23 一月 2008

Climate Change Capital's reaction to EU climate change proposals

(LONDON - 23th January 2008) Climate Change Capital, the investment banking group dedicated to the low carbon economy, gave a cautious welcome to today's package of legislative proposals on climate change and energy policy from the European Commission.

QUOTE: Kate Hampton, Head of Policy at Climate Change Capital said,

"The Commission has proposed a challenging framework for energy for the next 12 years, based on a stronger, streamlined carbon market and an ambitious regime for renewables. But, incentives for coal-fired power stations to capture and store carbon and incentives for clean tech investors in developing countries should have been stronger.  For capital to be deployed at scale through policy-driven markets, the politicians must now follow through on their promises."

Background

In March last year, EU Heads of Government committed to reducing greenhouse gas emissions by 20% against 1990 levels by 2020 on a unilateral basis, or by 30% in the context of an international post-2012 agreement on climate change.  Today's package provides the domestic policy framework out to 2020 aimed at delivering these reductions, as well as enhancing energy security and providing the EU with an industrial lead in the development and deployment of clean energy technology.

The Commission's proposals will be debated in the Council (by Member States) and in the European Parliament during 2008.  Adoption of the legislation is expected in early 2009, before Parliamentary elections.

EU Emissions Trading Scheme

The Commission proposal sets out amendments to the ETS Directive aimed at improving the scheme for the post-2012 period.  Key elements include:

  • A longer compliance period of eight years for Phase 3 (2013-2020) as opposed to the current five for Phase 2 (2008-2012);
  • Introduction of an EU-wide cap from the outset, as opposed to the current system of national caps set by Member States and approved by the Commission; the cap for the trading sector under the unilateral scenario limits emissions to 21% below their 2005 levels;
  • Full auctioning for all allowances to the power sector from 2013, phased in auctioning from 2013 for other sectors except those that are judged to be at significant exposure to international competition; auctioning modalities will be harmonised across the EU by a Regulation to be agreed later;
  • Tight restrictions on imports of UN emissions reduction credits from the Clean Development Mechanism (CDM) and Joint Implementation (JI) projects in the absence of an international agreement, with imports in Phase 3 limited to the carry over of unused imports from Phase 2; in the event of an international agreement, half the additional effort can be met with imports; if an agreement is delayed, the EU will negotiate bilateral agreements for project credits whose import volume remains unclear.

QUOTE: Commenting on revisions to the EU ETS, Kate Hampton, Head of Policy at Climate Change Capital, said,
 
"Although the final proposal has been somewhat weakened, the Commission is providing the framework for a much improved European carbon market out to 2020 by taking national politics out of the allocation process and auctioning the majority of allowances.  But new rules for importing UN sanctioned project credits make more sense as a negotiating position for an international agreement rather than as a signal to clean tech investors in developing countries."

Renewables

The Commissions' draft Directive delivers a framework to achieve the EU-wide target of 20% of energy consumption coming from renewables in 2020. Significant investment needs to be directed at the renewable electricity, heating and cooling and transport (biofuels) sectors to meet this ambitious target.

  • The text sets individual targets for Member States which can be met with a mix of renewable production coming from electricity, heating/cooling and biofuels sectors, provided that biofuels account for at least 10% of all transport fuel demand.
  • Recognising the ambitious nature of the target, the Commission introduced a flexibility mechanism: Member States which are on track to meet their targets can allow projects to export certificates to other Member States thereby helping them meeting their own target.

For example, this means an approximate annual increase in capacity across Europe of:

  • 9% for wind, which is less than half than the current growth rate, although future sites are expected to be more challenging in some countries;
  • 19% for solar thermal, which is close to the current growth rate;
  • 22% for biomass electricity, which is a doubling of the current growth rate.

QUOTE: Commenting on the renewables proposal, Kate Hampton, Head of Policy at Climate Change Capital said,

"This legislation provides the backbone for wide-scale investment in renewables; now Member States must step up to the challenge and reinforce national support schemes."

Carbon Capture and Storage

The proposed Directive provides a regulatory framework for the deployment of Carbon Capture and Storage (CCS) addressing issues such as permitting.  However, it does not make CCS mandatory, nor does it provide an incentive framework for the 12 demonstration plants promised by EU Heads of Government last year.  The EU ETS is unlikely to provide a sufficient price incentive for the first generation of CCS plant, although the auctioning of allowances in the power sector constitutes a disincentive to build traditional coal plants. 

QUOTE: Commenting on the CCS proposal, Kate Hampton, Head of Policy at Climate Change Capital said,

"This is a disappointment in the package.  The option to make CCS mandatory in the future has been kept on the table, but funding needs to be provided for first generation plant now. Coal is still a globally abundant fuel and has to be addressed with greater urgency."

- END -

 

Enquiries:

Kate Hampton is available for further comment on 00 44 207 939 5208 khampton@c-c-capital.com
General press enquiries ring Daniel Cremin 00 44 207 939 5314 dcremin@c-c-capital.com

 

Notes to Editors:

About Climate Change Capital Group Ltd

Climate Change Capital Ltd. (“CCC”) www.climatechangecapital.com is an investment manager and advisor specialising in the opportunities created by the transition to the low carbon economy. Its activities aim to make the world’s environment cleaner while delivering attractive financial returns.

  • Fund Management: Develops and manages funds that invest in companies, projects and technologies that provide products or services facilitating climate change mitigation or adaptation. CCC has over US$1.6 billion under management across the following alternative asset classes: Infrastructure and Carbon, Private Equity, Listed Equities, Real Estate, Land and Water. 
  • Advisory: Provides financial, strategic and policy advice to energy-intensive industries, financial institutions, clean technology companies and governments.
     

Through the combined talents of investment professionals, market specialists, and thought leaders we reconcile economic gain with environmental benefits without compromising implementation, discipline, client focus and accountability. We call this Creating Wealth Worth Having®.

Climate Change Capital Limited is authorised and regulated by the Financial Services Authority.

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