Enel views on EU ETS Mariano Morazzo Head of Climate Change and Renewable Energy Policies Enel Round table – Strategic challenges to the EU ETS in the long-term Bruxelles September 27 th , 2019
Regional ambitions to be consistent with global needs Coordination between global and regional policy objectives GHG reduction Phase 2 Phase 1 (2013-2020) (2008-2012) Limit the global temperature Assesses scientific informa Annex I Parties: Preventing dangerous increase to 2°C and pursue tion and estimates the targets 5% from 1990 anthropogenic efforts to limit the temperature requirements of GHG levels in 2008-2012 interference with the increase to 1.5 °C by the end reduction by regions climate system of the century -8% -18% Target -20% -80–95% achieved Target Target -40% Target 1990 2012 2020 2050 2030 2 Source: Enel - internal analysis
Translating IPCC 1.5°C Special Report Fully decarbonised electricity key lever for 1.5°C target Global emission targets Climate change impacts (from 1.5°C to 2°C) Global power sector emissions in NEO 2018 vs 2°C and 1.5°C pathways Electricity generation in 2020, 2030 and 2050 (NEO2018 vs IPCC1.5°C) GtCO2e 16 14 12 10 NEO 2018 8 2°C 180 Gt 1.5°C 6 150 Gt 4 2 64 Gt 3 0 2017 2025 2030 2035 2040 2045 2050 Source: BNEF 2018, NEO – New Energy Outlook Report Source: BNEF 2018, NEO – New Energy Outlook Report
Timing - Coordinating across policy levels The Paris Agreement calsl for advanced effort Governance - The twofold review cycle Pledge Review compliance cycle 2015 2016-2017 2018 2019 2020 2025 ….. 2028 2021 2022 2023 2024 Preparation of Facilitative Dialogue ■ Facilitative Dialogue (to ■ Communication/U ■ First ■ Communication ■ Second ■ Paris Agreement take stock of the progress pdate of NDC official /update of NDC official Global Signature towards the long-term goal Global stocktake Ceremony and stocktake Ratification ■ Special report by the IPCC on global warming of 1.5°C Revision of EU Revision ETS CAP? 2030 Target ??? Progress Report -NCEP National Energy and Climate Plans Long-Term Low Emission Strategy Commission Assessment of the National Plan Selected possible Member state actions 1 Ml Carbon Coal Only Zlev Coal Electric Brexit pricing floor Phase-out sales Phase-out Vehicles 2015 2019 2020 2023 2025 2030 4 Source: Enel - internal analysis *linear reduction factor related to avg. EUA 2008-2012. Yearly reduction of 38,3 Mt CO2 for 2013-2020 and 48,4 Mt CO2 for 2021-2030; ** Decision (EU) 2015/1814; *** EU ETS Directive
New Green Deal as opportunity to shake EU economy Increase Climate ambition looking at the EU economy and focusing to a Just Transition Turning points for the “The Green Deal represents European Ambition an unprecedented opportunity for Europe to move away from fragmented policymaking” • The policies and targets for Energy Efficiency and Renewable Energies are expected to reduce greenhouse gas emissions by around 45% by 2030 Green New Deal for Europe is an ambitious and pragmatic plan to transition to zero greenhouse gas emissions and transformation of the Europe through these main pillars: • LT Vision for an EU Low carbon Economy may include a net zero emission economy by 2050 and could imply different • Emissions reduction (2030) transition pathways – and different 2030 GHG targets • Economic growth • UE Presidency has stated it will pursue an increase of EU NDC ambition , with the goal of raising the 2030 GHG emission • Just Transition reducing target to 50-55% 5
