1 EU Energy Policy perspectives 5th Congress of the European Chemical Regions Network 30 November 2007 in Ludwigshafen Peter Botschek

2 Energy Policy Perspectives Global challenges: International Energy Agency (IEA) Outlook Chemical industry energy and emissions profile EU policy in the pipeline: January Package Implications for EU chemical regions

3 China & India in Global CO 2 Emissions Around 60% of the global increase in emissions in comes from China & India (IEA 2007) Cumulative Energy-Related CO 2 Emissions United States European Union Japan China India billion tonnes

4 Worlds Top Five CO 2 Emitters GtrankGtrankGtrank US China Russia Japan India China becomes the largest emitter in 2007 & India the 3rd largest by 2015 (IEA 2007)

5 Global Energy-Related CO 2 Emissions Global emissions will increase by 57% in the Reference Scenario, but they level off in the Alternative Policy Scenario (IEA 2007) billion tonnes (Gt) Reference Scenario 42 Gt Alternative Policy Scenario 34 Gt 19% 27 Gt

6 CO 2 Emissions Stabilisation Case By 2030, emissions are reduced to some 23 Gt, a reduction of 19 Gt compared with the Reference Scenario (IEA 2007) Gt of CO 2 CCS in industry CCS in power generation Nuclear Renewables Switching from coal to gas End Use electricity efficiency End Use fuel efficiency Reference Scenario 450 Stabilisation Case 27 Gt 42 Gt 23 Gt Energy-Related CO 2 Emissions

7 Average Annual Power Generation Capacity Additions in the 450 Stabilisation Case, A large amount of capacity would need to be retired early, entailing substantial costs (IEA 2007) 22 CCS coal-fired plants (800 MW) 20 CCS gas-fired plants (500 MW) 30 nuclear reactors (1000 MW) 2 Three Gorges Dams 400 CHP plants (40 MW) turbines (3 MW) Other Renewables Wind Biomass and waste Hydropower Nuclear Gas CCS Coal CCS GW

8 Global Industrial Manufacturing Energy Use Chemical Industry accounts for 30% (IEA 2007)

9 EU Industrial Manufacturing CO2 emissions Chemical Industry accounts for 16% (IEA 2007)

10 EU chemical* industry greenhouse gas emissions, energy consumption and production

11 EU chemical* industry greenhouse gas emissions per unit of energy consumption and per unit of production

12 Chemical* industry greenhouse gas emissions per production: EU versus US

13 EU Energy and Climate Policy In March 2007, the European Council agreed on an integrated climate and energy policy: Creating binding, regional targets for energy and climate policy : By 2020: at least 20% GHG reductions (EU) By 2020: 30% GHG reductions (if comparable efforts by other countries) By 2020: 20% energy efficiency increase By 2020: 20% renewable energies in energy consumption (today 7%) Biofuels: min. 10% until 2020 …EC legislative package announced for January 2008 Aim: to create low-carbon EU economy

14 Accelerating Pace EU Timeline Nov 07 Sep 07 Oct 07 Dec.07 Mar 08 Apr 08 May 08 June 08 Energy Markets: EC proposal ETS Review: ECCP recomme n-dations EC proposal 1st Reading EP/Council Jan 08 Feb Dec. CC UN Conference Bali 24 Sept. Intern. Conference Energy Efficiency July 08Aug 08Sep 08 1st Reading in Council and EP SET : EC Communi- cation Discussion in EP & Council EC proposal EP Discussion Renewable Energy: EC proposal 1st Reading in Council and EP 20 Nov HLG CEE 4 Dec. HLG Oct. Energy Council Nov. Energy Council 03 Dec. Energy Council Oct. EU Summit Events Emissions/climate change Energy Market Liberalisation Package Strategic Energy Technology Plan (SET) Renewable Energy HLG Council Meetings LEGEND Review of Environmental State Aid Guidelines State Aid Guidelines : Member States Consultation Final Version produced 27 Nov.: HLG Closing Conference 3 Dec. EU Summit 8 Apr. Feedstock Energy & Infrastructure HLG Chemicals CHEM4 EU

15 January Package: Renewables EC Mandate: Build legislation that achieves by % renewable energies in energy consumption; Biofuels: min. 10% until 2020 EC works on mandatory formula to enforce increase of renewables share towards 20% by 2020 : Macroeconomic model will take economic parameters, level of current and potential renewable energy share, certificate trading considered General Big Picture impact assessment announced Industry concerned about access to raw material Sector impacts to be ignored in impact assessment?

16 January Package: ETS Review under development Chemical industry processes to be included Threat: Allocation of emission rights by auctioning : Steep curve towards full auctioning of allowances for the power sector. No special provision for on-site energy installations (e.g. CHP): Our industrys power production facilities may be treated similar to the power sector. Only few exposed sectors may qualify for receiving free allocation based on benchmarks. Energy-intensive/exposed sectors: Possibly extra allowances compensating indirect ETS costs Free allocation according to a benchmark: 90% in 2013; the rest will be auctioning with increasing share of 5% per year until 50% auctioning is achieved in 2020.

17 January Package: ETS Review Action (1) : Cefic presented together with EFMA the case of European Fertilizer Manufacturers to EC. Cefic presents work on benchmarks in the petrochemical sector to EC. Cefic introduces systematic structure for data to be submitted to EC. Cefic safeguards submission of data on soda ash and petrochemicals

18 January Package: ETS Review Action (2) : Cefic sent letters to Commissioners on 6 November and Alliance letter, prepares high level advocacy action. Key messages: -The chemical industry is an enabling industry in terms of climate change solutions. -The ETS needs be enabling too by granting free allocation of CO2 certificates to major large homogeneous chemical processes based on benchmarks (covering 80-90% of emissions). -We propose chemical processes and benchmarks. -Exclude small emitters -We want to discuss solutions for globally competing energy- intensive sectors heavily impacted by the indirect effects of the ETS, i.e. the pass-through of CO2 costs through electricity prices.

19 January Package: ETS Review Action required : Defend principle of free allocation of CO2 certificates based on benchmarks Submit data to the EC demonstrating the exposure to international competition of the chemical processes. Develop EU benchmarks for major processes. Take action vis-à-vis national governments: -Reinforce need for free allocation for chemical processes based on benchmarks.

20 Summary EC January package is being negotiated in EC. Chemical industry to be included in ETS. Safeguard focus on major processes and bulk of emissions. Conditions of allowance allocation are being determined. The EU chemical industry needs free allocation based on benchmarks for safeguarding our sectors future perspectives in Europe. Thank you!

21 January Package: ETS Review ETS scope further to be enlarged: Inclusion of importers. EC want to ensure a global level playing field by imposing benchmarks (developed by the EU) to imported products at the customs office. Cefic rejects inclusion of importers: This may violate WTO law It is not feasible to make this distinction at the border (e.g. how to evaluate carbon footprint of plastic parts in imported car) Such measures threaten to be seen as protectionist by the EU trade partners which may retaliate with protectionist measures that can even be WTO compatible whilst harming EU exports Processed goods would undermine border measures and lead to relocation and CO2 leakage