve to address climate change infused COP23 with an inclusive spirit that resulted in enough progress to take us through to negotiation crunch-time at COP24. The well-below 2ºC degree guardrail, our collectively agreed temperature goal, is still however stubbornly out of reach.

Summary

Tackling climate change in earnest requires governing a ‘super wicked’ collective action problem through non-marginal actions across time horizons that expand regular market timescales. From scientists to policymakers and individuals we all need to be involved. Increasingly ambitious global action is key, as analyses by the World Meteorological Organisation (WMO) and the United Nations Environment Programme (UNEP) released prior to COP23 confirm that greenhouse gas emissions are still on the rise while efforts to reduce emissions are insufficient to hold temperature increases to a bearable level in a year in which the world has endured significant extreme weather events. Physical risks from climate change are increasingly clear.

The Paris Agreement provided the collective framework to limit temperature increases to well below 2ºC above preindustrial levels, but international rules that will govern the Paris Agreement are yet to be finalised. National climate laws and policies that are fostered, inter alia, by the Paris Agreement ensure action on the ground. Appropriation of new and existing climate policies is key to ensure their implementation. Citizen concern seems to be mounting, thus favouring increasingly ambitious climate regulation, although further action is needed. The current legal and social contexts highlight both transition risks and market opportunities for stakeholders as a function of their climate action.

Recent developments in climate science, legislation, litigation and citizen engagement provide the context in which international climate negotiations took place in Bonn this year. COP23 delivered, as expected, the necessary procedural progress to consider this COP successful. Negotiations advanced on the inclusion of Parties’ preferred options for the development of implementation guidelines (previously known as the Paris rulebook) that are to govern the Paris Agreement. Progress was also made on evaluating global progress towards our long-term temperature stabilisation target, as the design of the 2018 Facilitative Dialogue (renamed the Talanoa dialogue) was completed. Concrete outcomes were also achieved as regards the Vulnerability Agenda on gender, indigenous peoples, local communities and oceans. Intense negotiations at COP23 helped broker an agreement on agriculture after years of paralysis on this topic. At the request of developing countries, the pre-2020 ambition, an unexpected negotiating issue, was raised to the fore. Developed countries will be subject to evaluation as regards ambition and finance in 2018 and 2019. The Adaptation Fund, which was to expire with the second phase of the Kyoto Protocol, will continue serving under the Paris Agreement, an additional win for developing countries.

On Fiji’s expected grand coalition of actors, and building on the work undertaken at Lima (COP20), Paris (COP21) and Marrakech (COP22), the first formal dialogue between non-state actors (sub-national governments, the business sector and civil society) and Parties (national governments) was held in Bonn. Additionally, the Marrakech Partnership for Global Climate Action, that seeks to promote pre-2020 ambition, presented its first Yearbook on Global Climate Action. Given the realisation that non-state actors are crucial in the push towards a lower carbon development model, and building too on the increased interest by non-state actors to contribute to the low carbon transition, it is expected that future international climate meetings advance this dialogue. The meeting of the 2050 Pathways Platform to foster the development of long-term decarbonisation pathways also took place in Bonn.

Analysis

Science: urgent climate action required

As COP23 opened in Bonn, the World Meteorological Organisation (WMO) informed that 2017 was set to be the warmest year ever recorded without an El Niño2 event, and one of the three hottest years on record overall. This year the world has experienced record Extreme Weather Events (EWE), including hurricanes in the Caribbean and the southern parts of the US, the highest cyclonic September on record, global ocean heat content also reaching record levels, continued droughts in Somalia and above-average rainfall in some parts of India leading to significant floods.3 Although single events are difficult to attribute to climate change, as changes in climate patterns are studied over several decades (or longer), scientists agree that climate change is expected to bring increased frequency and severity of EWE such as those we have endured in 2017.

The eighth edition of the UNEP Emissions Gap Report,4 which analyses the information included in the IPCC’s Fifth Assessment Report, as well as more updated studies, provides a further warning signal. Full implementation of countries’ Nationally Developed Contributions (NDCs) will only provide one third of the emission reductions needed to meet our 2ºC goal in the most cost-effective manner. In terms of emissions, this implies having a gap (distance to the well-below 2ºC target) of 11 gigatonnes of carbon dioxide equivalent (GtCO2e) if conditional pledges are implemented and a 13.5GtCO2e gap if unconditional pledges are implemented. For the 1.5ºC target, the gap would increase to 16GtCO2e and 19GtCO2e respectively. The gap between our intentions (NDCs) and the 2ºC target is, according to UNEP ‘alarmingly high’.5

By 2030 the implementation of current commitments will use up 80% of the carbon budget6 to stay within the 2ºC temperature limit. Furthermore, the carbon budget for limiting temperature increases to 1.5ºC will be completely exhausted by 2030 if ambition is not ramped up. Therefore, the deadline to close the gap is 2030 if the world is to transition to a low-carbon model in a cost-effective manner. Hence, the 2018 Talanoa dialogue, the first global exam of our collective progress towards the long-term temperature stabilisation target, that will inform the 2020 revision of countries commitments (with a 2030 timeframe for NDCs), is critical in ensuring the world is ratcheting-up climate action.

The UNEP report does, however, provide some guidance as regards the sectors that have significant greenhouse gas (GHG) reduction potential. Over two-thirds of the potential comes from the energy, industrial and transport sectors. The uptake of low carbon energies including renewable energies, the use of carbon capture and storage,7 the recovery and re-use of methane in gas production or the pre-mining degasification in coal mining are some of the key actions that can be taken by the energy sector. Increasing energy efficiency, increasing the use of renewable energy to produce heat, using carbon capture and storage and reducing hydroflourocarbons are actions the industrial sector can take to reduce its GHG emissions according to UNEP. Fuel efficiency measures, transport modal shifts and increasing the use of electric vehicles are the key GHG reduction initiatives suggested for the transport sector.

Climate governance and legislation: the push from above

Since the Kyoto Protocol was adopted in 1997 climate laws and policies have increased twentyfold. This surge in climate legislation indicates greater concern and action to provide a stable climate as a global public good. Interestingly, and perhaps expectedly, it is developing countries that have put in place greater number of climate laws since 19948 although full integration of climate policy in development policy is yet to occur in developed and developing countries alike. Figure 1 below portrays climate-related laws and policies passed or enacted yearly from pre-1994 to 2016.

Figure 1. Climate laws and polices pre-1994 to 2016 by focus areas

The key areas in which global climate laws and policies focus include: the energy sector, accounting for 41% of total climate legislation; low carbon transitions accounting for just under 26% of climate laws; general environmental laws (under 12% of the laws); mainstreaming climate change into planning processes (7.7% of the laws) and the forestry sector (under 5% of the laws analysed).

The reduction in the amount of laws nearing 2016 that can be seen in Figure 1 above might soon be reversed. This is so as the entry into force of the Paris Agreement legally binds countries to present their Nationally Determined Contributions (NDCs) every five years, which could mean an increase in the number of climate-related laws and policies in the coming years. For instance, given that 90% of NDCs9 include the agricultural sector, that it is an under-legislated area and that there has been a decision at COP23, more national regulation in the agricultural sector could be seen in the future.10

Similarly, litigation has also increased throughout the 1994-2016 period analysed. At least 825 court cases related to climate change have been recorded, 600 of which are US-based. Although in most of the court cases to date climate change is not the main concern, this may well change in the future. One possible explanation for this increase in future climate litigation is that it is increasingly perceived as a valid strategy to drive climate action.

Three recent cases illustrate this increased demand for action. First, in October 2016 a group of young plaintiffs and the climate scientist Dr James Hansen won the right to trial according to US District Court Judge Anne Aiken. The plaintiffs argued that the US government had not upheld its obligation to ensure a stable climate, in line with the public trust doctrine, endangering plaintiffs’ fundamental rights to life and liberty. As judge Aiken stated: ‘the right to a climate system capable of sustaining human life is fundamental to a free and ordered society’.11 Secondly, during COP23, in November 2017 a German regional court deemed a Peruvian farmer’s demand for damages admissible. The farmer was demanding Germany’s RWE (one of the largest greenhouse-gas emitters) to contribute to the protection of his town in Peru that is at risk of overflows from a melting glacier. Lastly, in the Netherlands a Dutch court determined that, based on established climate science, the government had to increase its climate ambition by reducing greenhouse gas emissions by 25% by 2020 compared to 1990.12 Although in countries such as Spain a significant number of climate litigation cases in the past have been motivated by disputes between companies that operate under the European Emission Trading System (EU ETS) and the national government regarding allocated emission allowances,13 this need not be the case in the future.

The sharp increase in climate legislation and litigation since the 90s, coupled with the expectation that the Paris Agreement will inject climate laws with renewed impetus, will no doubt be understood by stakeholders as what the future holds. The development of increasingly ambitious climate laws exemplifies one of the transition risks laggards will face.

Society: increasingly concerned worldwide but actions lagging behind

Concern for climate change has waxed and waned for over three decades14 subject to economic development, political support for climate action, increased experience with climate-change related impacts materialising15 and heightened media coverage of climate change, among others (see Figure 2 below).

Figure 2. Public perceptions on climate change 1980s-2017

Sources: the author based on Capstick (2015), Pew (2017), Eurobarometer (2017)16 and Lázaro (forthcoming).17

The underlying trend, however, seems to point towards an increase in citizen concern about climate change. This can turn into demand for action from policymakers and businesses as part of a new social contract.18 For instance, in May 2017 a majority of Exxon Mobil shareholders voted19 for greater disclosure from the company as regards the company’s exposure to climate risks, a first in the firm’s history, with institutional investors strongly pushing for this move.20

As reported in the latest surveys, climate change is Africa’s and Latin America’s primary concern as a threat to their countries while in Europe and the US climate change is the second concern for citizens after international terrorism, according to the latest research published by Pew (2017).21 According to the 2017 Eurobarometer climate change is the third most serious problem facing the world for Europeans, preceded by poverty, hunger plus lack of drinking water, and international terrorism. For two EU countries, however, Sweden and Denmark, climate change is the most serious problem facing the world. As regards foreign policy priorities, citizens in the US, Germany and France rank fighting climate change as their second priority after fighting international terrorism.22 In Spain climate change has consistently been ranked as a second foreign policy priority from 2011 to 2016.23

So citizen concern about climate change is significant and indicates that, at least in some jurisdictions, foreign policy is expected to engage in earnest with climate action. As regards the willingness to pay for climate policies, analyses show it is, overall, significantly different from zero,24 albeit with stark geographical differences.25 As for individual’s self-reported behaviour regarding climate change, the latest Eurobarometer states that 49% of Europeans spontaneously report climate-conscious behaviour such as separating waste and reducing waste, but when prompted with specific examples of these types of behaviour the percentages reaches 90% of Eropeans.

Actions to curb GHG emissions at an individual level are, however, yet to follow in earnest according to per capita GHG emission accounts (see Figure 3 below), despite energy-related CO2 emissions having stalled in the past three years (IEA, 2017)26 (see Figure 4 below).

Figure 3. CO2 emissions per capita, fossil fuel use & cement production and Top-10 emitters (1990-2015)

Figure 4. Global CO2 emissions per region from fossil-fuel use & cement production, 1970-2015

Furthermore, citizens cite national governments, the EU and business and industry as the key institutions that should engage in climate action, which highlights the market and reputational transition risks different stakeholders can expect.

COP23 in context: enough to keep going but immense work ahead

In the aftermath of the adoption of the Paris Agreement at COP21, seasoned negotiators, observers and researcher alike started warning the international community that implementation and increased ambition, subject to adequate means,27 were paramount to take Paris beyond a diplomatic success.

COP22 provided the timeframe for finalising the implementation guidelines for the Paris Agreement, ie, the set of rules, modalities and procedures that will make the Paris Agreement operational. The rulebook deadline, which coincides with the Facilitative Dialogue enshrined in the Paris Agreement (now known as the Talanoa dialogue),28 was set in 2018. COP24 is therefore set to be a decisive milestone in the fight against climate change. Hence, the expectations for COP23 were those corresponding to a technical international climate meeting. And yet, the work during 2017 and 2018, prior to COP24, is of utmost importance in determining the resilience, effectiveness and buy-in of the Paris Agreement.

As regards the resilience of the Paris Agreement, 2017 was a premature test for global climate action. Prior to this year’s COP, on 1 June 2017, the 45th president of the US announced his intention to withdraw from the Paris Agreement. The arguments for withdrawing from the agreement were based on the misunderstanding or misrepresenting of three key issues:29

  • The nature of the Paris Agreement. This is an agreement in part crafted to suit US political circumstances (ie, circumvent America’s political gridlock on climate change). It is only binding on procedural issues and explicitly excludes the possibility of being exposed to liability claims for losses and damages. The Paris Agreement, like any other international environmental agreement, has not been imposed on any country by any other country as Donald Trump claimed. The Paris Agreement is a voluntary undertaking. Additionally, all Parties to the Agreement have expressed their voluntary commitments through Nationally Determined Contributions (NDCs) according to their national circumstances, ie, they are asymmetric in nature to allow for differentiation in terms of will and xapacity to act.
  • The economics of climate action. Trump misleadingly cited a partial study30 to provide only cost estimates of climate action, forgetting his own Environmental Protection Agency (EPA) estimates of the benefits of globally-concerted climate action.31
  • The scientific consensus on the impacts of climate action. The insufficiency of current NDCs notwithstanding, Trump underestimated the impacts of current mitigation commitment by a large quantity.32

Although every diplomatic effort, both within and outside the White House, was made during 2016 and 2017 to prevent the withdrawal announcement, on 4 August 2017 the Department of State announced the US had submitted a letter to the UN expressing America’s intent to withdraw from the Paris Agreement as soon as possible.33 A withdrawal that, according to article 28 of the Paris Agreement, would not occur before Trumps’ term in office ends. In the meantime, the US has sent a technical-profile group of seasoned negotiators to COP23, and will continue sending an official delegation to the negotiation in order to ‘to protect US interests and ensure all future policy options remain open to the administration’.34 Even though the official US delegation at COP23 has not had a leading role in the negotiations, it has been argued that it has not disrupted the negotiations either.

The political declarations during COP22 regarding the resolve to push ahead with the climate action agenda have fortunately proceeded apace throughout 2017. This should not be mistaken, however, with an innocuous US climate default. America’s first climate default (when it failed to ratify the Kyoto Protocol) arguably resulted in lowering ambition and expectations as regards climate action, something we cannot afford at present according to climate science. Trump’s decisions on cutting international climate finance can hinder cooperation between developed and developing countries, slowing down, to some extent, the low-carbon transition and leapfrogging processes in the latter. Trump’s disregard for established climate science, with currents reports of lawyers in the Justice Department questioning climate scientists regarding uncertainties in the science,35 his announced budget cuts to the EPA as well as to international institutions such as the IPCC, and the limitation imposed on EPA’s scientists to disclose their findings, can endanger the traditionally world-class climate science that, along with many other institutions worldwide, inform international climate negotiations and actions.

Europe’s resolve to fill the finance gap, as exemplified by declarations such as those of President Macron during COP23 and the UK Department for Business, Energy and Industrial Strategy (BEIS),36 the significant contribution by the EU to international climate finance, €20.2 billion in 2016 according to the Council of the EU,37 and the decisive support of climate scientists working, among others, at the Joint Research Center, the Copernicus Programme, Barcelona’s Supercomputing Center and H2020 programmes, will in all likelihood become increasingly important to fill the science-finance void left by the US.

As regards China, its New Normal economic38 development and its overwhelming investment in renewables39 provide reasons for optimism. However, China’s expected leadership role that was envisaged after Xi Jinping’s speech at the World Economic Forum in 201740 has arguably not yet materialised in international climate negotiations. China’s historical principled resistance to external oversight of emissions has been a stumbling block during COP23. This is so despite its technical capabilities41 as regards satellite monitoring of greenhouse gas emissions. The leadership role in international climate negotiations seems to be (at least partially) vacant for the time being.

COP23 priorities and key results

Prior to the celebration of COP23 in Bonn, under the Fiji Presidency, the key priorities were to advance on the rules that will govern the Paris Agreement, to design the first exam of the advances made towards meeting our long-term temperature goal, to advance on the vulnerability agenda and to foster climate finance. All these while avoiding re-opening issues that had been agreed in Paris and in Marrakech such as that on differentiation between developed and developing countries (see Box 1 below).

