This report is an attempt to move the debate on these sectors forward by analyzing them in detail, within a single country. The analysis starts with reference to the cost and decision-making drivers, and then considers how climate change policies and measures could affect these relative to other drivers faced by the industries.

The report assesses carbon costs relative to financial indicators for the Austrian cement, steel and paper and pulp sectors. It finds no compelling evidence that the EU ETS has already had an impact on competitiveness and leakage in the sectors analysed. As carbon costs to European producers may increase after 2012 due to changes in the design of the EU ETS, a reduction in competitiveness and leakage could however be expected, with a likely first impact being reductions in investment in new capacity (noting that such investments have already been limited in the EU over the past decade).

The report asks how effective sectoral approaches, agreements and measures (SAAMs) might be in reducing competitiveness and leakage impacts. Six possible variants are described from a wide range of types, and their impacts assessed. The analysis shows that only standards and labels, and particularly standards, are likely to have a significant impact on competitiveness and leakage concerns. The implementation issues with standards are significant, but this is not different from any other SAAM. One of the key factors that has held SAAMs in general back has been the ‘devil being in the detail’ required if we are to go beyond a concept and into a scheme which can be discussed and negotiated around.

The SAAMs discussed could help move countries contemplating membership of the EU to improve their performance in anticipation of the closer union and policies this would bring. Perhaps this should also be seen as one of their main purposes: SAAMs developed with partners outside the EU’s borders would help generate trust and joint activities which would be mutually beneficial.

Energy-intensive sectors remain a key blockage, and perhaps also an opportunity, to reducing GHG emissions across the world. The characteristics of Austrian energy-intensive sectors have much generic application in industrialised countries: they are mature; have long supply chains; feature large numbers of employees at concentrated sites; and, closure costs would be high to the national economy.

This paper addresses the topic of climate policy integration. We focus on horizontal policy integration at the EU level with respect to general strategic policy papers, energy policy and the EU’s Multi-annual Financial Framework.

Our qualitative appraisal confirms that while there is a high general commitment to climate change action on EU level, evidence on climate policy integration into specific policies analysed in this paper is not clear cut: While recent energy policy documents generally refer to climate change as a central motivation, the EU budget does not mention climate change as a budgetary priority. On the strategic level, the relationship of energy policy and climate policy is partly synergetic (e.g. the objective of a sustainable energy system) and partly conflicting (e.g. the emphasis on fossil fuels in order to ensure energy security). Specific energy policy documents generally reinforce climate policy targets. Climate policy integration is not reflected in the EU budget: No explicit resources are dedicated to climate change issues in the Multi-annual financial framework; in cohesion funding – to which a significant part of the EU budget accrues – climate-friendliness of the proposed projects is also no funding criterion. Quite the contrary, a large portion of cohesion funding is allocated to investment in road transport entailing adverse effects for climate policy.

In order to successfully tackle the challenge of limiting climate change it has to be recognised that climate policy is a cross-sectoral issue and needs to be firmly integrated in general and sector-specific policy areas that frame economic activity and societal development. Experience however shows that there is a divide between the need of addressing climate policy as cross-sectional issue and short term policy decisions that imply a low hierarchical rank for climate policy versus other policy areas. Still a big step is necessary to depart from climate policy as add-on policy area towards comprehensive integration.

Unlike the domestic policy context, where widely recognized criteria have evolved to guide choices among alternative policy frameworks, no equally systematic approach has yet been developed for the international arena, where narrow state preferences or a specific methodology tend to dominate the discussion. Drawing on lessons from the evaluation of domestic climate policies and measures as well as the study of broader international environmental governance, this paper surveys existing research and proceeds to define a matrix of criteria for the classification of alternative frameworks for international climate cooperation. In so doing, it hopes to facilitate a more transparent and systematic approach to the assessment of alternative frameworks for climate cooperation.

