Personal Cap and Share Scheme Part 2, Results from E3ME

1
Personal Cap and Share Scheme (Part 2), Results
from E3ME

• A presentation to Comhar Sustainable Development
  Council and the stakeholders

Hector Pollitt, Unnada Chewpreecha, Jamal
Tarafdar Cambridge Econometrics
www.e3me.com
27 August 2008
2
Outline

• Overall Objective
• The E3ME model
• Results
• economic results
• energy and environment results
• sensitivity analysis results
• Conclusions

3
Overall Objective

• Target
• to reduce CO2 emissions from all fossil fuels
  in Ireland from non-EU ETS sectors so that there
  is a 30 reduction compared to 2005 by 2020
  (starting from 2010)
• Non-EU ETS sectors include
• road transport,
• households, and
• industrial sectors
• No changes to existing EU-ETS sectors

4
Overall Objective (cont)

• Means to achieve this objective

5
Introduction to the E3ME model

• Large-scale econometric model, linking energy,
  environment and economy
• Detailed sectoral disaggregation
• For further information see www.e3me.com

6
Modelling introduction

• Baseline forecast calibrated to DG TREN 2008
  forecast, based on output from PRIMES model
• Scenarios defined as differences from this
  baseline

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Macroeconomic Impacts, 2020
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Household Income Distribution- CS
difference from baseline
1st quintile
All households
5th quintile
Note(s) Chart shows percentage difference in
household real disposable income from baseline in
2020, including value of sold allowances (30
target). Source(s) E3ME.
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Household Income Distribution- CO2 Tax
difference from baseline
retired
1st quintile
All household
rural
Note(s) Chart shows percentage difference in
household real disposable income from baseline in
2020 (30 target). Source(s) E3ME.
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Key Sectoral Trends

• Energy sectors the fuel mix changes
• Less gas but more electricity demand
• Some sectors benefited from increase consumer
  spending
• Retailing, Banking and Finance, Other Business
  Services
• Some sectors benefited from extra investment in
  response to higher energy costs
• Motor Vehicles, Other Transport Equipment,
  Mechanical Engineering

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A very high carbon price is required in all
scenarios
Note(s) Eurostats population forecast for
Ireland in 2020 is 4,897,070
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Reasons for the high carbon price

• The target is very ambitious in the time-scale
  available
• there is little time for long-term changes
• Only a single instrument is applied
• in reality there would probably be parallel
  regulation
• The model results assume no fuel switching in
  cars
• no historical data exist with which to estimate
  parameters

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Sensitivity Analysis CS (different targets)
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Sensitivity Analysis CS (higher oil price)
Note(s) percentage difference from baseline
with high oil price assumption
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Sensitivity Analysis CO2 tax (using existing EU
ETS price as CO2 tax rate
Note(s) percentage difference from baseline
with high oil price assumption. ETS price is 22
08/tCO2 in 2020.
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Conclusions

• The economic impact of cap and share will be
  small some sectors will lose but others will
  gain
• In relative terms the lowest income groups
  benefit the most from this scheme
• the allowance price is a larger share of income
• they spend a larger share of income on heating,
  but less on motor fuels
• Any of the schemes on their own are unlikely to
  meet 30 target in 2020

17
Personal Cap and Share Scheme (Part 2), Results
from E3ME

• A presentation to Comhar Sustainable Development
  Council and the stakeholders

Hector Pollitt, Unnada Chewpreecha, Jamal
Tarafdar Cambridge Econometrics
www.e3me.com
August 2008
18
Household Income Distribution- Hybrid
difference from baseline
1st quintile
All household
5th quintile
Note(s) Chart shows percentage difference in
household real disposable income from baseline in
2020. Source(s) E3ME.
19
Sensitivity Analysis CO2 tax (different targets)
20
Sensitivity Analysis CO2 tax (higher oil price)
Note(s) percentage difference from baseline
with high oil price assumption
21
Sensitivity Analysis Hybrid (different targets)