Box 1. Priorities for COP23

Source: UNFCCC (2017)42 and OECC (2017a).43

Some of the key outcomes of COP23 include: (1) the Paris work programme; (2) finalising the design of the Talanoa dialogue; (3) reaching an agreement on evaluating pre-2020 ambitions and requesting ratification of the Doha Amendment; (4) progress on the Vulnerability Agenda; and (5) the grand coalition, or the increasing (yet still fuzzy) role of non-state actors.

(1) The Paris work programme44

The implementation guidelines have made progress. The negotiating texts being developed for the implementation of the Paris Agreement managed to include the preferred options from all Parties. This was essential in ensuring the appropriation by all countries of the rulebook that will govern the implementation of the Paris Agreement. The work ahead will entail treamlining the negotiating texts that it is to be hoped will be adopted in COP24. As the amount of work ahead is immense, the topic complex and the issues of mitigation, adaptation, finance, technology and capacity building are highly interlinked, there will be an additional negotiating session in the period between May 2018 and COP24. Additionally, there was a request to the UNFCCC secretariat to develop an online platform to track the progress made in the Paris work programme. The goal is to avoid having lengthy negotiations such as those prior to the entry into force of the Kyoto Protocol. The key outcomes are presented in Table 1 below.

Table 1. Some key discussions and advances at COP23

Sources: Carbon Brief (2017)45, OECC (2017), Serdeczny (2017)46
Ulargui(Pers. Comm), UNFCCC (2017) and Wuppertal Institute (2017)47

(2) Finalising the design of the Talanoa dialogue

Previously known as the Facilitative dialogue the Talanoa dialogue will take place throughout 2018 and will conclude in COP24. The goals of this first evaluation are to analyse the progress towards our long-term temperature stabilisation goal and to inform the upcoming review of national commitments (NDCs) in 2020 in which ambition has to be increased. The key features of this dialogue will be the inclusive, participatory and non-confrontational nature of the analysis, in line with the Talanoa spirit.

The Talanoa dialogue is structured in two phases. The first phase is a technical one that will gather evidence from scientific institutions (eg, the IPCC’s special report on climate change scenarios in a 1.5ºC warmer world), stakeholders and Technical Expert Meetings (TEMs) and will summarise the information for the second phase (the political phase) that will report on the findings of the dialogue and will help in the development of the next generation Nationally Determined Contributions (NDCs).

Parties are expected to bring to the Talanoa dialogue their national or regional progress and initiatives to achieve the long-term temperature goal. In this respect, the EU has communicated during COP23 that it will strive to bring to the table the most advanced legislative package possible, which includes the recently reformed EU ETS,48 the Effort Sharing Regulation proposal for 2021-30,49 the land use and forestry proposal for 2021-3050 and the energy Package.51 This, it is hoped, will demonstrate that the EU is a credible and ambitious partner. The EU claims that not only does it have a strong track record in climate action, having disbursed €20.2 billion in climate finance last year and decoupling economic growth from greenhouse gas emissions, as GDP has grown over 50% since 1990 while emissions have fallen over 20%, it also has a clear vision of how to decarbonise its economy and it has in place (or it is developing) the policies to support the low carbon transition.

(3) Reaching an agreement on evaluating pre-2020 ambitions and requesting ratification of the Doha Amendment

Pre-2020 ambition was, arguably, an unexpected negotiating topic at COP23. The African Group wanted to ensure climate actions and finance were disclosed prior to the implementation of the first set of NDCs, to ensure continued post-2020 ambition. The EU’s expected overachievement of 2020 goals plus its significant contribution to international climate finance, and its recurrent narrative of Europe’s will to keep leading by example voiced by Commissioner Arias Cañete, were some of the drivers for the EU agreeing to the decisions taken on pre-2020 ambition.

The pre-2020 decisions include, first, sending letters to Parties to the Kyoto Protocol to ratify the Doha Amendment so that the second period of the Kyoto Protocol (2013-20) would enter into force. The EU stated it would strive to send its ratification before the end of 2018 and Spain deposited its instrument of ratification on 14 November 2017, joining 15 other EU countries that have also ratified the Doha Amendment.52 The EU ratification has not materialised yet due to the Polish veto to ratify, but Poland has announced it will do so ahead of COP24,53 which will be hosted in Katowice under its Presidency.54 The EU’s ratification will not, however, imply crossing the threshold for the Doha Amendment to enter into force. Secondly, the decision was taken to hold a stock-taking meeting in 2018 and 2019 in which mitigation efforts, support and information regarding the actions under the Marrakech Partnership for Global Climate Action by non-Party stakeholders will be analysed.

(4) Progress on the Vulnerability Agenda

The first COP presided by a Small Island Developing State (SIDS), plus a year of extreme weather events, fostered the vulnerability agenda at COP23. The outcomes within this agenda included:

(a) The establishment of a Gender Action Plan55 in order to mainstream gender-responsive climate action. Mainstreaming would in turn result in increasing capacity building through, inter alia, specific training programmes, increasing access of women to the international climate negotiating process and fostering gender-related approaches in national climate action plans.

(b) The development of the local communities and indigenous peoples platform56 whose goal is to preserve local and indigenous knowledge through the exchange of information and best practices. It also aims to improve local communities and indigenous peoples’ access to the international climate negotiation process and to improve the communication between the platform and other stakeholders.

(5) The grand coalition, or the increasing (yet still fuzzy) role of non-state actors

The first formal open dialogue between Party (national governments) and non-Party stakeholders (subnational governments, cities, firms and civil society) took place at COP23.57 A dialogue that is expected to continue in future COPs.

A permanent dialogue mechanism between Parties and non-Party stakeholders has been recognised as key to deliver effective climate action. Bottom-up actions by non-state actors have surged since Copenhagen (COP15), with cities for example demanding greater involvement in the UNFCCC process.58 Key initiatives in the post Copenhagen era include:

(a) The Lima-Paris Action Agenda and the establishment of the Non-state actor Zone for Climate Action (NAZCA) platform at COP20 in Lima that records commitments by non-Party stakeholders.

(b) The development of the roadmap for Global Climate Action59 at COP21 in Paris to enable the formal liaison between Party and on-Party stakeholders, with Laurence Tubiana and Hakima el Haite as High-Level Climate Champions.

(c) Also at the behest of the first climate champions, the 2050 Pathways Platform60 was launched at COP22. The key goal of this initiative is to support governments at all levels as well as companies61 to develop long-term decarbonisation strategies to achieve the long-term net-zero GHG goal. During COP23 Spain announced it had joined the 2050 Pathways Platform.

(d) The Marrakech Partnership for Global Climate Action62 that seeks to enhance pre-2020 actions and engagement by Party and non-Party stakeholders, which is complementary to Party negotiations. The Marrakech Partnership also tracks progress by non-party stakeholders using the NAZCA platform and reports actions annually in the Yearbook of Global Climate Action.

The first Yearbook on Global Climate Action was published in 2017. Although the yearbook has, understandably, not recorded all on-going initiatives, the following show the widespread engagement by non-Party stakeholders. First, over one billion (109) people have committed to reduce their GHG emissions by 80% by mid-century. Secondly, water adaptation capacity is to be scaled up by megacities with over 300 million inhabitants, with a significant number of initiatives being announced in developing countries. Third, a significant number of companies are committing to using 100% renewable energy. Companies are also increasingly willing to be subject to science-based targets in line with a 2ºC temperature target in their GHG reduction commitments. This alignment with science-based targets can furthermore help future capital allocation decisions by institutional investors that are increasingly mindful of companies’ exposure to climate risks. Science-led climate action and disclosure is potentially a means for attracting investment.

One of the most notable initiatives as regards non-Party stakeholders at COP23 was arguably the presentation of America’s Pledge, an initiative developed by cities, businesses and civil society in the US that was presented by Michael Bloomberg and Jerry Brown. In contrast with Donald Trump’s announcement to withdraw from the Paris Agreement, over half of America’s population (amounting to over half of the US GDP, equivalent to the third-largest GHG emitter globally) committed to uphold the goals of the Paris Agreement. This contrasted to the relatively low profile of the US delegation at COP23 that focused its work on, inter alia, a working group on NDC implementation, loss and damage, climate finance and avoiding reopening the issue of country differentiation. The only official American side event at COP23, titled ‘Cleaner and More Efficient Fossil Fuels and Nuclear Power in Climate Mitigation’, was disrupted by protesters, a clear sign of the deep divide in the US between the federal government and non-Party stakeholders.

The key gaps identified to implement and scale-up climate action in the 2017 Yearbook on Global Climate Action are: integrating approaches, closing the financial gaps, enhancing capacity and addressing technology and information gaps. Moving forward, however, the challenges include: institutionalising the Marrakech Partnership for Global Climate Action and ensuring it has the appropriate means to develop its work; and setting up a system to account rigorously for all non-state actor climate actions in a transparent way that can be verified and compared and that ensures non-Party commitments are additional to Party commitments. The design of this accounting mechanism is expected to occur after the implementation guidelines for the Paris Agreement are finalised.

An additional high-profile initiative presented at COP23 was the Powering Past Coal Alliance,63 fostered by the governments of the UK and Canada. Initially signed by 25 governments (national and subnational) the alliance seeks to accelerate traditional coal phase-out (ie, coal-fired power plants without Carbon Capture and Storage, CCS).64 At the One Planet Summit that marked the 2nd anniversary of the Paris Agreement,65 24 businesses and other organisations joined the initial list of national and sub-national signatories of the Powering Past Coal Alliance.66

Based on the work by Climate Analytics,67 the alliance declaration states that given that 40% of current electricity worldwide is supplied by coal and that there are significant health impacts from the use of coal for electricity production, amounting to 800,000 deaths a year, traditional coal should be phased out. This phase-out, it is argued, should occur by 2030 in the OECD and the EU and by 2050 in the rest of the world. As regards Spain, the question was asked during COP23 regarding the potential adherence to the Powering Past Coal Alliance. At present, the reasons given for not doing so include the potential increase in the price of electricity,68 the job losses this would entail and the need to ensure security of supply. There is, however, an on-going dialogue with the energy sector regarding the coal phase-out.69

Other achievements

Other achievements include: (1) breaking the gridlock on agriculture; (2) launching the Ocean Pathway at COP23; and (3) involving institutional investors in climate change.

Breaking the gridlock on agriculture70

After years of unfruitful negotiations, COP23 brought greater understanding and trust among Parties as regards agriculture. In moving forward, the Subsidiary Body for Implementation (SBI) and the Subsidiary Body for Scientific and Technological Advice (SBSTA) will jointly address the topic of agriculture and climate change through workshops and expert meetings. The topics to be addressed are yet to be finalised but they are expected to include the enhancement of soil carbon, increasing adaptation and resilience, improving livestock and food security. The issue of how to account for emissions by the agricultural sector was a contentious one once again during COP23, with methane at the centre of the disputes. Latin American countries including Brazil, Argentina and Uruguay71 (with a large cattle industry) raised, once again, the issue of the disadvantages they faced due to the current Global Warming Potential72 used to calculate the warming impact of methane.73

Launching the Ocean Pathway74 at COP23

This initiative seeks to include the issue of oceans and climate change within the UNFCCC negotiations given the importance of oceans for SIDS and coastal states and the role that oceans play in (and impacts they endure from) climate change.75 It also seeks to include ocean-related climate mitigation and adaptation actions in NDCs. The IPCC is additionally preparing a Special Report on the Ocean and Cryosphere in a Changing Climate (SROCC)76 that will be published in 2019 and that will inform the debate moving forward.

Involving institutional investors in climate change

Some of the key messages coming from investors both prior77 to and during COP23 as regards climate change include the reiteration that climate change is increasingly being considered a systemic risk. Climate change may reduce the value of assets under management due to both physical and transition risks. Climate action is in turn seen as a potential value-creating-strategy. More is being done, though, on the side of mitigation than on the side of adaptation for the time being. Some of the requests from investors to ramp-up climate finance include:

  • Embedding climate finance considerations both in future rounds of NDCs (starting in 2020) and in the development of national climate policies.78
  • Fostering blended finance so that investment risks be minimised.
  • Ensuring predictable climate (and related) policies to attract climate finance.
  • Providing ex ante public climate finance information to enable low carbon investment in developing countries, a demand by institutional investors that is aligned with that of developing countries, and which is enshrined in article 9.5 of the Paris Agreement.
  • Project aggregation to ensure institutional investors can finance the low carbon transition.
  • Ensuring independent science-based targets guide national climate policies.
  • The most progressive climate laws and policies have introduced institutions and mechanisms that respond to institutional investors’ demands, among other, to help secure future capital for the low carbon transition.

Conclusions

Reflecting on the results of COP23

On evaluating the results of a largely technical COP it is important to reflect on the goals set for such a meeting, the broader temperature stabilisation goal and contextual factors.

As regards the goals set and the expectations on achieving these goals prior to the meeting in Bonn, the outcome could be judged as positive. Despite the temptations to reopen historical discussions on differentiation, and the expected wrangling on ex ante information relative to international climate finance, COP23 managed to advance on the Paris work programme by producing a set of pre-negotiation texts that are acceptable to all Parties. Inclusiveness and trust are known to be key drivers of climate negotiations and thus having all options in the texts that contain the rules (implementation guidelines) that will govern the Paris Agreement was crucial in moving forward. Such all-encompassing negotiating texts have to be narrowed down prior to the celebration of COP24 in December 2018. The workload is such that at COP23 an additional negotiating session prior to COP24 was planned. Some negotiators are somewhat sceptical of the possibility of closing every negotiating item on time, despite this additional session.

The second key goal of COP23 was the design of the Talanoa dialogue, which was achieved. It is unclear at this stage whether the inputs from the IPCC and other stakeholders, which will be reviewed prior to the political phase of the dialogue, will be enough to spur the increase in ambition that is needed to ensure we do not overshoot our long-term temperature goal. The first key test of the Talanoa dialogue will come in 2020 when Parties have to submit their updated NDCs, with commitments to be met in 2030. The third key goal of COP23 was the advancement of the vulnerability agenda. Both the Gender Action Plan and the platform for local communities and indigenous peoples have been long-awaited and positive outcomes. Advances on agriculture materialise at COP23, after years of entrenchment.

Finally, the advancement of the Global Climate Action Agenda was arguably the space where the greatest climate action and engagement were seen during COP23. This multi-stakeholder engagement is a key element of the social appropriation of the new low carbon development model countries have signed up to.

Though the negotiation process might be progressing according to COP negotiation timescales, the progress as regards limiting temperature goals is still disappointing. GHG emissions are on the rise and 2017 has brought record extreme weather events. Speeding up the pace of negotiations and actions through the development of national climate laws with the 2050 horizon in mind is expected to be an increasingly pressing topic.

As for contextual factors, the US announcement of its intention to withdraw from the Paris Agreement could have taken a bigger short-term toll on international climate negotiations, especially if the Trump Administration had sent a high political profile negotiating team to undermine the work at COP23. No backsliding or domino effect has occurred so far, but both the international climate finance gap left by the US as well as Trump’s disregard for climate science can imperil years of hard-won trust in the international climate negotiations as well as in established climate science, two key issues to watch moving forward.

Lara Lázaro
Senior Analyst, Elcano Royal Institute | @lazarotouza


1 The author would like to thank Gonzalo Escribano Francés and Miguel Muñoz Rodríguez for their comments and suggestions on an earlier version of the article. The usual disclaimer applies.

2 According to the National Oceanographic and Atmospheric Administration (NOAA), El Niño is a ‘warming of the ocean surface, or above-average sea surface temperatures (SST), in the central and eastern tropical Pacific Ocean. Over Indonesia, rainfall tends to become reduced while rainfall increases over the tropical Pacific Ocean’ (see What is the El Niño–Southern Oscillation (ENSO) in a nutshell?, last accessed 26/XI/2017).

3 Although rainfall in India was 5% less than average, some parts in the north-east and neighbouring countries have had more severe flooding than usual.

4UNEP (2017), ‘The Emissions Gap Report 2017’, United Nations Environment Programme (UNEP), Nairobi, last accessed 26/XI/2017.

5 The emissions gap is the difference between emissions consistent with achieving a given temperature goal, say limiting temperature increases to well below 2ºC compared to pre-industrial levels, and expected emissions according to a given set of climate commitments, for instance those of current Nationally Determined Contributions, NDCs.

