ROCA CGE MODEL FOR POLANDREGIONAL OPTIONS OF CARBON ABATEMENT MODEL

Leszek KasekWorld Bank, Europe and Central Asia Region

Skopje, March 1, 2011Prospects for Green Growth in Macedonia. Methodological approach

Issues

EU energy and climate package 20-20-20: myriad of policy instruments

GHG reduction targets Structure of the ROCA model Policy issues analyzed Main results

EU energy and climate package 20-20-20

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. 1990 EU27

- Biofuels 10% Transp. fuels each MS

Target Scope

• 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 2020

• 20% 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 20-20-20

Source: World Bank Staff based on EU regulations.

0

500

1000

1500

2000

2500

3000

2005 2020 2005 2020

ETS non ETS

EU27 PL

-21 %

-10 %

+14 %

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) 9.5 21.3 ETS 21.0 20.8 Non-ETS -14.0 22.0EU-26 (total) 16.6 18.8 ETS 21.0 24.3 Non-ETS 12.5 13.5

ROCA at a glance

A igr

RA r

C r

M ir Other

Regions

Fossil Fuels

Y gr

Region r

Energ -intensive sector

Other Sectors

Lr, Kr, Qff,r

8

CGE framework with more detailed technology representation

Other regions

Hous-hold

Demandforenergy&othergoods Exports of energy& othergoods

Imports of energy& othergoods

Income cycle

EU 27

Non ETSETSRenewables

GHG target

Renewable target

Agri. FoodPetroleum products

Iron andSteel Paper,Pulp,

PrintingOther ETS

Che-mical prod.

Other EII

Rest of ind.

Coal

Oil

Gas

Nucl

ear

Bio

mass

Win

d

Hydro

Transport Electricity

Other regions

Hous-hold

Demandforenergy&othergoods Exports of energy& othergoods

Imports of energy& othergoods

EU 27

Non ETSETSRenewables

GHG target

Hybrid CGE Model: Large-Scale Implementation

Sectors and regions in the modelGrouping of 57 Sectors and commodities Grouping of 113 Countries and regions

Energy Regions 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-energy Regions 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