CAKE at EUI Climate Week 2023 in Florence

CAKE at EUI Climate Week 2023 in Florence

CAKE at EUI Climate Week 2023 in Florence

On the 3 May Robert Jeszke, CEO of CAKE participated in the EUI Climate Week at organized by European University Institute and School of Transnational Governance. Robert Jeszke took part in the panel discussion focused on the Carbon Markets in the session: “What Next for EU Climate Policy?”.

The legislation resulting from the European Green Deal is being finalised. This is a major achievement, but the new context of the war in Ukraine has changed the boundary conditions dramatically, particularly for the EU. In the meantime, the US has adopted its IRA. What can we expect for the remainder of the decade? How to maintain a solid industrial base on the European continent?
Does the EU need a new geopolitical strategy on energy and industry? How should the agenda towards 2040 be shaped in preparing the EU to reach ‘netzero’ greenhouse gas emissions in 2050? Might some Member State be expected to over-achieve on ‘net-zero’ so that others can continue to emit? These were the key questions and doubts that came up during the discussion.

Panel participants were:

• Kurt Vandenberghe, Director General, DG CLIMA, European Commission
• Ottmar Edenhofer, Director and Chief Economist, PIK
• Nathalie Tocci, Director, Istituto Affari Internationali
• Robert Jeszke, Head of Centre for Climate and Energy Analyses, KOBiZE

Robert Jeszke presented the main conclusions from the latest CAKE analysis. If the EU ETS is to remain a market-based instrument and continue to be the central pillar of the EU’s climate policy, it will inevitably need to be reformed further and extended to more sectors of the economy. Extending the EU ETS to cover new sectors would mitigate the risk of its collapse and ensure that the system would continue to serve as the key measure to reduce emissions in the most efficient way. Merging the current EUETS with the ETS2 for buildings and transport can bring big winners and big loosers. Robert Jeszke emphasized that due to CAKE simulations in case if the two schemes function separately, the price of emission allowances in the BRT system is very large in the long run. This situation would generate large costs for regions with high deficit of allowances in BRT, who must purchase allowances from the other regions. If we merge EUETS and ETS2, the marginal costs in ETS2 will be radically lower. Main beneficiaries of merging EUETS and ETS2 in the long-run would be South-East Europe, Central Europe, Northern Europe and Poland. Reaching netzero target in EU in 2050 would be practically impossible without a wide range of carbonremoval, including both technologies such as CCS/CCU as well as negative emissions from BECCS and AFOLU. 

The electric power sector plays a key role in achieving the netzero goal in 2050, mainly due to its high emission reduction potential. Without negative emissions from the energy sector, it is practically impossible to achieve a zero-emission economy. Europe does not have enough RES capacity potential to meet the demand for electricity and clean hydrogen without nuclear power or without import of energy. There is need to create a system to develop green hydrogen using RES and nuclear sources in the EU structures. We should talk also about post 2050 period. The mechanisms and technology must go beyond this year to ensure Europe’s emission neutrality. That is why the energy sector plays such an important role.

Recording form the meeting is available here: LINK