6 The carbon budget is the amount of carbon that can be emitted if the goal is to stay within a certain temperature rise limit. In order to limit global mean temperature increases to 2ºC compared to pre-industrial levels, the IPCC’s Fifth Assessment Report (5AR) stated that the carbon budget amounts to 2,900GtCO2, of which 65% (1,900 GtCO2) had been used up by 2011. More updated figures by Carbon Budget estimate significantly lower remaining carbon budget, reducing the amount of years we have left to exceed the 2ºC and 1.5ºC temperature targets in the next years or decades (see Analysis: Only five years left before 1.5C carbon budget is blown, last accessed 26/XI/2017). Glen Peters at CICERO reminds that at 40 GtCO2 there are only have 20 years left until the carbon budget is exhausted at current emission levels under the assumption that meeting the IPCC’s overall carbon budget will give a 66% chance of limiting temperature increases to 2ºC. It has to be noted, however, that uncertainties and model assumptions provide a range of carbon budget estimates. For further information see How much carbon dioxide can we emit? (last accessed 26/XI/2017).

7 Note that the International Energy Agency considers CCS as key to meet out climate change commitments. However, at present issues such as safety, costs and acceptance have limited the deployment of CCS. See IEA (2016), ‘20 years of carbon capture and storage. Accelerating future deployment’, last accessed 19/XII/2017; J. Fogarty & M. McCally (2010), ‘Health and safety risks of carbon capture and storage’, Journal of the American Medical Association, vol. 303, nr 1, p. 67-68, last accessed 19/XII/2017; and T. Napp (2014), ‘Attitudes and barriers to deployment of CCS from industrial sources in the UK’, Imperial College London, last accessed 19/XII/2017.

8 M. Nachmany et al. (2017), ‘Climate change laws of the world database’, Grantham Research Institute on Climate Change and the Environment and Sabin Centre for Climate Change Law, last accessed 27/XI/2017.

10 Nachmany (2017), personal comment at COP23.

12 Q. Schiermeier (2015), ‘Landmark court ruling tells Dutch government to do more on climate change’, Nature, doi:10.1038/nature.2015.17841, last accessed 2/XII/2017.

13 Sabine Center for Climate Change Law (2017), ‘Spain archives-climate change litigation’, last accessed 2/XII/2017.

14 S. Capstick et al. (2015), ‘International trends in public perceptions of climate change over the past quarter century’, WIREs Clim Change, nr 6, p. 35-61, doi 10.1002/wcc.321.

15 Attribution studies are needed to establish the causal link between a given event and climate change. However, climate science warns that extreme weather events such as severe storms, droughts and cyclones will become more frequent and severe due to climate change.

16 European Commission (2017), ‘Special Eurobarometer 459’, last accessed 30/XI/2017.

17 L. Lázaro (forthcoming), ‘Citizens and climate change. From Homo Economicus to Homo Climaticus?’, ARI, Real Instituto Elcano.

18 N.W. Adger (2013), ‘Changing social contracts in climate change adaptation’, Nature Climate Change, doi 10.1038/NCLIMATE1751, last accessed 3/XII/2017); and R.T. Byerly (2013), ‘Business IN society: the social contract revisited’, Journal of Organisational Transformation & Social Change, vol. 10, nr 1, p. 4-20, doi 10.1179/1477963312Z.0000000002, last accessed 3/XII/2017.

19 D. Cardwell (2017), ‘Exxon Mobil shareholders demand accounting of climate change policy risks’, New York Times, 31/V/2017, last accessed 1/XII/2017.

20 Institutional Investors Group on Climate Change (2017), ‘Investors update guidance to strengthen engagement on climate risk with oil and gas companies’, last accessed 1/XII/2017.

21 Pew Research Center (2017), ‘Globally, people point to ISIS and climate change as leading security threats’, last accessed 30/XI/2017.

22 Real Instituto Elcano (2017), ‘Barómetro de la Imagen de España. 7ª oleada’, last accessed 2/XII/2017.

23 Real Instituto Elcano (2016), ‘Barómetro del Real Instituto Elcano. 38ª oleada’, last accessed 6/XII/2017.

24 M. Hanemann, X. Labandeira & M.L. Loureiro (2011), ‘Public preferences for climate change policies: evidence from Spain’, Documento de Trabajo nr 2011-06, Federación de Estudios de Economía Aplicadajo, http://documentos.fedea.net/pubs/dt/2011/dt-2011-06.pdf, last accessed 2/XII/2017.

25 E. Johnson & G. Nemet (2010), ‘Willingness to pay for climate policy: a review of estimates’, Working Paper Series, La Follette School Working Paper nr 2010-011, last accessed 30/XI/2017.

26 IEA (2017), ‘IEA finds CO2 emissions flat for third straight year even as global economy grew in 2016’, last accessed 30/XI/2017. Key contributors to current GHG emissions in percentages in 2014 include: China (30%), US (15%), EU-28 (9%), India (7%), Russia (5%), Japan (4%) and others (30%), according to T.A. Boden, G. Marland & R.J. Andres (2017), ‘National CO2 emissions from fossil-fuel burning, cement manufacture, and gas flaring: 1751-2014’, Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, US Department of Energy, doi 10.3334/CDIAC/00001_V2017. See also WRI (2015), ‘Infographic: what do your country’s emissions look like?’, last accessed 22/XI/2017.

27 A. Averchenkova & S. Bassi (2016), ‘Beyond the targets: assessing the political credibility of pledges for the Paris Agreement. Policy brief’, Grantham Research Institute, last accessed 2/XII/2017.

28>/ UNFCCC (2017), ‘2018 Talanoa dialogue’, last accessed 6/XII/2017.

29 See G. Escribano (2017), ‘Delirios de carbono’, Comentario Elcano nr 28/2017, Elcano Royal Institute, 6/VI/2017, last accessed 2/XII/2017; L. Lázaro (2017), ‘Trump versus the planet? No global climate action derailment but uncertainty on the horizon’, Elcano Blog,, last accessed 19/XII/2017; and L. Lázaro (2017), ‘The Paris Agreement after Trump and the future of climate action’, Expert Comment nr 29/2017, Elcano Royal Institute, 6/VI/2017, last accessed 19/XII/2017.

30 NERA Economic Consulting (2017), ‘Impacts of greenhouse gas regulations on the industrial sector’, last accessed 11/XII/2017.

31EPA (2015), ‘Climate change in the United States: benefits of global action’, US Environmental Protection Agency, Office of Atmospheric Programs, EPA 430-R-15-001, last accessed 11/XII/2017.

32 Sergey Paltsev Sokolov, Henry Chen & Erwan Monier (2016), ‘Climate impacts of the Paris Agreement’, Geophysical Research Abstracts, vol. 18, EGU2016-8016, last accessed 11/XII/2017.

33 US Department of State (2017), ‘Communication regarding intent to withdraw From Paris Agreement’, last accessed 4/XII/2017.

34 Ibid.

35 S. Waldman (2017), ‘Government seeks scientists’ doubts for climate court battle’, E&ENews, 4/XII/2017, last accessed 7/XII/2017.

36 M. McGrath (2017), ‘Europe steps in to cover US shortfall in funding climate science’, BBC, 15/XI/2017, last accessed 5/XII/2017.

37 Council of the EU (2017), ‘Climate finance: EU and member states' contributions up to €20.2 billion in 2016’, last accessed 5/XII/2017.

38 L. Lázaro & E. Esteban (2016), ‘China and climate change: the good, the bad and the ugly’, ARI nr 70/2016, Elcano Royal Institute, 3/X/2016, last accessed 5/XII/2017.

39 Amounting to just under a third of renewable investment globally in 2016 but with a significant drop in investment compared to 2015. See Frankfurt School-UNEP Centre/BNEF (2017), ‘Global trends in renewable energy investment 2017’, last accessed 5/XII/2017.

40 CGTN (2017), ‘Full text of Xi Jinping keynote at the World Economic Forum’, last accessed 5/XII/2017.

41 Xinhu (2017), ‘China’s new meteorological satellite monitors global carbon emissions’, China Daily.com, 15/XI/2017, last accessed 5/XII/2017.

43 OECC (2017), ‘Nota sobre los principales resultados de la Cumbre del Clima de Bonn’, last accessed 3/XII/2017.

44 See FCCC/CP/2017/L.13.

45 Carbon Brief (2017), ‘COP23: key outcomes agreed at the UN climate talks in Bonn’, last accessed 12/XII/2017.

46 O. Serdeczny (2017), ‘Loss and damage at COP23 – goals, roadblocks and detours’, Climate Analytics, last accessed 12/XII/2017.

47 Wuppertal Institute (2017), ‘A first assessment of the COP23’, last accessed 12/XII/2017.

50 See Land use and forestry proposal for 2021-2030, last accessed 12/XII/2017.

51 See Clean Energy for All Europeans, last accessed 12/XII/2017.

52 The 16 EU countries that have ratified the Doha Amendment at the time of writing include Belgium, Cyprus, Finland, France, Germany, Hungary, Italy, Lithuania, Luxembourg, Netherlands, Portugal, Romania, Slovakia, Spain, Sweden and the UK. The full list of ratifications can be seen at Doha Amendment to the Kyoto Protocol (last accessed 9/XII/2017.

53 Reuters (2017), ‘Poland aims to sign global climate deal amendment this year’, 16/XI/2017, last accessed 8/XII/2017.

54 In any case, the real value of the ratification is symbolic as even EU ratification will not mean going over the 144 ratifications needed for the Doha Amendment to come into force.

55 See FCC/SBI/2017/L.29 for further reference.

56 See FCCC/SBSTA/2017/L.29 for further reference.

58 A. von Lehe, (2011), ‘Cities, climate and COPs’, Southeastern Environmental Law Journal, vol. 19, nr 2, p. 218-229.

59 UNFCCC (2016), ‘Road map for global climate action’, last accessed 11/XII/2017.

61 Spanish companies that had joined the 2050 Pathways Platform prior to COP23 include ACCIONA, Correos, FERROVIAL, Gamesa Corporación Tecnológica, Gas Natural, Gestamp, Grupo Logista Spain, Iberdrola, Inditex, Maessa and NH Hotel Group. See: 2050 pathways platform announcement, last accessed 11/XII/2017.

62 UNFCCC (2017), ‘Climate action now. Summary for policymakers 2017’, last accessed 11/XII/2017.

63Powering Past Coal Alliance Declaration’, last accessed 11/XII/2017.

64 See L. Meade (2017), ‘Countries launch “Powering Past Coal” Alliance’, last accessed 22/XII/2017.

65 See One Planet Summit - The 12 #OnePlanet Commitments, last accessed 22/XII/2017.

66 Businesses and organizations in the Powering Past Coal Alliance: Abraaj Group, Alterra Power Corp., ArcTern Ventures, Autodesk, Avant Garde Innovations, BT, CCLA Investment Management Limited, Diageo, DSM, Econet Group, EcoSmart, Electricité de France (EDF), Engie, GreenScience, Iberdrola, Kering, Marks and Spencer, Natura Cosmetics, Ørsted, Pacific Islands Development Forum, Salesforce, Storebrand, Unilever and Virgin Group. See: Powering Past Coal Alliance Declaration, last accessed 22/XII/2017.

67 Climate Analytics (2016), ‘Implications of the Paris Agreement for coal use in the power sector’, last accessed 11/XII/2017.

69 I. García Tejerina (2017), personal communication.

70 Agriculture and land use, land use change and forestry are the only two sectors included in the negotiations due to their relevance for developing countries. See FCCC/SBSTA/2017/L.24/Add.1.

71 Brazil, Argentina and Uruguay coordinated their positions ahead of COP23. See Argentina, Brasil y Uruguay coordinan posiciones para la COP 23 de Cambio Climático, last accessed 22/XII/2017.

72 For a brief explanation of Global Warming Potentials see Understanding Global Warming Potentials, last accessed 22/XII/2017.

73 Carbon Brief (2017), ‘COP23: key outcomes agreed at the UN climate talks in Bonn’, last accessed 12/XII/2017.

74 Marrakech initiative on Global Climate Action (2017), ‘The Ocean Pathway. A strategy for the ocean into COP23. Towards an ocean inclusive UNFCCC process’, https://cop23.com.fj/wp-content/uploads/2017/11/The-Ocean-Pathway-Strategy-8.11.2017.pdf, last accessed 9/XII/2017.

75 In terms of mitigation and impacts the ‘Ocean Pathway’ underlines that oceans are key in ‘management of carbon, the absorption of heat and regulation of global weather patterns… climate change has negative impacts on the ocean in terms of acidification, warming, rising sea levels and de oxygenation’.

78 J. Kock (2017), personal communication. See also Koh (2016), ‘Bridging the adaptation gap: approaches to measurement of physical climate risk and examples of investment in climate adaptation and resilience’, Discussion paper, November, last accessed 11/XII/2017.

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<![CDATA[ The Paris Agreement after Trump and the future of climate action ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/commentary-lazaro-paris-agreement-trump-future-climate-action 2017-06-06T05:10:53Z

The message from world leaders is clear: there is no intention of abandoning an agreement that has taken over five years to negotiate. The world will move forwards towards a low-carbon future despite Trump’s efforts to hold it back.

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On 1 June 2017, the 45th President of the US, Donald Trump, announced his government’s withdrawal from the Paris Agreement. The announcement, though disappointing for the global community, was expected. As such, statements from major greenhouse-gas emitters such as China and the EU were ready to be released shortly after Trump’s withdrawal speech. The message from world leaders is clear: there is no intention of abandoning an agreement that has taken over five years to negotiate and there is no possibility of renegotiation at the request of a single nation. The world will move forwards towards a low-carbon future despite Trump’s efforts to hold it back. The environment, the economy and the people need a low-carbon transition.

The withdrawal and renegotiation announcement by President Trump has been heavily criticised. It makes little sense to try to renegotiate an agreement that is legally binding on procedural issues, which is based on Nationally Determined Contributions (NDCs) that countries voluntarily submitted, and which takes into account the principle of common but differentiated responsibilities and respective capabilities while being mindful of national circumstances. No country imposed any obligations on others, either in terms of reducing GHG emissions or as regards contributions to the Green Climate Fund. The hybrid nature of the agreement –with rule development, oversight and five-year reviews taking place at the international level, and contributions decided at the domestic level– ensures voluntary pledges that are in the countries’ own interests.

“Trump based much of his withdrawal speech on the cost of climate action. However, there are a number of reasons why his arguments are highly questionable”

Trump based much of his withdrawal speech on the cost of climate action. However, there are a number of reasons why his arguments are highly questionable: the study he cited did not include the benefits of action (ie, ignored the costs of inaction), innovations and evolving technology costs were ignored, and labour market figures were both misunderstood by Trump and incomplete in the study. Nevertheless, analysing the labour market consequences of a low-carbon transition and ensuring a just transition for workers is a relevant and, to date, underexplored issue. Designing measures in national climate laws that are in the making to ensure workers can adapt to a low-carbon economy will, probably, increase the likelihood of citizens buying-in climate policies.

In addition to the above, Trump’s claim that full implementation of the NDCs would only reduce temperatures by 0.2ºC is arguably underestimating the impact of the full implementation of the Paris Agreement. The MIT states that full implementation of the Paris Agreement would lead to a reduction in global mean surface air temperature (SAT) of between three and 5.5 times higher than claimed by Trump. This means a reduction in SAT of between 0.6ºC and 1.1ºC by the end of the century compared with a no-policies scenario. While this is insufficient to limit global mean temperature increases to well below 2ºC compared with preindustrial levels, as full implementation will mean overshooting the 2ºC guardrail by about one degree, it is hardly insignificant progress. Additionally, big emitters such as China and India are recognised to be on track to over-complying with their initial Paris commitments, partially counteracting the US rollback of federal climate regulations.

What does US withdrawal from the Paris Agreement mean? The consequences can be analysed both within the US and internationally. For the US, withdrawal implies single-handedly isolating itself from the international climate diplomacy community, a move that damages its credibility as a trustworthy partner in negotiating global matters. It also means squandering the political capital invested in designing the key features of the agreement and its rulebook and frustrating climate negotiators worldwide. Frustration will arguably result from the fact that the architecture of the Paris Agreement was in part designed to suit US political constraints.

“US withdrawal from the Paris Agreement has also effectively erased the global climate leadership the Obama Administration nurtured”

US withdrawal from the Paris Agreement has also effectively erased the global climate leadership the Obama Administration nurtured, especially during his second term in office. States, cities and American corporations are, however, manifesting their intention of pushing ahead with ambitious commitments. In fact, after Trump’s announcement it was reported that Michael Bloomberg is leading a group of mayors, governors, university chancellors and companies in negotiating the acceptance of their commitment pledges under the UNFCCC along with those of other parties. Currently, non-state actor pledges are held under the Non-State Actor Zone for Climate Action (NAZCA) platform and the 2050 pathways platform, among others.