Specifically, the criteria proposed in this paper are: Level of Ambition, Compliance Facilitation and Control, Institutional Capacity, Participation and Inclusiveness, Systemic Coherence, as well as Political and Economic Feasibility. Future application of this matrix to existing and proposed climate governance frameworks will determine whether the foregoing criteria offer a suitable frame of reference for the evaluation and comparison of contending climate architectures, regimes, and institutions. Given the proliferation of existing and proposed venues to advance climate governance, such a framework would seem both timely and useful.

Recent climate negotiations have evinced a controversial debate on how best to reform the institutional and legal framework of international climate governance. While this discussion on competing governance architectures is by no means new, it has rarely been pursued with the intensity prompted by what many observers considered a failure of classical multilateralism at the Copenhagen climate negotiations in 2009. While the latest negotiating mandate agreed in Durban in 2011 has strengthened the climate regime of the United Nations as the central venue for climate cooperation, a number of reform proposals are still on the table, and new recommendations are likely to follow in upcoming years; the discussion has thus not yet been put to rest.

Based on a database comprising more than 10,000 installations in 26 EU Member States, this paper provides a thorough analysis of the performance of the EU ETS in the period 2005 to 2010. In the first part, we analyse allocation patterns – i.e. the stringency of allocation caps and distribution issues – on EU and Member State level comparing the results of the EU ETS pilot phase and the first three years of the Kyoto phase. In the second part of the paper, we assess trading flows of European Allowance Units (EUAs) between Member States comparing the results for the first and second trading period and analyse the use of project-based credits in the second trading period.

Our analysis shows a higher overall stringency of the 2008 allocation caps compared to the first trading period reflecting the stronger role of the European Commission. For the following years we find, however, a surplus of allowances reflecting the decline in emissions due to the economic crisis. Traded certificates account for only a small share in EU-wide surrendered allowances, but increased in the second trading phase. Our analysis reveals that some countries have been net importers of EUAs despite national surpluses of allowances. This may either be due to differences in allocation patterns within Member States, EUA transfers between associate companies or due to excess imports because of wrong (emission) growth expectations. 

The EU Emission Trading Scheme (EU ETS) covers emitters from industry and the energy sector and 40% of the EU’s total greenhouse gas emissions. It is the biggest implementation of a cap-and-trade scheme worldwide and the core instrument of European climate policy since its start in 2005.

Several years of experience with the EU ETS and various adaptations of the regulatory framework are accompanied by discussions whether an institutional setting to stabilise carbon markets is needed.

This paper discusses imperfections in market forces – contrary to theoretical assumptions – especially with respect to the implications of the use of marginal abatement cost curves as well as the role of stable price signals for investment decisions. We argue that the gap between ex ante information when emission caps are set and ex post outcomes might be one of the reasons for price variability in the EU ETS.

This divergence between ex ante and ex post information illustrates that the theoretical assumptions on emissions trading are not matched by a real world setting. We conclude that this weakens the potential role of carbon prices for investment decisions. In order to improve the functioning of the EU ETS we reiterate the arguments for a carbon authority put forward in the literature and extend them by the argument that the concept of abatement curves is only of limited value in the context of CO2 emission reductions where marginal abatement costs often are ambiguous and time variant.

This project, funded by the Australian Department of Climate Change and Energy Efficiency, highlights the major findings about the implications of ambitious climate policy that emerge from a sub-set of internationally recognised integrated assessment models, and critically examines the ways in which these results are presented. The analysis suggests
that further thought needs to be invested in the communication and representation of model results. Modelling results and insights will be most useful and influential when different audiences are easily able to understand them and see their relevance to policy assessments and decision-making. This project highlights the need for a more plural approach to communicating modelling results to ensure effective and relevant communication to policymakers and civil society, in a manner that provides clarity and empowers sound decisions.

The aim of this study is to provide an overview of the production output, specific emissions and trading patterns of the aluminium sector at the disaggregated product level in order to determine whether certain products require special consideration when designing policies to improve the competitiveness of European firms and to prevent carbon leakage.

The aim of this study is to provide an overview of the production output, specific emissions and trading patterns of the pulp, paper and paperboard sectors at the disaggregated product level in order to determine whether certain products require special consideration when designing policies to improve the competitiveness of European firms and to prevent carbon leakage.