MSR Review Workshop December 03, 2020 - European Commission
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MSR Review Workshop Jahn Olsen December 03, 2020
Purpose of the MSR
✓
● Removing legacy surplus while ensuring ● High price guarantor
there is enough surplus available ● The main price driver in the long-term
● Low time delay ● More climate ambition through the ‘back
● Intervention predictability – something we door’ (invalidation mechanism)
can model into the future
● Stability and protection against future
demand shocks
Source: BloombergNEF
1 December 03, 2020The EU Green Deal
The EU Green Deal
EU net historic and target greenhouse gas emissions
MtCO2e
6,000
Current 2020
target: 20% Current 2030
target: 40%
4,000
Historic emissions 50% reduction
Expected emissions
2,000 (with existing
measures) 55% reduction
Net-zero target
0
1990 2000 2010 2020 2030 2040 2050
Source: European Commission, European Environment Agency, BloombergNEF.
2 December 03, 2020The EU Green Deal
2030 targets were set with 40%
emissions reduction goal in mind
EU targets for renewables in energy consumption
Gross final energy Electricity Heating and cooling
100% 100% 100%
Increased 2030
target, 65%
75% 75% 75%
Increased 2030 Increased 2030
target, 39% 2030 target, target, 40%
50% 50% 55% 50%
2030 target, 2020 target, 2030 target,
32% 31% 33%
2020 target, Trend 2020 target,
25% 20% 25% 25% 22%
Trend Achieved Trend
Achieved
Achieved
0% 0% 0%
2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030
Source: Eurostat, European Commission, BloombergNEF. Note: Increased target shows upper bound from European Commission’s Sept. 2020 impact assessment.
3 December 03, 2020Modelled European generation
TWh Other
4,500 Solar thermal
4,000 Small-scale PV
Utility-scale PV
3,500 Offshore wind
3,000 Onshore wind
Biomass
2,500
Geothermal
2,000 Hydro
1,500 Nuclear
Oil
1,000
Peaker gas
500 Combined-cycle gas
Coal
0
2012 2020 2025 2030 2035 2040 2045 2050 Exports
Source: BloombergNEF
4 December 03, 2020Modelled EU ETS emissions
MtCO2
2,500
2,000
1,500
Aviation
1,000 Industry
Power
500
0
2006
2007
2008
2009
2010
2011
2012
2021
2022
2023
2024
2025
2026
2027
2005
2013
2014
2015
2016
2017
2018
2019
2020
2028
2029
2030
Source: BloombergNEF
5 December 03, 2020Modelled EU ETS emissions, whole
systems model (bottom up)
MtCO2
100%
9%
90%
80% 37%
70% 47%
49%
60%
Aviation
50%
Industry
40%
63% Power
30% 51%
42%
20%
10%
0%
2005
2006
2007
2008
2015
2016
2017
2018
2019
2026
2027
2028
2029
2030
2009
2010
2011
2012
2013
2014
2020
2021
2022
2023
2024
2025
Source: BloombergNEF
6 December 03, 2020Modelled EU ETS emissions, EU ETS
model (top down)
MtCO2
100%
6%
90%
80% 37%
70% 47%
60%
60%
Aviation
50%
Industry
40%
63% Power
30% 50%
33%
20%
10%
0%
2005
2006
2007
2008
2009
2016
2017
2018
2019
2020
2021
2028
2029
2030
2010
2011
2012
2013
2014
2015
2022
2023
2024
2025
2026
2027
Source: BloombergNEF
7 December 03, 2020Modelled hedged holdings
Hedged holdings (Mt)
1,400
Regulated gas
1,200
Semi-liberalized gas
1,000 Liberalized gas
Regulated coal
800
Semi-liberalized coal
600 Liberalized coal
400 Regulated lignite
Semi-liberalized lignite
200 Liberalized lignite
0
2015 2020 2025 2030
Source: BloombergNEF
8 December 03, 2020Circulation
m EUAs
1,600
1,400
1,200
1,000
800
600
400
200
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
50% EU target, current injection rate 50% EU target, 24% injection rate through Phase 4
55% EU target, current injection rate 55% EU target, 24% injection rate through Phase 4
Source: BloombergNEF
9 December 03, 2020TNAC versus circulation
Illustrative scenario 1 Illustrative scenario 2
m EUAs
1,800 m EUAs
1,800
1,600
1,600
1,400
1,400
1,200
1,200
1,000
TNAC 1,000
800 TNAC
Circulation 800
600 Circulation
600
400
400
200
200
0
0
2023
2030
2017
2018
2019
2020
2021
2022
2024
2025
2026
2027
2028
2029
2023
2030
2017
2018
2019
2020
2021
2022
2024
2025
2026
2027
2028
2029
Source: BloombergNEF Source: BloombergNEF
10 December 03, 2020Final thoughts
1 Getting MSR parameters right requires some knowledge on the wider EU ETS context…
Source: BloombergNEF
11 December 03, 2020Final thoughts
1 Getting MSR parameters right requires some knowledge on the wider EU ETS context…
2 …it also requires an MSR that reflects reality…
Source: BloombergNEF
12 December 03, 2020Final thoughts
1 Getting MSR parameters right requires some knowledge on the wider EU ETS context…
2 …it also requires an MSR that reflects reality…
..which means that the TNAC calculation should ideally include supply and demand from
3 all participating sectors…
Source: BloombergNEF
13 December 03, 2020Final thoughts
1 Getting MSR parameters right requires some knowledge on the wider EU ETS context…
2 …it also requires an MSR that reflects reality…
..which means that the TNAC calculation should ideally include supply and demand
3 from all participating sectors…
4 ..and reflect trade between linked partner markets.
Source: BloombergNEF
14 December 03, 2020Copyright and disclaimer
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