Further consequences of US paralysis on climate action could include transition risks such as those identified by the Task Force on Climate-related Financial Disclosures. One such example is the US government’s greater exposure to climate-related litigation, a concern voiced by Trump during the withdrawal speech that is unlikely to be circumvented by withdrawing from the Paris Agreement. Additional transition risks that can be faced by the US and its companies are related to the market opportunities forgone in competing for the demand for low-carbon goods and services (estimated to be worth US$4.2 trillion), the loss of reputation and facing sectorial stigmatisation.

For the world, losing the second-largest GHG emitter in the global fight against climate change is not good news. Preventing dangerous interference with the climate system will become harder after Trump’s withdrawal announcement. US non-state actors and the remaining parties to the Paris Agreement now have the task of filling the void left by yet another US climate default (the first being its failure to ratify the Kyoto Protocol). It also becomes more expensive for developed countries to meet the Copenhagen, Cancun and Paris pledges, including the commitment to disburse US$100 billion annually from 2020 onwards to foster mitigation and adaptation by less developed countries.

Now more than ever, leadership by the EU and China is essential to drive the world’s transition to a low-carbon future, but they will need other regions and actors to collectively implement current commitments and should rise to the occasion to respond to one of the world’s most pressing challenges.

Lara Lázaro
Senior Analyst, Elcano Royal Institute
| @lazarotouza

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<![CDATA[ Energy and the climate in 2017: limited volatility, climate implementation and political uncertainty ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari42-2017-escribano-lazaro-energy-climate-2017-limited-volatility-uncertainty 2017-05-22T05:28:48Z

The main factors likely to shape the energy and climate fields in 2017 are: a relatively contained volatility in the prices of oil and the implementation of increasingly ambitious climate policies in a context of political uncertainty.

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Original version in Spanish: Energía y clima en 2017: volatilidad contenida, implementación climática e incertidumbre política

Theme

The main factors likely to shape the energy and climate fields in 2017 are: a relatively contained volatility in the prices of oil and the implementation of increasingly ambitious climate policies in a context of political uncertainty.

Summary

The year 2016 bequeathed Spanish foreign policy some major and pressing challenges in the arena of energy and climate: the swift coming into force of the Paris Agreement, the completion of the rulebook following COP22, the energy and climate uncertainties stemming from Brexit and the Trump Administration, the long-awaited Energy Union Winter Package and an agreement between OPEC and Russia to restrict oil production. Many of these are, in fact, developments that had already emerged by the end of 2016, and thus will to a large extent mark what 2017 brings. The present analysis offers a number of conjectures regarding: (1) the geopolitics of oil prices; (2) the central importance that the evolution of European energy policy will have for Spain; (3) the future of aspirations surrounding the climate; (4) the development and implementation of European and Spanish climate policy; and (5) the opportunities that emerge from the leadership vacuum that the US is expected to leave in international climate talks.

Analysis

The geopolitics of oil prices

Last year it was suggested that, in light of the demand and supply forecasts, the oil market would continue being affected by an excess of supply likely to keep prices low. From among the highly varied forecasts, a range was quoted for a barrel of Brent that went from US$55.78 (forecast by the US EIA) to US$37 (forecast by the World Bank), limits that did indeed encompass market movements in 2016, which averaged approximately US$45. After collapsing at the beginning of the year, the price of Brent crude recovered with the first tentative signals of intervention from OPEC, eventually exceeding US$50 in the summer. With summer over the price fell rapidly to around US$45, returning at the end of September with the first serious warnings of production cuts announced by OPEC in Algeria.

At the end of November OPEC reached an agreement, the first in eight years, to cut production by 1.2 million barrels a day, to which a group of non-OPEC producers led by Russia later added another cut of 558,000 daily barrels (Russia accounting for 300,000, Mexico 100,000 and Oman, Azerbaijan, Kazakhstan, Malaysia, Equatorial Guinea, Bahrain, Brunei and the two Sudanese republics smaller quantities). Prices rose rapidly in response, ending the year at around US$55 per barrel. The agreement came into force in January 2017 and is valid for six months, extendable for another six. It will be necessary to wait for the end of the first quarter of the year and the data for oil tanker movements to check compliance with the agreement, but various producers, such as Saudi Arabia, Kuwait and Iraq, have made considerable noise about their production cuts during the first weeks of 2017.

The oil price forecasts for 2017 are, as always, highly diverse. Keeping the same sources used in 2016, the range goes from the US$53 forecast by the US EIA to the US$55 forecast by the World Bank. Clearly, other forecasts broaden the scope for increases, some even exceeding US$60, such as those of Merrill Lynch and Bank of America. Other analysts by contrast predict that the rapid response of non-conventional US oil could take price back to below US$50 towards the end of the year. Among the producers, Gazprom forecasts prices in the US$50-55 range for 2017, the Saudi Arabian budget for this year assumes equally conservative prices, and Iran is working on the basis of similar ranges. In a survey carried out by Reuters of 28 analysts at the beginning of December 2016, some days after the OPEC agreement, the forecasts ranged between US$83 and US$50, and the average was US$57.

It appears that there are lower expectations of price volatility, with a tightening in the ranges of the forecasts, above all in a downward direction. The significant volatility in the oil price has been described as one of the main failures in the governance of globalisation, so its eventual mitigation is likely to have highly positive geopolitical and geo-economic effects. There are, however, differences in the forecasts regarding the evolution of oil market fundamentals for 2017. The US EIA predicts that oil supply will continue to outstrip demand until at least 2018, barring seasonal peaks in demand during the summer. By contrast, the International Energy Agency (IEA) in its January 2017 Oil Market Report forecasts a rebalancing of the market in 2017 caused by an excess of demand over supply, and the consequent consolidation of prices.

Be that as it may, 2017 dawns with new questions: will the agreements to restrict production be respected, either by OPEC or the non-OPEC countries? Will they suffice for eliminating over-supply or encourage non-conventional US production to a greater or lesser degree than forecast? What will be the impact of the Trump Administration’s energy policy? Will there be positive geopolitical surprises like a rapid recovery of production in Libya and Nigeria, not subject to OPEC cuts? Or, on the contrary, could negative developments arise in these and other scenarios?

The price forecasts reflect different answers to all these questions. If discipline between OPEC and Russia holds, prices could firm up over the course of the first half of the year. An extension of the agreement covering the second six months, added to the seasonal increase in demand in the summer, could help to drive the price towards the upper end of forecasts. Experience shows that OPEC has serious difficulties in maintaining discipline among its members over long periods of time; moreover, the OPEC/non-OPEC deal, which includes non-OPEC countries with little in common, ranging from Mexico to Brunei, lacks mechanisms for maintaining discipline. In this context, and in light of the fiscal problems constraining many producers and the incentive not to comply with the agreed production cuts, maintaining discipline appears relatively simple for the first half of the year, but less so for the second.

Extending the agreement to the second half of the year would require new negotiating efforts and probably cuts (in response, for example, to the recent growth in Libyan and Nigerian production), plus a new distribution of concessions and obligations. The initial production cuts were announced by various OPEC producers in the first few days of 2017, particularly Saudi Arabia and its Gulf allies. In fact, the Saudi Oil Minister, Khalid al-Falih, announced on 16 January at the World Economic Forum that the agreement might not be extended if prices consolidate production at their current levels, and that he doesn’t ‘lose sleep’ over US producers of shale. At the beginning of February the Director of the National Iranian Oil Company announced in response that Iranian production would exceed 4 mbd by March, without even mentioning the OPEC deal.

In any event, if the agreement is adhered to, it is likely that towards the end of the year the response of the US frackers will restrict the price rise by increasing their output, almost all of it profitable at what would be the higher end of the prices being forecast. If there is any certainty in the Trump Administration’s energy policy it is that it no longer puts any hurdle in the way of expanding oil production and fracking, despite the obstacles erected by Obama in the last days of his government. It should be remembered however that what drives US output stems not so much from regulations as the structure of the market and the price vectors, which in the current environment are much more important than the energy policy of the new president, whose impact on hydrocarbons is expected to be limited.

Although to a lesser extent, other producers may also respond with increases in output, such as Latin American and African deep water producers and North Sea output. Indeed, the OPEC/non-OPEC deal excludes some of the largest oil producers in the world, such as Canada and Brazil, and could encourage the oil reforms envisaged by producers such as Argentina. Over the medium term, the producers in the Middle East are aware of the major reserves of non-conventional hydrocarbons in China (their main customer). They also know that if any country can replicate the US fracking revolution, albeit by different means, that country is China. But in the short term, the challenges for OPEC and Russia will be, first, to maintain the production-cuts deal in the second half of the year; and secondly to seek an exit strategy from the agreement to avoid the collapse in prices that has followed every failed attempt to rig the market fundamentals in a lasting way.

As far as the geopolitical risks are concerned, they seem to have been relegated to a secondary role by the scope of the agreement between OPEC and, essentially, Russia. Perhaps one of the least-noticed aspects of the talks among producers concluding in late 2016 is that the prominent role afforded to Russia seems to offer a sort of ‘geopolitical insurance policy’ against the volatility of oil prices. Russian mediation between Saudi Arabia and Iran in the OPEC negotiations, and the way the conflicts in Syria and Iraq unfold, mitigate the geopolitical risks and demote them to a secondary status.

Russia will also be the focus of US energy policy. The new President and his Secretary of State will need to take decisions on such issues as the continuation or otherwise of sanctions against the Russian oil industry and the nuclear pact with Iran. In the case of the former, it does not seem compatible to lessen sanctions against a country that commits itself to negotiating and fixing production quotas to rig the market fundamentals: it is not necessary to lift sanctions on a state that chooses to sanction itself; or, if they are lifted, at least demand a renouncement of output quotas. In the case of the latter, the OPEC agreement mediated by Russia already restricts the increase of Iranian output, regardless of the Trump Administration’s foreign policy considerations and the importance that Russia plays in them. Meanwhile, Russia has recently acknowledged that the advent of Trump could increase US gas exports to Europe and create a new geo-economic rivalry that the Russian government has hitherto discounted.

The recovery in prices will do something to ease the economic tensions of producer countries, but not enough to avoid the need for continued belt-tightening measures. The political economy characterised by oil prices at around the US$50-60 mark continues posing serious problems to the governments of producer countries, although it enables more gradualist approaches to the reforms that are needed. It should be remembered that Saudi Arabia has announced a record fiscal shortfall, obliging the regime to cut subsidies, double the price of petrol and reduce civil servants’ wages by as much as 20% for high-ranking posts, something unprecedented in the country. The deterioration of the Saudi economy also has implications for Spain, which in 2015 exported more than €3 billion-worth to Saudi Arabia, the seventh-largest market for Spanish exports in that year outside the EU, ahead of Brazil, Japan and South Korea. Venezuela, incapable of halting the decline in its output, is one of OPEC’s traditional hawks, but it seems unlikely that the level of prices being forecast will suffice to stem its serious economic woes.

Such difficulties become more acute among producers engaged in costly ongoing conflicts, such as Saudi Arabia itself (with Yemen), Iraq, Libya and Nigeria. Offering forecasts in the case of Libya is virtually impossible, except that any geopolitical impact was discounted years ago. In any event, the most recent news about Libyan output is positive: in January 2017 it stood at almost 700,000 barrels a day, more than double the 300,000 being produced last September. In Nigeria too it is likely there will be a consolidation of the recovery in production as the government’s management of problems in the Niger Delta improves. Lastly, Algeria remains in a situation of ongoing deterioration, with its economic and energy reforms semi-paralysed due to the uncertainty over President Bouteflika’s succession, but the risks are tending to decline as crude prices stabilise.

From the consumers’ perspective, whether they be countries, companies or individuals, it seems reasonable to accept that oil prices as low as those of the last two years could not last indefinitely; and that, as a consequence, national economies, companies’ strategies and consumers’ decisions will need to adapt to the stabilisation forecast for oil prices. These are likely to remain at levels not too dissimilar to current ones, although perhaps with a certain risk of price rises as the year unfolds. The impact of rising prices was already evident at the beginning of the year with the increase in natural gas prices (partly due to their indexation to oil prices, and partly to the increase in demand caused by the technical shut-down in the French nuclear industry) and the consequent rise in electricity prices.

Climate change in 2016: an eventful year

2016 was characterised by both positive and negative developments in the climate arena. After the diplomatic climax of COP21 and the ratification of the Paris Agreement by China and the US, the Agreement entered into force ahead of COP22 in Marrakesh, thanks to ratification by the EU, among others. It is the first time in the history of the climate talks that an agreement has come into force less than a year after being signed, which indicates the importance of climate change to the global agenda.

Another positive element that accompanied the Paris Agreement coming into force was the passing of the Kigali Amendment to the Montreal Protocol for the gradual elimination of the use of hydrofluorocarbons (HFCs). Progress has also been made in the transport sector. 2016 saw the approval of the global mechanism for offsetting emissions devised by the International Civil Aviation Organisation (ICAO). For its part the International Maritime Organisation (IMO) has adopted a system for collecting data on ships’ fuel consumption and measures related to reducing emissions of greenhouse gases are expected in 2018.

The agreements reached by the international community represent an unprecedented global commitment to a transition towards a low-carbon development model. It is a commitment founded on a decrease in the cost of renewable energies, on better scientific knowledge of the effects of climate change, on business opportunities for the companies that lead the transition towards a low carbon economy, on growing concern about the effects of climate change among the general public and on citizens’ demands for climate initiatives on the part of their governments.

The commitment to climate action has also been joined by the international financial industry, which since 2016 has had a report, piloted by Michael Bloomberg and Mark Carney, on voluntary disclosures relating to the climate risks that companies are exposed to and drawn up by the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board. Information about exposure to climate risks (and the ability to manage them) will be of immense value to investors and insurers, who will have the information needed to differentiate between investments in businesses that are acquainted with their climate risks and manage them proactively and those that are unaware of them.

The aforementioned progress and commitment indicate that climate action is irreversible, as the international community declared at COP22. However, 2016 was also the first acid test for the Paris Agreement. On 8 November Donald Trump was elected the new President of the US. As the second-largest producer of greenhouse gases, US climate policy is crucial to reducing carbon in the global economy.

Although there is uncertainty about the steps Trump will take at a federal level, the president-elect’s declarations on the climate issue, the appointment of climate-change sceptics opposed to Obama’s climate policy, such as the former Governor of Texas Rick Perry to head the Department of Energy, the Attorney General of Oklahoma Scott Pruitt to lead the Environmental Protection Agency (EPA) and the naming of Rex Tillerson, former Chairman and CEO of Exxon Mobile, as Secretary of State and head of US diplomacy, do not augur well. Indeed, the Trump Administration’s recently-published energy plan (An America First Energy Plan), outlines in the space of barely one page aspirations to increase domestic energy output, liberate the country from OPEC and drastically cut energy regulations, without even mentioning renewable energy or climate change, apart from affirming the Trump commitment to abandoning Obama’s Climate Action Plan.

Moreover, the initiatives that were unveiled in the first two weeks of Donald Trump’s presidency confirm the fears surrounding the new US government’s lack of ambition in the climate field. There are clear signs of a change of direction in US climate policy, such as: the deletion of references to climate change on the White House website; the restrictions imposed on communications and publications released by institutions of such acknowledged international renown as the EPA and the plans to dismantle this institution; the repeal of the law that limited methane emissions from oil and gas exploration and production processes; and the signing of two executive orders to proceed with the construction of two oil pipelines (Dakota and Keystone XL).

It should also be remembered that Trump committed himself during his campaign to revoke the Clean Power Plan, whereby the US undertakes to reduce emissions released from thermoelectric power plants by 32% by 2030 compared to 2005 levels. It is also likely that Trump will ‘cancel’ the Paris Agreement, and he seems set to do this soon. But in any event, according to article 28 of the Paris agreement, the US will not be able to withdraw prior to 2019. Finally, it is expected that Trump is unlikely to honour US financial commitments on climate issues.

The response from scientists, activists and politicians has been swift. Various universities in the US and Canada have been storing climate data on private servers since December. A march for science and against post-factual science policies has been organised for 22 April 2017, Earth Day. It is also worth pointing out that there is likely to be ongoing support for climate policy from individual US states and cities. Moreover, the fall in the costs of renewable energies and the competition from other fossil fuels make investments in coal, for example, increasingly less attractive. That said, despite all the initiatives under way to offset Trump and the relatively limited scope of the measures at a federal level, uncertainty is once again haunting hopes for the climate, potentially delaying the transition to cleaner energy.

