Leszek Kasek World Bank, Europe and Central Asia Region Skopje, March 1, 2011 Prospects for Green Growth in Macedonia. Methodological approach

 EU energy and climate package : myriad of policy instruments  GHG reduction targets  Structure of the ROCA model  Policy issues analyzed  Main results

EU energy and climate package Source: World Bank Staff.

4 Policy targets until 2020 (EU Summit March 2007):  Energy efficiency +20% vs. BaUEU27  Renewables‘ share 20% PE EU27  GHG emissions -20%/-30% vs. 1990EU27 - Biofuels 10% Transp. fuelseach MS TargetScope 20% unilateral reduction of greenhouse gas (GHG) emissions compared to 1990 (30% conditional on comparable efforts in other regions) Energy efficiency improvement of 20% as compared to the business-as-usual (BaU) in % renewables share in primary energy consumption (10% renewable energy in transport) What is in the package: Policy Background: EU Climate and Energy Package

Poland’s commitments Source: World Bank Staff based on EU regulations.

Nominal and effective emission reduction targets in 2020 for Poland and the EU Source: World Bank Staff based on EU regulations. Nominal GHG reduction pledges Effective GHG reduction pledges (relative to 2005, in %) (relative to ROCA BAU 2020, in %) Poland (total) ETS Non-ETS EU-26 (total) ETS Non-ETS

ROCA at a glance

8 CGE framework with more detailed technology representation Other regions Hous- hold Demandfor energy & othergoods Exports ofenergy &othergoods Imports ofenergy&othergoods Incomecycle EU 27 Non ETS ETS Renewables GHG target Renewable target Agri.Food Petroleum products Iron and Steel Paper,Pulp, Printing Other ETS Che- mical prod. Other EII Rest of ind. Coal Oil Gas Nuclear Biomass Wind Hydro TransportElectricity Other regions Hous- hold Demandfor energy & othergoods Exports ofenergy &othergoods Imports ofenergy&othergoods EU 27 Non ETS ETS Renewables GHG target Hybrid CGE Model: Large-Scale Implementation

Sectors and regions in the model Grouping of 57 Sectors and commoditiesGrouping of 113 Countries and regions EnergyRegions with Kyoto emission reduction pledges Coal (COL)Poland (PL) Crude oil (CRU)Rest of EU-27(EU-26) Natural gas (GAS)Remaining industrialized countries (A1) Refined oil products (OIL) Electricity (ELE) Non-energyRegions without emission pledges Chemical industry (CRP)Developing countries (DC) Air transport (ATP) Other transport (TRN) Non-metallic minerals (NMM) Iron and steel industry (I_S) Non-ferrous metals (NFM) Paper–pulp–print (PPP) Other manufactures and services (Y)

10 Excess cost and incidence of emission market segmentation: –Inefficient split of abatement targets for ETS and non-ETS –Implications of -CDM provisions for ETS and non-ETS -Coverage of ETS –Outcome-based allocation of abatement burden (comparable efforts) Excess cost and incidence of overlapping regulation: –Renewable targets –Interaction with initial (energy) taxes and subsidies Unilateral policy measures and emission leakage: –Global cost-effectiveness of subglobal climate policies –Adjustment measures for energy- and trade-intensive industries (output-based allocation, import tariffs, tax rebates) Member State’s implementation: –Non-ETS regulation –Use of revenues from ETS/non-ETS regulation Policy Issues

MAIN EU 3x20 policy scenario – macroeconomic effects ‘Main’ scenario: macroeconomic variables 2020, in % vs. BAU