Carbon neutrality will require more ambitious targets 2030 targets may be revised to be consistent with 1.5° IPCC Scenario 2020 2030 2050 target 1 target 2 MtCO 2 eq (adopted in 2014) (enacted in 2009) (EC Roadmap 2011) 6000 GHG 40% target aligned to the Linear reduction trend for lower end of the ambition range reaching 2020 target envisaged in the 2050 Roadmap 5000 -20% (Comm. Long-Term Strategy 2018) EU ETS possible reform • In order to reach Paris 4000 Option 1- 85% reduction (“well below 2°C” ambition) Agreement goal should be -40% • Electrification Actual GHG evolution increased EU ambition setting • Hydrogen (-23% in 2017) the LRF to 2,5% by 2020 • Power to X 3000 • Ambitious CEP targets call for • Energy Efficiency ~ -45% MSR enhancement • Circular Economy 80%-95% -55% 2000 (2°C aligned) GHG ~ 45% target aligned to the Option 2 (COMBO) - 90% reduction higher end of the ambition range • Combination of alternatives from Option 1 envisaged in the 2050 Roadmap, New Green Deal (C. LTS 2018) -80% achievable with the EU Clean ambition increase Option 3 - 100% reduction (“1.5°C” ambition) 1000 Option 1 -85% Energy Package (-45.6%) proposed by the • Based on COMBO with more BECCS,CCS new Commission Option 2 -90% • Based on COMBO and CIRC -95% 0 Option 3 -100% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050 Actual GHG evolution LT Strategy Option 1 LT Strategy Option 2 LT Strategy Option 3 Linear reduction trend for 2020 target GHG Target – enacted / adopted 6 Source: European Commission, November 2018 – “An in-depth analysis in support of the Commission Communication COM(2018) 773” – A Clean Planet for all A European strategic long-term vision for a prosperous, modern, competitive and climate neutral economy. Eurostat Abbreviations: GHG – Greenhouse gas, BECCS - Bio-Energy Carbon Capture and Storage, CCS - carbon capture and storage, CIRC - Circular Economy
Europe is called for increasing ambition Paris Agreement may force EU to re-consider its targets European targets • The EU committed under the Paris GHG Non-ETS sectors Agreement to cut GHG emissions GHG ETS sectors in the EU by at least 40% below -30% -34% -49% 1990 by 2030 -43% -50% -55% • Under the current regulation ( Clean Energy Package ), the EU could reach up to 45.6% GHG emission 2005 2030 P.A 2030 2030 * 2005 2030 P.A 2030 2030 * reduction by 2030 Clean Clean Commitment Green Deal Commitment Green Deal Energy Energy • New EU Green Deal* ambition could Package Package increase emission reduction target RES Energy Efficiency to 50-55% by 2030 38% 34-45% -32,5% -40% 32% (60-75% RES-E) • RES and Energy Efficiency targets (66% RES-E) (56% RES-E) 20% 18% should be re-set to be consistent with the emission targets (1) 2017 2020 2030 * 2030 ref 2020 2030* 2030 2030 Assessment by others Green Deal Clean Energy Green Deal Clean Package Energy Package 7 Sources: EC, EC Primes technical note 3232.5 (1) Green Deal possible revisited EU 2030 Energy and Climate targets for RES, EE and GHG ETS/non-ETS estimated internally as a preliminary approximation based on assessments made by third parties (Climate Action Tracker, CAN Europe, Sandbag, European Climate Foundation), assuming an ambition increase to a 55% GHG reduction target by 2030
National policies may undermine the ETS Without cancellation, a surplus in the order of 200 to 500 MtCO 2 /yr could be generated Coal in the electricity Timeline of coal TAKEAWAYS Coal capacity 2017 (GW) generation mix 2017 (%) phase-out 80 60 40 20 0 • Besides DE and IT, another 10 countries 3 FR have already announced coal phase-out SE 2020-2025 <1 SK by 2030, which may amplify EUA demand IE reduction IT 5 UK AT 1 • Coal is the largest CO 2 emitter within 14 5 NL 46 27 EU ETS and a political phasing out could FI 2026-2030 lead to up ~500 Mt CO 2 emission 10 PT 1 DK reductions by 2030. Volumes could be 3 1 1 ES 6 1 <1 even higher, having a roller-coaster effect 8 DE on the surplus 2031 + 2 5 10 HU 4 PL • Cancellation of EUAs demand is a CZ BG complex decision in terms of timeline and GR Coal phase-out announced Legend volumes (e.g. replacement with new gas SI ? Coal phase-out under discussion RO capacity, impact on the MSR) No phase-out under discussion HR 8 Source: internal assessment based on drafted NCEP, Europe Beyond Coal assessment and Others
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