An additional annoyance for Spain is the prominence of the role that the Institute for Energy Research will play in US energy policy: some readers may remember this ‘delightful’ Republican think-tank publishing a pamphlet in which it fallaciously concluded that for every post created by renewable energies in Spain, 2.2 had been destroyed in the rest of the economy.

Turning again to the international scene, the domino effect that Donald Trump’s electoral victory could have had on international climate talks –with China, among others, potentially reducing its level of ambition and paralysing negotiations– has not transpired. On the contrary, the international community meeting in Marrakesh sent out a message of unity amid the prospective challenge of climate change. The cause of this retrenchment in the acquired climate commitments may lie in governments’ awareness of the transition that has taken place from an international system of dividing up the mitigation efforts towards a situation in which countries and businesses compete for the opportunities stemming from a low-carbon economy.

A good example of the competition for the opportunities arising from a global energy transition has been provided by China in recent years. The exhaustion of an economic model highly dependent on greenhouse gas emissions, with the undesirable socio-economic and environmental consequences that accompany such a model, is giving way to a new economic model in China, underpinned by the country’s 13th Five-Year Plan (2016-20). China has set a course towards a model that produces lower emissions, competes for the renewable technologies market and bolsters its international standing as a fundamental player, and increasingly important asset, in the climate arena, among other goals. The figures in the renewable field are overwhelming: in 2016 China more than doubled its installed photovoltaic capacity relative to the preceding year (77GW in 2016, compared to 34GW in 2015) and has a third of the world’s wind capacity (more than 145GW of the 433GW installed worldwide in 2015). The alignment of Chinese social, economic and environmental interests is bringing about a change in international climate leadership.

In the European context, one of the potentially destabilising elements for climate policy in 2016 was the UK’s decision to leave the EU. Indeed, the uncertainties about the effects of Brexit on the fight against climate change are considerable. Given that the UK and EU climate policies have evolved in a coordinated manner in the past it may be expected that they will continue to be fundamentally aligned in the future, but Europe has lost a skilful negotiator on the international climate scene. Europe has also lost a (generally) ambitious partner on climate issues, something that lends more relative weight on EU climate decisions to member states that are less proactive on the carbon-reduction front, such as Poland and Italy. The effect of Brexit, while not being devastating to the climate process, could alter and delay the European energy transition. The mid- to long-term effects on the European Union Emissions Trading System (EU-ETS) and on the Effort Sharing Regulation (ESR), which impinges on the so-called diffuse sectors (businesses, residential, transportation and agriculture) are also unclear, and the uncertainties seem unlikely to be resolved in 2017.

As far as European leadership on climate issues is concerned, the situation that arose in 2016 recalled in some respects, all things being equal, the one seen in 2001 when the US failed to ratify the Kyoto Protocol, sowing doubts about the future of the international climate regime. Then, Europe took the lead in the international talks that culminated in the protocol coming into force in 2005. As happened on that occasion, the vacuum the US will create in the international climate talks in 2017 could present a new opportunity for Europe to resume its executive leadership role, this time accompanied by, among others, the other members of the High Ambition Coalition, the Climate Vulnerable Forumand China –on this occasion it will be more difficult for Europe to lead on its own, in part due to the Brexit effect and to the need to reconfigure the European project–.

Foreign policy, energy and climate change: European energy policy and the Winter Package

2016 was an important year for European energy policy, with the approval at the end of November of the Energy Union’s Winter Package. Apart from its somewhat unfortunate name, which the Commission is trying to replace, without great success, with the slightly more palatable Clean Energy for all Europeans (in line with the UN Sustainable Energy for All initiative), the package represents, together with the evolution of oil prices, the other major challenge of 2017 for member states’ energy policies, the companies in the sector and European consumers. The new energy package is a significant transition in the orientation of Europe’s foreign energy policy and the Energy Union itself, which may be summed up by the formulation ‘“from Tusk to Musk’. The Energy Union came into being as an initiative linked to Donald Tusk, the then Polish prime minister and now president of the European Council, aimed at encouraging the diversification of European gas imports from Russia following the succession of Ukrainian gas crises.

By contrast, the Energy Union Winter Package seems to replace the geopolitical strategy of reducing Europe’s dependency on Russian gas imports with one of diversifying its sources of energy towards renewables and reducing reliance on fossil fuels, including natural gas. Its support for renewable energies, especially decentralised ones and electric vehicles, as well as their pan-European regulation and the fostering of intra-European flows of renewably-produced electricity, seem to offer a prospect that differs from that originally envisaged by the Energy Union. The Winter Package thus seems to have more in common with the tech vision of Elon Musk and the plans of his company Tesla than the geopolitical ambitions initially set out by Donald Tusk.

It is unavoidable for Spain to participate actively in this conceptual shift in EU energy policy, which now not only covers the traditional aspects of the secure continuity of supply of hydrocarbons, but also increasingly the geopolitical aspects of the evolution of renewable energy sources, including exchanges of renewably-generated electricity, both within the EU and with its neighbours. A detailed analysis of the Package is impossible given its breadth, and therefore the paragraphs that follow are restricted to highlighting the opportunity it represents for Spanish foreign policy.

The Winter Package entails that the foreign energy policy of the new government will continue being focused in 2017 on the electricity aspects of the Energy Union. This dimension affects top-priority issues for Spain’s European energy policy, ranging from interconnections to the treatment of renewables and cross-border electricity flows, and including the situations of cities and islands regarded as peripheral and the governance of the Energy Union itself. Member states are obliged to submit Integrated Energy and Climate Plans covering 10 years to reach the 2030 targets: for example, how to reach the 15% electricity interconnection target, contribution to the 27% renewables target and 30% efficiency target (assuming the proposal is approved by the Commission), and how to improve the energy security situation. The government will need to submit a draft of its plan to the Commission on 1 January 2018, when a process of planning, monitoring and programmed communication will get under way in parallel with the Paris Agreement.

But the European legislative process in the Parliament and Council begins much earlier, in the first months of 2017 and augurs problems. It is likely that Parliament will demand more ambitious commitments (for example, 40% in efficiency and a more ambitious renewables target) and the Council will focus on the aforementioned agreed targets. The way energy policy is handled, the commitment to consumers and self-generation could also be sources of controversy. From the foreign policy perspective, the government will continue emphasising interconnections with France, but will need to make them manifest in the aforementioned Integrated Plan, which will mark out the rules of the game for the Spanish electricity sector over the course of a decade.

The whole of this process offers Spain a major opportunity in terms of its standing abroad. Possibly for the first time in many years, Spain finds itself in 2017 in a position to contribute constructively and creatively to European energy policy. The new government finds itself with a restructured sector that is freed from the burden of the tariff deficit, with a substantial international reputation, and with a climate policy that is firmly anchored in the Paris Agreement. It seems an ideal moment for raising the pitch of Spanish foreign policy in the energy arena, particularly in Europe. It is important for both the government and the various political parties to be able to overcome their differences at the domestic level, with consensuses emerging such as those related to energy poverty and climate change, in order to focus more attention on the international dimension of energy, at least in the European context. To extend an earlier idea, there is a gulf from Tusk to Musk that may prove to be particularly fertile for Spanish energy interests.

Closely linked to the preceding point, 2016 ended with a joint declaration, agreed on the sidelines of COP22 in Marrakesh, on a roadmap for sustainable electricity trading between Morocco and the EU, signed by the host country, Germany, Spain, France and Portugal. Its aim is to facilitate the exchange of renewable electricity and electrical integration with Morocco. Over the course of 2017 an implementation deal will need to be agreed, the signing of which has been set for COP23. Also in December of last year, at the meeting of Energy Ministers of the Union for the Mediterranean (UfM) in Rome, a ‘regional improvement framework’ was agreed for Euro-Mediterranean energy cooperation. This enables the implementation of joint projects across the three Euro-Mediterranean platforms of gas, electricity and renewables.

The Elcano Royal Institute has consistently emphasised the external benefits for Spanish foreign policy of this type of structural agreement and of establishing an attractive narrative for them. This enables the country to be perceived as Europe’s and Morocco’s comrade in their energy transitions, complementing Spanish advocacy for the interconnections while strengthening energy relations with Morocco. It would be advisable to extend this capacity for cooperation to countries such as Algeria, where Spain could contribute in a major way to establishing a more attractive narrative for Euro-Algerian energy relations. Spain can also rely on other European initiatives, such as the aforementioned UfM platforms for gas, electricity and renewables, and strengthen the activity and visibility of its foreign policy in the energy arena.

European climate change in 2017: implementation and design

Internally, Europe will continue working throughout 2017 on projects to reform the European emissions trading system (EU-ETS), the ESRand the dossier on land-use, land-use change and forestry (LULUCF), which are in a highly advanced stage.

On 15 February the European Parliament will vote on the EU-ETS reform, the main aim of which is to give a clear long-term pricing signal to the decarbonisation market for emission-intensive industries participating in the European emissions rights market. To this end it is necessary to modify the Market Stability Reserve and put forward measures that incentivise the decarbonisation of emission-intensive sectors while avoiding the risk of ‘carbon leakage’. As far as the ESR is concerned, the Commission’s proposal involves a share-out among the member states of the emissions reduction target for the so-called diffuse sectors (a target that involves an emissions reduction of 30% by 2030 compared to 2005 levels). The proposal relating to ESR is subject to changes both in the European Parliament and the EU Council of Ministers, which also have to come to an agreement in order for the Commission’s proposal to prosper. In the context of LULUCF, the Commission’s proposal consists of the member states adopting a legally-binding commitment until 2030 to offset emissions generated by land-use, land-use change and forestry.

Meanwhile, Germany holds the presidency of the G20 until the end of 2017. Two of the priorities of its presidency are the implementation of climate commitments acquired within the framework of the Paris Agreement and the reconciliation and alignment of climate and energy policies as prerequisites for ensuring economic growth.

Domestically, Spain formally ratified the Paris Agreement at the beginning of 2017. Its implementation and the raising of ambitions are now the principal challenges that remain. In this context it is expected that Spain will begin work in 2017 on designing the heralded Climate Change and Energy Transition Law, an Act that is expected to regulate existing and future measures (with 2030 and 2050 in mind) for the fight against climate change. The forthcoming legislation will need to address the complex task of combining the target of the virtually complete decarbonisation of the economy with the demands of the business sector: a sector looking for rules that are predictable and comparable at an international level, as well as economic support that is sufficient to avoid loss of competitiveness in sectors at risk of carbon leakage (off-shoring) vis-à-vis European and international companies.

As far as the outstanding tasks are concerned, in its most recent environmental performance review the OECD recommends that Spain increases the ‘greenness’ of its tax system, withdraws subsidies for diesel and reduces the fiscal pressure on employment. It also emphasises the importance of integrating and coordinating environmental policies across the various institutions, as well as the need to improve the transposition of European regulations. The OECD notes the importance of the transport sector in the country’s total output of greenhouse gases (24% of emissions in 2014), and underscores the opportunities for emission-reduction in this sector, for example through electrification. Measures in the field of energy efficiency, the development of renewable energies and opportunities in the construction sector are also mentioned as areas where there is scope for improvement.

In terms of foreign policy in the climate arena, the vacuum created by the Obama Administration’s departure from international climate talks and the reconfiguration of the EU in the wake of Brexit provide Spain with an opportunity to increase its presence and leadership on the international climate stage. In this it can rely on the backing of the Spanish public, because once again, as they have been doing since 2011, Spaniards have identified climate change as the second most important issue in foreign affairs after the fight against jihadist terrorism.

The tools available to the government to increase the Spanish presence on the global climate stage include, among others, institutions such as the Ibero-American Network of Climate Change Offices (RIOCC), which has the potential to be replicated in other geographical areas, and climate-related funding. Such funding will amount to €900 million annually by 2020 if the commitments announced by the government are kept. The additional nature of the funding, as well as the inclusion of the recipients’ requirements in managing the funding, will help to reinforce Spain’s image as a country that is committed to international mechanisms of climate solidarity.

Conclusions

2017 poses some major challenges for Spanish foreign policy in the energy arena. First, the majority of forecasts point to a stabilisation of oil prices at a level not dissimilar to those that currently prevail, although everything will depend on how united OPEC manages to remain in a year that its members are likely to perceive as eternal. This represents a wake-up call from the positive supply-side impact that has benefitted the Spanish economy in the last two years and was never going to last indefinitely, something Spain has already experienced in the form of rising electricity prices in the first few weeks of the year. In addition, the partial recovery of prices eases the tensions among such important suppliers for Spain as Algeria, Nigeria and Saudi Arabia, although it does not reduce the need to continue with economic reforms and fiscal tightening.

The second major external energy-related challenge of 2017 will be to contribute to the debate about the new European electricity and renewables package, and draw up the Spanish plans that the new regulations require. It is also important to maintain a proactive capability on the Euro-Mediterranean energy stage: making headway on a new renewable exchanges project with Morocco and clearing up doubts about the third electrical interconnection; contributing with ideas for renewing the European energy relationship with Algeria; and, in general, trying to raise the commitment and visibility of EU energy initiatives.

But apart from these major energy vectors, 2016 and 2017 are also years of change in the micro-geopolitics of energy to be resolved between new entrants and incumbents, and between the former and consumers (and ‘prosumers’, whether existing or potential). Conceptual factors carry more and more weight in consumers’ decisions and technology broadens their options. One of the milestones that passed virtually unnoticed in 2016 was that, according to International Energy Agency, 2015 saw a turning point for renewable energies, which in terms of installed capacity overtook coal for the first time.

The Trump administration will be seen in action in 2017 and the early decisions indicate a 180-degree about-turn in US climate policy. The international financial sector will benefit from a guide, namely the Task Force on Climate-related Financial Disclosures (TFCFD) report, to providing information about climate risks and their management, information that will have an increasing impact on investors and insurers. In the EU, resolute headway will be made on reforming the ETS, the ESR and the dossier on LULUCF, shaping the route to be taken by European climate policy in the medium term. Negotiations will begin in Spain to lay the groundwork for the Climate Change and Energy Transition Law, with the 2030 and 2050 horizons in view. Another eventful year on the climate front is thus to be expected.

Apart from the major EU targets in the field of energy and climate policy for 2030 (27% in renewables, 30% efficiency –if the Commission’s proposal is accepted– 40% decarbonisation and 15% interconnections), in 2016 it emerged that in 2017 Google will become 100% renewable, beating both Apple and Facebook to this prize; and that Tesla, not content with entering the solar roof and large battery markets in 2017, wants to build a million cars in 2018. It is not easy to specify exactly when the tipping point will come in the transition towards a low-carbon economy, but perhaps 2016 and 2017 are likely candidates.

Gonzalo Escribano
Director of the Energy Programme at the Elcano Royal Institute
| @g_escribano

Lara Lázaro
Senior analyst, Elcano Royal Institute
| @lazarotouza


1 In other words, that climate funding is in addition to official development aid, rather than siphoning off funds from development projects for the fight against climate change.
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<![CDATA[ Assessing the design elements in the Spanish renewable electricity auction: an international comparison ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/dt6-2017-delrio-design-spanish-renewable-electricity-auction 2017-04-17T12:31:49Z

The RES-E (electricity from renewable energy sources) auction in Spain is quite different from other international experiences regarding key design elements, namely investment-based support, uniform pricing, lax prequalification and penalties.

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Index

(1) Introduction – 4
(2) Analytical framework: components for the assessment of design elements in auctions – 6
(3) Method – 14
(4) Analysis of the design of the Spanish RES-E auction in an international context – 16
(5) Conclusions – 29

Summary

The aim of this working paper is to contextualise the choice of design elements used in the first auction for renewable electricity in Spain, considering the international experiences from around the world, and to assess this choice taking into account the literature on the design elements in auctions. The analysis of the RES-E auction in Spain has shown that it is quite different from other international experiences regarding key design elements, namely investment-based support, uniform pricing, lax prequalification and penalties. The absence of a schedule for regular auctions in the future, seller concentration rules and organising stakeholder dialogue processes in the Spanish auction, which can be considered examples of best practices, are also uncommon features of renewable electricity auctions in most countries. In contrast, other design elements in the Spanish auction are widespread and are either best practices (disclosure of volumes) or their choice can be justified according to specific criteria (sealed-bid auctions, absence of local content rules, volume defined as capacity, technological specificity and price-only auctions).

Pablo del Río
CSIC

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<![CDATA[ Climate change in COP 22: irreversibility of action and rulebook development despite the elephant in the room ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari88-2016-lazarotouza-climate-change-cop22-irreversibility-action-rulebook-development 2016-12-19T12:25:29Z

The design of the Paris Agreement set the stage for a technical meeting in COP 22 but the stakes were raised in the aftermath of the US election. Implementation, increased ambition and a just transition are the pending tasks.

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Theme

The design of the Paris Agreement set the stage for a technical meeting in COP 22 but the stakes were raised in the aftermath of the US election. The rapid entry into force of the Paris Agreement has accelerated the development of the Paris rulebook that is expected to be finalised in 2018. Implementation, increased ambition and a just transition are the pending tasks in the minds of negotiators amid statements of the irreversibility of climate action.

Summary

Since the adoption of the Paris Agreement the world of climate politics and policies has experienced a year of accelerated change. Scientific data on ever-increasing temperatures, evidence of our limited mitigation, adaptation and finance actions, a rapidly changing energy landscape, the UK vote to leave the EU, the adoption of the Kigali Amendment to the Montreal Protocol, the establishment of a Global Market- based Measure (GMBM) under the International Civil Aviation Organisation (ICAO), the entry into force of the Paris Agreement and the US elections have all kept the climate community busy prior to the climate meeting in Marrakech.

After the political climax in Paris, and given the design of the Paris Agreement, COP 22 was expected to be a technical meeting. Progress was indeed made as regards the initial understanding of countries’ positions, processes and plans. And, for the first time after a big negotiating breakthrough such as that opened up by the Paris Agreement, there was no major backtracking or re-opening of the agreed text.

The unexpectedly fast entry into force of the Paris Agreement has led to an accelerated roadmap for the development of the Paris rulebook that will govern international climate action in the post Kyoto-Protocol era. Hence, the transitional period from ratification to implementation and rule development will be necessarily short. Some may argue that excessively so, as agreeing on the entire set of rules for a permanent climate governance system is likely to be a complex endeavour that could benefit from a longer development timeframe.

Other interesting developments announced at the Marrakech climate meeting, aside from the political declaration (the Marrakech Action Proclamation for our Climate and Sustainable Development) include: the Partnership for Global Climate Action that seeks to engage Parties and non-Parties in pre-2020 action (in the absence of a Doha Amendment entry into force); the 2050 Pathways Platform to foster the development of deep decarbonisation initiatives across sectors; and the Climate Vulnerable Forum Vision, where 48 climate vulnerable developing countries from Africa, Asia, the Caribbean, Latin America and the Pacific have pledged to go 100% renewable. Finally, there is a joint declaration to develop a Roadmap for Sustainable Electricity Trade between Morocco, Portugal, Spain, France and Germany.

Analysis

Context

This section will discuss the contextual factors that preceded COP 22 in Marrakech. These include: the scientific data available as regards climate change; the insufficient advances in mitigation commitments compared to our 2ºC benchmark as well as our insufficient adaptation finance efforts; a brief reflection on the changing narrative of the economics of climate change since the publication of the Stern Review 10 years ago; advances in the competitiveness and deployment of renewable energy; unforeseen political events; citizen views on climate change; and climate and related agreements since the adoption of the Paris Agreement.

(1) Science

Scientific information regarding climate change in 2016 has not been positive. In July NASA reported that the first six months of the year had been the hottest on record since 1880. Additionally, Arctic sea ice had reached its lowest extent for five out of the six first months in 2016 since records began in 1979 (NASA, 2016). By mid-November the Washington Post reported that Arctic scientists were warning that mean temperatures in that area were a staggering 20ºC warmer than usual (Mooney & Samenow, 2016). These and other (more contested and alarming) findings (see Hansen et al., 2016) come after the Intergovernmental Panel on Climate Change, IPCC’s Fifth Assessment report that warned that climate change is unequivocal, with a clear anthropogenic component and already affecting humans and ecosystems alike (IPCC, 2014).

(2) Commitments and gaps: mitigation and adaptation finance

In terms of progress made towards our temperature goal, the United Nations Environmental Program (UNEP) emissions gap reports have been telling us since 2010 that there is a wide and non-diminishing gap1 between our commitments and a pathway consistent with a 2ºC target (see UNEP, 2010; UNEP, 2011; UNEP, 21013; UNEP, 2014; UNEP, 2015; and UNEP, 2016b). In fact, the 2016 Emission Gap Report (UNEP, 2016b) warns that climate action both pre-2020 and pre-2030 has to be significantly ramped up to meet our goals. This is so because full implementation of the INDCs will overshoot our ‘well below’ 2ºC by over one degree centigrade (UNEP, 2016b).

As regards action to bridge the emissions gap, the latest UNEP report recommends further improvements in energy efficiency in the building, transport and industrial sectors. In the building sector, building energy codes and energy certificates are recommended. At an industry level the adoption of energy management systems and standards should be pursued. On the transport front the report focuses on improving vehicle efficiency, promoting electric mobility2 and improving logistics.

Additionally, UNEP (2016b) underlines that despite the added complexity of including non-state actors in the calculations (due to the uncertainty about the additionality of their actions, accounting concerns and questions regarding potential overlaps with actions by other institutions), their role is essential to achieve a low carbon transition. What is more, actions by non-state actors can additionally help mobilise policy makers towards the implementation of increasingly ambitious climate policies.

Key to the lasting engagement of developing countries in the fight against climate change is the availability of climate finance. In fact, many of the NDCs are conditional (or contain conditionality clauses) on the availability of finance in their commitments. To help evaluate the adaptation aspect of finance, the second iteration of the Adaptation Finance Gap Report (UNEP, 2016c) analyses adaptation costs, the finance available to cover these costs and the gap between the two. Despite the need for further information and despite the various methods used to account for adaptation costs, the report offers a range of adaptation cost estimates based on existing studies. These adaptation costs range from US$140 billion to US$300 billion by 2030 and from US$280 billion to US$500 billion in 2050. Total adaptation finance amounted to US$25 billion in 2014. UNEP (2016c) estimates that avoiding the adaptation gap in 2030 would require multiplying available finance from developed to developing countries by six to 13 in 2030 and by 12 to 22 in 2050.

(3) Economics: from costs to opportunities

As for the economics of climate change, 2016 marks the 10th anniversary of the release of the Stern Review. As Lord Stern recently stated (see Stern, 2016, and Stern, 2006), the key messages, that have arguably stood the test of time, were:

  • Climate change is a global threat, affecting the poor and most vulnerable disproportionately.
  • Climate change is the largest externality (market failure) we have ever experienced but there is still time for tackling the problem before the worst consequences hit.
  • The cost of inaction significantly exceeds the cost of action3 although large uncertainties existed as regards these costs at the time the Stern Review was released.
  • Prompt action is strongly recommended.
  • Policies can yield promising results, especially if concerted global climate action is forthcoming.
  • Proactive adaptation should be considered as a priority given the inevitability of the consequences of the change in climate already built into the system.

After the academic debates on the results of the Stern Review (Tol & Yohe, 2006; Carter et al., 2006; Byatt et al., 2006; Nordhaus, 2007; and Dietz, Hope, Stern & Zenghelis, 2007) and the subsequent analyses on model limitations (Stern, 2013), uncertainties and fat-tail probability distributions of climate damages –plus the limits these may imply for the use of cost benefit analysis (Weitzman 2009, 2010; and Pyndick, 2011)– the economic narrative on the reasons for climate action (see Dell. et al., 2011; Burke et al., 2015; and Wagner & Weitzman, 2015) strengthened in the public eye. This narrative also morphed from emphasising the cost of action versus inaction into emphasising the opportunities of climate action, while acknowledging some additional upfront investment costs will exist and institutional barriers will have to be addressed. This has been particularly so since the publication of the New Climate Economy Report (GCEC, 2014, 2015 and 2016).

(4) Energy: renewable electricity and e-transport?

As the energy sector is key in the transition to a low carbon economy,4 developments in the costs of renewables are important to watch. According to the International Renewable Energy Agency (IRENA) the Levelised Cost of Electricity (LCOE) produced from renewable sources both in OECD and in non-OECD countries is lower (on average) than producing electricity from diesel. The same holds true for electricity produced from onshore wind, biomass, hydropower and geothermal energy vis-à-vis electricity produced using other fossil fuels (IRENA, 2014). In fact, in some locations hydropower and geothermal are the cheapest sources for electricity production (see Figure 1). Bloomberg New Energy Finance (2016) expects that electricity produced from wind and solar will become cost competitive across a large number of countries and in terms of deployment, since 2013 there is more power installed from renewable energy sources than from fossil fuel sources.

Figure 1. LCOE (weighted average and range)

Other sectors such as transport5 are key in decarbonising the economy. In fact, the International Energy Agency IEA (2016) recently stated that in order to meet their 2ºC scenario (2DS), there was a need to reach 10% of global penetration of electric vehicles (EVs) in 2030 and over 40% (1 billion light duty vehicles, LDVs) in 2050 up from 0,1% today in a market with a prominently Chinese, Norwegian and Dutch demand (IEA, 2016). Infrastructure, cost6 and institutional barriers are yet to be tackled in earnest for such a significant uptake. Policies guided towards pushing the uptake of electric cars and vans en masse (such as reducing taxes or providing subsidies to electric vehicles, ensuring every new building has plugs for e-cars or making use of command and control regulations to avoid the most polluting cars entering city centres to mitigate air pollution problems) can nudge consumers towards low CO2 vehicles when an alternative to public transport is needed.

(5) Politics: surprise, surprise

As regards politics, 2016 has been a year of surprises for climate change. The vote to leave the EU by the UK was unexpected and it is arguably too early to discern the consequences for EU climate policies. Despite the small contribution of the UK to world emissions (1,3%), its potential divorce from the EU could imply that the Europeans will lose of one of their most skilful climate negotiators in the international arena. It could also mean a weakening of the EU’s internal climate ambition due to the relative strengthening of less ambitious member states such as Poland.

The European Emission Trading System (one of Europe’s flagship climate initiatives that has been strongly supported by the UK) could be affected by Brexit should the UK decide to operate a separate Emissions Trading System (ETS) or if the UK and the EU end up de-linking and re-linking their emission trading systems. European energy efficiency and renewable ambition could, however, be raised in the absence of the UK that has been less ambitious than other member states. British-inspired calls for cutting EU red tape could be softened if article 50 is finally invoked, appeasing concerns regarding a possible weakening of European environmental standards.

On the other side of the Atlantic, America’s election of Donald Trump as its 45th President again caught the world off guard. Given the strident campaign rhetoric regarding climate change, dubbed a hoax made in China to reduce America’s competitiveness by the President-elect, the first reaction of the international climate-change policy community after the elections could be described as one of shock and concern. It also inevitably raised the stakes of COP 22 and prompted a political declaration by world leaders regarding their steadfast determination to pursue decisive climate action.

In the aftermath of the US elections, the issue was not only about getting the first truly global climate agreement to work, the fight was, once again, to keep global climate multilateralism alive. The first test for the Paris Agreement has come early on in its life. However, both the design of the agreement (based on countries’ self-interest and inclusive of non-state actors) and the resolve of major emitters including China and India, as well as emerging climate leaders –such as the High Ambition Coalition or the Climate Vulnerable Forum– seem to have helped us pass this test.

As for the consequences of a Trump Presidency in the US on climate change the jury is still out. If he abides by his campaign promises, President Trump will pull out of the international climate regime. This drastic step would take one year if he were to decide to withdraw from the United Nations Framework Convention on Climate Change (UNFCCC), leaving the US as the only major power in the world outside the global climate-change framework of action. If Trump decided instead to withdraw from the Paris Agreement, article 28 states that this would take three years after entry into force of the agreement and one year after the notification of withdrawal has been deposited. If this were the route taken, the US withdrawal would come as Trump’s term in office ends.

Other actions announced by Trump could, however, be as damaging as a withdrawal from the Paris Agreement, or even more damaging. Trump could, for instance, cut domestic funding for climate research. America is a powerhouse in terms of climate analyses and this would damage international understanding of the phenomenon. Trump could fail to honour America’s financial commitments towards the international community (ie, US$ 3 billion, Green Climate Fund, 2016) thereby increasing tensions between developed and developing countries regarding climate finance. Trump’s replacement of Judge Scalia could undermine the Clean Power Plan, one of the key pieces of climate legislation of the Obama Administration, which seeks to reduce GHG emissions from power plants by 32% in 2030 compared with 2005 levels. These, plus the recent appointment of Myron Ebell, climate-change denier and contrarian to the Clean Power Plan, to run the Environmental Protection Agency transition team are indeed a cause for concern.

Not all is lost though. The economic case for climate action is growing (GCEC, 2016; and The Economist, 2016) and if Trump wants to make America great again the clean tech and renewable energy sectors can provide the country with growth, jobs and a competitive edge in the next wave of innovation (Wilenius & Kurki, 2012). Additionally, the Federal government, though important, is not the only piece of the climate puzzle in the US. Action at the state and city levels is likely to continue apace (Hultman, 2016).

(6) Citizens

As regards global citizen views on climate change, the survey conducted in 2015 called World Wide Views7 on Climate and Energy shows that 78% of respondents were very concerned about climate change. In line with the above discussion regarding the economics of climate change, two thirds of respondents see climate policies as an opportunity to improve the quality of life and 63% said they would support all the necessary policies for limiting temperature increases by 2ºC. Respondents were also overwhelmingly in favour of the use of economic instruments such as taxes to implement climate policies, although citizens in the US, China and Russia were less in favour of CO2 taxation (Danish Board of Technology Foundation, Missions Publiques and the French National Commission for Public Debate, 2015).

Of potential interest to Trump, according to a survey conducted by Yale University in March 2016, 70% of Americans believe climate change is happening, with 58% being at least somewhat worried about climate change and 61% of respondents supporting climate action by the US independently of what other countries do (Leiserowitz et al., 2016).

In terms of foreign policy, climate change is an area governments should address as one of their top priorities, according to citizens, at lease in some countries. In two recent surveys conducted by the Elcano Royal Institute in 2016, respondents across 10 different countries were asked to choose the first, second and third foreign-policy priorities for their governments. Once they responded the question, an index was calculated to compound their preferences. According to this index, respondents in Germany, France and the US stated that the fight against climate change was their second foreign policy priority- the first being fighting international terrorism. The UK and Portugal placed climate change fourth and sixth in the index, respectively (see Figure 2).

Figure 2. Foreign policy priorities in Germany, the UK, France, Portugal and the US (1), weighted index (2)

For other countries in which the option of investing in development aid was not included (Colombia, Peru, Morocco, China and India) the results indicate that it is only in Latin American countries, Colombia and Peru, that the fight against climate change is considered the second most important foreign-policy priority –the first being improving the country’s image–. In China, climate change is ranked third, after increasing the country’s influence in the world and improving its image. Both of these top priorities could arguably be achieved, inter alia, by stepping up China’s game in the global fight against climate change in the (expected) absence of national-level US leadership during the Trump era. As regards India, the results indicate that fighting against climate change would come fourth in the index for foreign-policy priorities, just above increasing the country’s influence on the world. For Morocco, and despite its COP 22 presidency starting just a few months after the survey was conducted, the fight against climate change was the last of the foreign policy priorities according to survey results (see Figure 3).

Figure 3. Foreign policy priorities in Colombia, Peru, Morocco, China and India (1), weighted index (2)

Reflecting on what Spanish people consider their top foreign-policy priorities it is interesting to read the Elcano Royal Institute’s forthcoming 38th survey (Barómetro del Real Instituto Elcano, BRIE). In this survey the index shows that respondents in Spain see the fight against climate change as the second most important foreign-policy priority after fighting jihadist terrorism10 (see Figure 4). In fact, Spanish citizens have ranked climate change as the second top foreign-policy priority in every survey since 2011 and consider climate change one of the greatest threats to Spain (Real Instituto Elcano, forthcoming, 2016b, 2015 and 2013). The newly appointed government in Spain could reflect on the above data and continue engaging in international and national climate action, aligning its priorities with those of its citizens.

Figure 4. Top foreign-policy priorities for Spanish respondents

(7) The Paris Agreement and other climate-related agreements since 2015

The Paris Agreement was adopted on 12 December 2015. Its main goal, in line with the UNFCCC, is avoiding a dangerous interference with the climate system. In order to meet this goal the agreement seeks to limit global mean-temperature increases to ‘well below’ 2ºC (aspiring to 1.5ºC) compared with pre-industrial levels. It also strives for a balance between emissions and absorption (removals by sinks such as forests) in the second half of the century, in line with the scientific warnings that stabilisation of temperature requires gradually reducing emissions to zero (Thomas et al., 2016).

The Paris Agreement resorts to a hybrid system to achieve its goals. The bottom-up process –embedded in global climate governance since the Copenhagen Accords– requires Parties to periodically present national commitments11 for curbing greenhouse gases (GHGs) that are to be increasingly ambitious. The top-down approach entails both a periodic review of the progress made (via the all-important transparency mechanism) and guidance to achieve the above stated goals (Stavins, 2015). Market and non-market mechanisms have also been enshrined in the Paris Agreement as additional instruments to nudge the low carbon transition. Moving away from the Kyoto-style penalty system for non-compliance, Paris hopes to engage countries in increasing cooperation that is in the Parties’ self-interest, expressed through their national commitments.

In order to enable developing countries to meet their commitments, the accompanying decision to the Paris Agreement stresses the need for scaling up finance (to the tune of US$ 100 billion annually by 2020, echoing the Copenhagen Accord, and above that amount after 2025). Technology, capacity building and increasing adaptation capacity are further pillars of the accord.12

This new landmark global framework for climate action was to enter into force 30 days after 55 Parties, amounting to 55% of world GHG emissions, deposited their instrument of ratification, acceptance or approval. China and the US ratified ahead of the G-20 meeting in September 2016, putting pressure on the EU to do so. When the EU, among others, ratified the Paris Agreement on 5 October, the double requirement for entry into force was achieved. Hence, on 4 November 2016 the Paris Agreement entered into force. This is quite an achievement that had been in the making since (at least) the diplomatic debacle of COP 15.13. Few expected the Paris Agreement to enter into force less than a year after its adoption. In fact, this is one of the fastest entries into force within the international agreements realm and by far the fastest of any climate-change treaty.14 It therefore seems that the ‘spirit of Paris’ has survived a turbulent 2016.

Other international meetings have taken place –and agreements have been adopted– in 2016 that add to the great diplomatic success of the Paris Agreement and that, indeed, signal an unprecedented momentum in climate action, despite the election of Donald Trump in the US. These agreements include the Kigali Amendment of the Montreal Protocol and the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

The Montreal Protocol that entered into force in 1989 regulates the use and phasing out of substances that deplete the ozone layer. Many of these substances, such as hydroflourocarbons (HFCs), are also powerful greenhouse gases. The Kigali Amendment of the Montreal Protocol adopted in 2016 has mandated a phase-down of HFCs for developed countries starting in 2019 (UNEP, 2016a). Developing countries will have a longer time frame for reducing consumption of HFCs (2024 or 2028 depending on the country). By 2040 the goal is to limit consumption to 15% to 20% of countries’ baselines. The Kigali amendment has been widely praised as a very positive development for climate action, with announcements that claim that it could even prevent 0,5ºC of global warming. Climate experts caution against excessive optimism as some of the effects of phasing out HFCs might have already been accounted for within the NDCs.

The aviation sector, currently responsible for 2% of global CO2 emissions and one of the fastest in emissions growth, celebrated its 39th Assembly of International Civil Aviation Organisation (ICAO). Governments, industries and other stakeholders agreed on a global market mechanism called Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). The mechanism’s goal is to achieve carbon neutrality from 2020 onwards, based on carbon emissions in 2019-20, it is to be hoped without incentivising companies to unduly increase their emissions during that period. Despite having been criticised by countries such as India (for being unfair) as well as by NGOs (that blame the aviation industry for using offsets rather than abating), the decision by ICAO has been commended by some climate negotiators who believe that progress has been significant as this type of initiative was unthinkable just a few years ago.

Headline results from COP 22

Given the design of the Paris Agreement, with its five-year review cycles, facilitative dialogue in 2018, etc., COP 22 was never expected to be a meeting of grand political announcements and big agreements. In fact, as Pete Betts recently argued,15 according to the mantra of climate negotiators that ‘nothing is agreed until everything is agreed’, the complete rulebook for the Paris Agreement was not to be expected until at least 2018 (COP 24). Given this mantra and the results from COP 22, it seems that the package-deal approval approach will push ahead. This is so despite some less-developed countries wanting to adopt individual decisions concerning the Paris rulebook as soon as they are ready, that is, without waiting for the entire Paris rulebook package to be agreed (ENB, 2016).

As regards the headline results in Marrakech, it can be argued that initial understanding of Party positioning, procedural advances in the Paris rulebook, plans and calls for submissions were the key outcomes of COP 22 (C2es, 2016). It is also worth noting that, according to Alina Averchenkova,16 contrary to previous COPs that succeeded the adoption of landmark climate agreements, there was no backtracking during COP 22, perhaps ironically due to the need to counteract the Trump effect. With the above considerations in mind some salient issues discussed in Marrakech are summarised in Figure 5.

Figure 5. Summary of some headline results from Marrakech

Topic

Results and recommendations

Comments

Key meetings17

COP 22 (UNFCCC).

CMP 12 (Kyoto Protocol).

CMA 1 (Paris Agreement).

The first meeting of the governing body of the Paris Agreement (CMA 1) took place and was adjourned until all countries could participate in the rulemaking process after ratification.

Mitigation

The diversity in the characteristics and specificity of NDCs resulted in calls for clarification to enhance transparency.

Countries dissented on the flexibility that should be allowed as regards commitments, timing, monitoring and reviews.

The US, Mexico, Germany and Canada were the first countries to communicate their long-term decarbonisation strategies.

US target: reduce GHGs by 80% or more below 2005 levels by 2050.

Mexico’s target: reduce GHGs by 50% by 2050 below 2000 levels.

Germany’s target: reduce GHGs by 80% to 95% below 1990 levels by 2050.

Canada’s target: reduce GHGs by 80% in 2050 below 2005 levels.

Adaptation

The Adaptation Fund created under the Kyoto Protocol will continue serving the Paris Agreement in all likelihood.

US$81 million were pledged for the Adaptation Fund, beating its fundraising target for 2016.

The report of the Adaptation Committee and a reviewed work plan for 2016-18 was presented. Next review of the Adaptation Committee will occur in COP 27.

Developing countries pushed for the Adaptation Fund to continue serving the Paris Agreement.

As regards adaptation communications, effort recognition and analyses were the areas where COP 22 focused on.

A shortfall in funds for the Adaptation Committee was noted.

Loss and damage

The first review of the Warsaw International Mechanism for Loss and Damage took place.

The review took place despite the short time available for it. Further guidance on strengthening the WIM is recommended. Periodic reviews are recommended, starting in 2019. The review will analyse the work and the long-term vision of WIM.

Capacity building

The terms of reference for the Paris Committee on Capacity-building (PCCB) were adopted. Work begins in 2017.

The goal is to address capacity building needs in developing countries, facilitating climate action.

Finance

The Australian/UK analysis of the Roadmap towards the US$100 billion was presented and recognised.

Developed countries agreed to continue to increase finance and a work program was agreed.

The 2016 biennial assessment report emphasised the need to improve data collection, increase granularity of data, and improve tracking and reporting of climate finance.

The initial strategic plan for the Green Climate Fund (GCF) was adopted.

There is increasing support for climate- related financial risk disclosures to foster low carbon investments.

The updated guidelines for the 6th review of the Financial Mechanism were adopted.

Finance is still one of the most contentious issues with developing countries unsatisfied with the level of funding disbursed by developed countries.

Developing countries should enhance their institutional capacity to enable adequate reporting.

There are gaps in the systematic collection of private climate finance data.

Finance flows from developed countries to developing countries amounted to US$25.4 billion in 2013 and US$26.6 billion in 2014.

Total average climate finance flows in 2013-14 amounted to US$741 billion.

Currently 70% of climate finance is allocated to mitigation. Further balance in the allocation of climate finance should be sought.

There are significant costs of fund and project management (1%-12% of approved funding).

The sixth review of the Financial Mechanism will be finalised in COP 23 (2017).

Technology

The joint annual report of the Technology Executive Committee and the Climate Technology Centre and Network for 2016 was presented.

Linkages between the Technology Mechanism and the Financial Mechanism are encouraged to enhance mitigation and adaptation. The importance of finance in early stages of technology development is underlined.

Transparency

The work programme is clearly guided by a common set of questions that all countries have to respond.

Diverging views were voiced regarding flexibility in transparency requirements between developed and developing countries. Further discussions are expected on this issue.

Market and non-market instruments

Market and non-market mechanisms were discussed. More significant advances were recorded as regards market-based mechanisms vis-à-vis non-market based instruments. Further submissions by Parties are expected.

The potential use of economic instruments, such as fossil fuel subsidy reforms were tabled.

Avoiding double counting was discussed in the context of ensuring environmental integrity and avoiding past mistakes (eg, avoiding hot air).

Discussions were held regarding whether to precisely define the concept of sustainable development.

Avoiding fuzzy conceptualisations would arguably require clarifying whether a weak sustainability paradigm (substitutability of man-made capital for natural capital) or strong sustainability (requiring the preservation of certain forms of natural capital) should be pursued.

Stocktake and compliance

Consultations will continue on the organisation of the facilitative dialogue in COP 23.

Procedural discussions took place as regards the first global stocktake.

Questions on how the compliance mechanism would work were raised.

Sources: UNFCCC (2016), C2es (2016), LSE (2016), ENB (2016), Lázaro-Touza & Atkinson (2013).

Beyond the advances in procedural elements mentioned above, the key political declaration arising from COP 22 was the Marrakech Action Proclamation for our Climate and Sustainable Development. Of little practical substance, the proclamation is important because it reiterates the high-level political commitment to increasingly ambitious climate action that is mindful of asymmetric national circumstances. It also recognises the transition towards a low-carbon economy as an opportunity and encourages multi-stakeholder engagement in climate action. This recognition of climate action as an economic opportunity signals a paradigm change in the political narrative of climate change that arguably started 10 years ago with the publication of the Stern Review.

The results as regards the multi-level and multi-stakeholder engagement with the UNFCCC framework materialised in the Marrakech Partnership for Global Climate Action heralded by the Climate Champions Hakima el Haite and Laurence Tubiana. The goal of the initiative is to foster action and interaction between Parties and non-Parties (firms, subnational and local governments as well as NGOs and civil society organisations) prior to 2020. It calls for climate policy coherence (integration) in order to ensure effective cooperation.

Complementing the UNFCCC negotiations, the Marrakech Partnership for Global Climate Action seeks to help track non-Party actions, increase ambition, identify priorities and help exchange information and experiences. The initial topics the partnership will focus on include: land-use, oceans and coastal zones, water, human settlements, transport, energy and industry. Transverse issues will include gender, education, health and ‘decent work’. In fact, the inclusion of the concept of a ‘just transition’ is seen by some negotiators, such as Emmanuel Guérin,18 as absolutely crucial to counteract phenomena of disenfranchisement of the population with the low carbon transition that will inevitably alter production and consumption systems. This is a topic requiring further academic and political attention if we are to ensure social appropriation of the low-carbon transition. The partnership will meet throughout the year as well as during the COP and will produce the Yearbook of Global Climate Action, containing information on policy options for decision-makers to consider.

Also under the aegis of the Climate Champions, the ‘2050 Pathways Platform’ was announced during COP 22. The platform’s goal is to foster the development of deep decarbonisation pathways so that the goal of carbon neutrality –balancing emissions and absorption capacity by sinks– is reached. This is to be achieved through the integration (‘mainstreaming’ in UN policy parlance) of climate-policy considerations across sectors.19

Another welcome development arising from Marrakech was the Climate Vulnerable Forum Vision, according to which 48 developing countries will strive to reach 100% renewable-energy production. This group of countries can be seen as significantly pushing the current political ambition regarding climate change. The leadership void left by the US could be filled by these newly emerged leaders plus China and the High Ambition Coalition (including the EU) in a move à la 2001 when the US failed to ratify the Kyoto Protocol and the EU took the lead in global climate action.

Finally, during COP 22 the governments of Morocco, Germany, Portugal and Spain signed a joint declaration on the establishment of a Roadmap for Sustainable Electricity Trade between Morocco and the European Internal Energy Market. The declaration acknowledges that in order for the EU to meet its commitment to reach 27% of renewable energy consumption by 2030 and for Morocco to meet its commitment of producing 52% of its electricity from renewable energy sources by 2030, enhanced electricity market integration between the Middle East and North Africa (MENA) and Europe could be mutually beneficial. The effective implementation of this roadmap would also help in the integration of renewable electricity. The purpose of the roadmap is to identify and suggest ways to eliminate barriers to trade in sustainable electricity (EC, 2016). Signatories of the joint declaration have pledged to work on a Sustainable Electricity Trade Roadmap (SET Roadmap) and to work towards an agreement that could be ready for COP 23.

Conclusions

After a turbulent 2016, COP 22 –dubbed the ‘Action and Implementation COP– delivered a roadmap for operationalising the Paris rulebook in 2018. It also provided guidance on how to proceed for the successful development of the facilitative dialogue. Some progress was made in the analysis of positions regarding implementation and compliance, mitigation, adaptation, transparency and the global stocktake. And, as explained above, there were a host of initiatives from Party and non-Party actors that reiterated the momentum of climate action.

Some of the challenges that remain include the entry into force of the Doha Amendment that establishes the second commitment period of the Kyoto Protocol that would increase ambition pre-2020. Developing domestic legislative frameworks to match NDCs and increasing ambition are still pending tasks. All of these, with a just transition in mind to help gain acceptance of low carbon strategies by citizens. In terms of expected hurdles, flexibility issues between developed and developing countries and allocation of responsibilities are expected to lead to disagreements in future meetings.

As regards the leadership void left by the US there are indications that the world, perhaps through the actions of newly emerged climate leaders (among others), will work à la 2001 when the EU performed a directional leadership role in the entry into force of the Kyoto Protocol after the US failed to ratify the agreement.

Should the world push ahead with its climate commitments, the case for decisive climate action is likely to be made based on the economics on transitioning to a low carbon future, the co-benefits of a decarbonised development model (Stern et al., 2016), better messaging and (sadly) increasing climate change experience, especially with extreme weather events (Dunlap et al., 2016).

Lara Lázaro-Touza
Senior Research Fellow, Elcano Royal Institute
| @lazarotouza

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1 The emissions gap for 2030 is currently 12GTCO2e to 14 GtCO2e for 2°C scenarios and 3 GtCO2e larger for 1.5ºC scenarios according to UNEP (2016b).

2 For instance, Canada, China, France, Japan, Norway, Sweden, the UK and the US announced their pledges to increase electric vehicles in government fleets through the Government Fleet Declaration during COP 22.

3 Provided assumptions on ethics and discount rates were aligned with the choices made in the Stern Review.

4 Two thirds of greenhouse gas emissions come from the energy sector and 87% of global primary energy comes from the use of fossil fuels (IEA, 2015).

5 See for example the case of Spain in Deloitte (2016).

6 Note that some analysts believe EVs might become cost competitive vis-à-vis vehicles powered by internal combustion engines (ICE) in a decade (IEA, 2016).

7 Note that the sample was 10,000 people across 76 countries who were given information about climate change prior to the survey; they had time to reflect on the information provided and they debated among themselves before answering questions about climate change.

8 Note that the survey was conducted via Internet by Qíndice. The fieldwork took place between 26 May and 9 June 2016. The sample amounted to 4,105 respondents (between 400 and 473 respondents depending on the country). Quota sampling was used for age, gender and location. The error margins vary from +/-5% for countries with 400 interviews to +/- 4.6% for the country (Peru) where 473 surveys were completed, for a 95% confidence level and the most unfavourable case (p = q = 0.5). The age of respondents ranged from 18 to 70. For further details on the survey see Elcano Royal institute (2016a), p. 3-5).

9 Ibid.

10 The BRIE asked the question in a different format compared with the BIE and hence the results are not directly comparable. In the BRIE, respondents to the questionnaire were presented with a conjoint analysis-type question where they choose between pairs of alternatives. The analyses of results provided the ranking available in Figure 4.

11 Commitments made by countries are called Intended Nationally Determined Contributions (INDCs) or Nationally Determined Contributions (NDCs) once the instrument of ratification, accession or approval has been deposited with the UNFCCC secretariat.

12 For further information on the Paris Agreement and the accompanying decision see European Parliament (2016). For further analysis of the drivers of the Paris Agreement and the elements of this global climate agreement, see Clemençon (2016) and Lázaro-Touza (2016).

13 It could be argued that COP 15 in Copenhagen allowed the basic pillars of the Paris Agreement to be forged (Lázaro-Touza, 2010), despite comments to the contrary (see the discussion in Bodansky, 2010).

14 Note that the UNFCCC was adopted in May 1992 and took almost two years to enter into force (in March 1994). The Kyoto Protocol was adopted in December 1997 and entered into force after Russia’s ratification on 16 February 2005, over seven years later (UNFCCC, undated, a, b).

15 Panel debate ‘A year on from Paris: turning commitments into action’. Grantham Research Institute on Climate Change and the Environment. 24/XI/2016. Pete Betts is the Director, International Climate Change at the Department for Business, Energy and Industrial Strategy in the UK.

16 Panel debate ‘A year on from Paris: turning commitments into action’. Grantham Research Institute on Climate Change and the Environment. 24/XI/2016. Alina Averchenkova is the Co-Head of Climate Policy at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.

17 During COP 22 in Marrakech the following meetings took place: the 22nd session of the Conference of the Parties (COP 22), the 12th session of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (CMP 12), and the 1st session of the Conference of the Parties serving as the meeting of the Parties to the Paris Agreement (CMA 1).

18 Panel debate ‘A year on from Paris: turning commitments into action’. Grantham Research Institute on Climate Change and the Environment, 24/XI/2016. Emmanuel Guérin is Special Advisor to the French Climate Ambassador, Laurence Tubiana; and Consultant, Children’s Investment Fund Foundation.

19 According to the UNFCCC ‘22 countries have started or are about to start a process of preparing a 2050 pathway. Already 15 cities, through C40 and ICLEI, 17 states, regions and cities, through the Under2 coalition, and 196 businesses, through the We Mean Business Coalition and the Science Based Target initiative, are also committed’. Spain has not yet prepared a 2050 decarbonisation pathway but the region of Catalonia and several companies in Spain are already in this platform. These companies are: ACCIONA S.A., Correos (Grupo Sepi), FERROVIAL, Gamesa Corporación Tecnológica, S.A., Gas Natural SDG SA. Gestamp, Grupo Logista, Iberdrola SA, Inditex, Maessa and NH Hotel Group.

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<![CDATA[ China and climate change: the good, the bad and the ugly ]]> http://www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/ari70-2016-lazaro-esteban-china-climate-change-good-bad-ugly 2016-10-03T12:10:30Z

Although much remains to be done by China to set the world on a climate-bearable path, China’s efforts are significant and its ratification of the Paris Agreement ahead of the G-20 meeting is a key step for the entry into force of Kyoto’s successor.

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Theme

The exhaustion of China’s old economic model based on investment and manufacturing has had, at least, one positive outcome: a ‘new normal’ development pathway that is less energy and emissions intensive. Although much remains to be done by China (and others) to set the world on a climate-bearable path, China’s efforts are significant and its ratification of the Paris Agreement ahead of the G-20 meeting is a key step for the entry into force of Kyoto’s successor.

Summary

China’s double-digit economic growth rate of the past three decades has brought with it economic, social and environmental problems. In addition to fostering a profound restructuring of the Chinese economy, these problems are at the core of the country’s shift in domestic action against climate change. Arguably, they have also motivated, at least in part, China’s uptake of a prominent role in international climate negotiations. This paper will briefly discuss China’s climate-change policy. It will be argued that, although impressive in pace and scale, Chinese climate commitments are not consistent, at present, with limiting global mean temperatures to 2ºC compared with pre-industrial levels. Given this outlook, some policy recommendations for future action will also be suggested.

Analysis

Context

The ‘Kaya identity’ shows the main drivers of CO2 emissions globally. These include: population, economic growth, energy intensity and CO2 intensity. Data for China for each of these variables justifies the critical role the country has in the fight against climate change. With a population of 1.3 billion, over half of which lives in cities, China is the world’s most populated country and its second-largest economy. The 13th Five-Year plan (henceforth 13FYP) establishes an average annual economic growth rate of 6.5% between 2016 and 2020. China is the world’s largest energy consumer (accounting for 23% of global energy consumption currently, compared with 10% in 1971), producer and importer. According to the Energy Information Administration (EIA), China’s energy intensity was just under four times that of the US and approximately six times that of Japan, so energy efficiency gains are still feasible.

Additionally, China’s primary energy consumption is overwhelmingly fossil-fuel based (see Table 1 below) with coal, the highest CO2 emitter per unit of energy, overwhelmingly dominating the energy mix. A positive development, however, is the recent evolution of carbon intensity in the power sector, which has been decreasing since 2005.

Table 1. Primary energy consumption in China

International and domestic commitments

China emitted over a fifth of greenhouse gases (GHG) globally in 2011 according to the World Resources Institute, making it a key player in the climate change arena.

Internationally, China has been involved in climate negotiations since 1992. In fact, it was one of the first countries to ratify the United Nations Convention on Climate Change. This does not mean, however, that China has historically been a leader in climate action. Its developing-country status, its argument that countries should act according to common but differentiated responsibilities while taking into account their capabilities and national circumstances, and its perennial focus on economic growth have, until recently, relegated the country to a peripheral role in international climate action.

In Copenhagen (COP15) China’s peripheral stance on international commitments started to shift as it pledged to reduce its carbon intensity between 40% and 45% below its 2005 level by 2020. This was the first time China made international climate commitments. Additionally, it pledged to increase forest cover by 40 million hectares by 2020 compared with 2005 levels and to augment its forest stock by 1.3 billion cubic metres by 2020 compared with 2005 levels.

In November 2014 a joint announcement was made by the US and China on climate change by which China, for the first time, accepted GHG mitigation targets ahead of developed countries. China also stated its intention to reach its peak in CO2 emissions by 2030 and strive to reach this peak earlier, a first for a developing country. On 30 June 2015 China submitted its Intended Nationally Determined Contribution (INDC). This voluntary commitment reiterates China’s mitigation target of reaching a peak in CO2 emissions around 2030 (aiming to peak earlier). It also pledges to reduce its carbon intensity by 60% to 65% below 2005 levels by 2030 and to increase its forest stock by 4.5 billion cubic metres by 2030 compared with 2005 levels. More recently, a day ahead of the G-20 summit, China ratified the Paris Agreement (as did the US). Being the top two emitters, the Chinese and US ratifications will, in all likelihood, be the tipping point for the Paris Agreement entering into force shortly.

Domestically, climate change was not a priority for China until 2006, when it became the world’s largest GHG emitter, which increased both international and national pressure to step up Chinese climate action. From 1992 until 2006 climate actions were driven by the co-benefits from fighting other environmental problems such as air pollution. During this period, civil society (especially in urban areas) put pressure on the government via social media and demonstrations to curb air pollution. Institutionally, climate change was dealt with at a scientific level rather than at a political level via the Chinese Meteorological Administration (CMA). Moreover, broader environmental issues were addressed through a government agency rather than through the Ministry of Environmental Protection, which was created in 2008. Additionally, it was not until the 11th Five-Year Plan (2006-10) that climate change was mentioned in development guidelines. This greater concern for climate change is the result of the Chinese authorities’ increased awareness, under the aegis of Hu Jintao, who sought to ensure the sustainability of China’s economic model in order to sustain the regime.

From 2007 onwards climate change institutions were developed in China, aside from the pre-existing and science-focused CMA. Climate governance structures and regulations were also developed post 2007. More recently, the 13FYP (2016-20) includes targets for the reduction of both China’s energy intensity per unit of GDP and carbon intensity per unit of GDP. China also pledges to increase the proportion of non-fossil fuels in its primary energy consumption to 15% by 2020. The main targets in the 13FYP are shown in Table 2 below.

Table 2. Major targets in 13FYP (2016-20)

The good, the bad and the ugly

The good news for climate change comes from the exhaustion of China’s old economic model and from the profound restructuring of the Chinese economy as a result. The current weight of investment and heavy industry (very intensive in GHG emissions) in China’s economic structure is being reduced in favour of consumption and services (less intensive in GHG emissions). Overcapacity in highly polluting industries is being managed by the Chinese government through supply-side structural reforms. Capacity cuts are taking place in the steel and coal sectors. For instance, a reduction of 100 to 150 million metric tonnes in yearly crude steel capacity (13% of current capacity) by 2020 was announced earlier this year. Similarly, a cut in coal output of 500 million metric tonnes (9% of current capacity) will take place in the next three to five years. Local governments are being asked to cooperate in the provision of information to develop plans for capacity cuts and penalties are being announced for non-compliers. As a result, the first six months in 2016 have seen a 1.5% drop in steel production and an 8.5% drop in coal production. These developments have, inter alia, led to what is known as China’s ‘new normal’ economic development.

Other elements that are also providing the basis for a structural shift towards China’s low carbon green growth include: slower expected GDP growth and energy demand; China’s push for competitiveness –through the promotion of high value added industries, including renewables (see the significant growth in Graph 1 below)–; and a greater focus on environmental protection and energy efficiency, plus its Ecological Civilisation concept. The latter is an extension of the concept of sustainable development whereby nature and mankind must co-exist harmoniously.

Graph 1. Development of non fossil fuels in China (2005-13)

Climate change action seems to be aligned with China’s development priorities. Climate policy has not hindered economic growth in China to date. China’s energy transition could have moderate or even negative costs (benefits) in terms of GDP, according to Stern and others. Climate policy can furthermore help advance China’s ‘war on pollution’, tackling concerns about citizen’s health. In the international arena, climate action (eg, the ratification of the Paris Agreement ahead of some developed countries such as the EU) can grant future leadership status to China. It should not therefore come as a surprise that the Chinese leadership is increasingly committed to tackling climate change, if only to further its future economic growth and its international clout, retain political legitimacy among its citizens and appease existing competitiveness concerns.

When evaluating China’s efforts towards decarbonisation some experts believe Chinese action is ambitious. This position could be further backed by the fact that embodied emissions, which refer to emissions generated in the production of exported goods, account for a significant proportion of the country’s emissions. Some studies even contend that emissions associated to exports are eight times higher than emissions associated to imports. Graph 2 below shows an analysis of per capita territorial CO2, consumption CO2 footprint, and exports and imports of CO2 for different GDP levels from 1960 to 2008 in the US, the EU and China.

Graph 2. Evolution of per capita GDP and CO2 emissions by major region

Analysis by Climate Action Tracker, on the other hand, states that China’s Copenhagen commitment and its INDC are rated as ‘medium’, except for the energy intensity target in China’s INDC that is rated ‘inadequate’. The medium rating awarded to China’s commitments is on a par with those awarded to the EU and to the US.

The ‘good news’ is that, although medium ratings will not ensure having a likely chance of limiting mean global temperatures to 2ºC above pre-industrial levels, China is known for under-promising and over-complying, and the profound restructuring of the economy will help it in doing just that. In fact, China’s peak coal is said to have already been reached, with a drop in coal consumption (in volume) of 2.9% in 2014 and 3.6% in 2015, while the economy grew by 7.3% and 6.9% respectively. Given the above data regarding China’s energy mix, its post coal growth could be seen as a welcome development.

An additional positive development in terms of collective action is that China and the US seem to be cooperating rather than competing in other climate-related areas. In addition to the ratification of the Paris Agreement, China and the US have agreed to collaborate on the amendment of the Montreal Protocol, aiming to eventually phase out hydrofluorocarbons (HFC’s) and to participate in the pilot phase of a market-based mechanism in the aviation sector, should it be agreed upon in the upcoming ICAO conference.

The bad news come from a global analysis of commitments. China’s commitments are insufficient to limit climate change to a bearable level. For instance, Climate Action Tracker’s analysis of INDC’s warns that with current commitments global mean temperatures will miss the 2ºC target by about 1ºC. Only mitigation pledges submitted by Bhutan, Costa Rica, Ethiopia, Morocco and The Gambia are rated as sufficient by Climate Action Tracker, although together they account for less than 1% of global emissions. This sufficient rating means that commitments by these countries are in the stringent part of the 2ºC range, although commitments have to be effectively implemented. If other governments undertook similar efforts, there would be a likelihood of limiting global average temperatures below 2ºC compared with pre-industrial levels.

Transition costs, implementation, uptake of market instruments and development of a well functioning nation-wide emissions trading system are part of the ‘ugly’ in the Chinese mitigation equation. As regards the latter, the seven pilot emission trading systems (ETS) in China are heterogeneous in their coverage and rules, they lack penalties, they are argued to suffer from legal uncertainty and, to date, there is no futures market. These characteristics could lead investors to shy away from the national Chinese market that will operate from 2017 onwards (Luca Taschini, personal comment).

An additional challenge is China’s focus on economic growth (remember the Kaya identity), coupled with the energy security needed to deliver this growth and the fact that energy is still heavily fossil-fuel based. Breaking the fossil dependency is expected to be a slow process.

The potential for reducing emissions in the industrial sectors is diminishing and policies for tackling emissions in the diffuse sectors are still evolving. The challenge is to engage all stakeholders in future emission-reduction policies as the economic model shifts towards consumption.

Although China has become a powerhouse in renewable energy manufacturing, domestic deployment has been slower. Ramping up deployment and integrating it with existing infrastructures and institutions will be a complex task, especially when local authorities receive more revenues from coal-fired power plants than from renewable alternatives.

Finally, if China is gradually reducing its role as the world’s manufacturer due to the exhaustion of its old growth model and its ageing population, other countries with lower wages will take this role. Hence, global climate mitigation policies will have to take into account broader macroeconomic trends.

Recommendations

As regards China’s energy sector, its weight in global energy consumption, which is mostly fossil-fuel based, calls for interfuel substitution and greater uptake of low carbon technologies. China therefore needs to further cap coal consumption and keep advancing on renewable energy deployment. In addition to reducing CO2 emissions, these measures help advance China’s goal of increasing energy security and independence while tackling health problems derived from air pollution.

The global market for green technologies is expected to double (or treble) by 2020 (up from the €1,000 billion per annum estimated in 2012 by the EU). Investment in low-carbon technologies and a greener growth model bodes well with China’s goals of being an innovation-driven country that strives for sustainable development.

Economy-wide emission targets coupled with a continuously increasing carbon price are needed to guide investment and consumption towards a low carbon pathway. These policies are expected to nudge China’s energy efficiency, which is currently low vis-à-vis other countries. Increases in energy efficiency are of interest to the Chinese authorities as they can also bring financial savings. Care should, however, be taken to avoid a rebound effect that would increase energy demand. Improvements in China’s monitoring, reporting and verification system are also recommended in order to ensure a well-functioning climate policy.

In addition to the use of market and non-market based instruments, a change in local priorities is a must. While local governments continue to be fixed on the growth bandwagon, well-being and low carbon development will be difficult to achieve. In this respect, the 3rd Plenary Session of the 18th Central Committee of the Communist Party of China (November 2013) discussed the possibility of evaluating local governments according to new criteria (ie, in addition to economic performance) so that they were incentivised to protect the environment. The effective implementation of evaluation criteria that take environmental performance into account is of paramount importance in China’s effective engagement with a low-carbon economic model.

Guidance from the central government as regards the downscaling of the low-carbon transition is required. Related to changing local governments’ priorities is the issue of urbanisation, one of the key trends in the 21st century. Considering the long-lasting effects of urban planning on greenhouse gas emissions, compact, connected and coordinated cities are needed in China (and elsewhere).

Conclusions

China’s GHG growth has been fuelled by several factors. Its population, the breath-taking pace of its economic growth, and energy and carbon intensity are the key elements of China’s emissions. Economic growth, in turn, has been powered by cheap and emission-intensive energy, pre-eminently coal.

External factors such as the 2008 crisis as well as internal factors such as the restructuring of the economy, and health and environmental concerns (eg, air pollution), are the main elements that have reduced the pace of Chinese GHG emission growth. In the energy sector these internal and external factors have resulted in a reduction in the use of coal, an increase in energy efficiency, increases in the deployment of renewable energy and a substitution of gas for coal.

China’s climate change efforts are significant. However, as with other large greenhouse gas emitters, the US and the EU included, its efforts are not enough to limit global mean temperature increases to 2ºC above pre-industrial levels. China’s energy transition will be shaped by its macroeconomic policy, development guidelines, and energy and environmental policies. Following the Chinese (and US) ratification of the Paris Agreement, the spirit of Paris seems to live on. The litmus test will come when implementation and increased ambition are gauged against the 2ºC yardstick.

Lara Lázaro
Senior Research Fellow, Elcano Royal Institute
| @lazarotouza

Mario Esteban
Senior Analyst (Asia-Pacific), Elcano Royal Institute
| @wizma9

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