20/08/2021 NON-ETS-SECTORS

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20/08/2021

NON-ETS-SECTORS

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AGENDA

1. Effort Sharing Regulation + ETS BRT

1. Presentation (Koen Meeus, Dienst Klimaat) 2. Q&A

2. Social Climate Fund

1. Presentation (Yenthe Peeters, Dienst Klimaat) 2. Q&A

3. Sociale impacts carbon pricing

1. Presentation (Vincent Van Steenberghe, Service Climat) 2. Q&A

4. Tour de table

5. Wrap-up

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« FIT FOR 55 » CONFERENCE– (HUIDIGE) NON-ETS-SECTOREN •6/10/2021

KLIMAATARCHITECTUUR EN DOELSTELLINGEN

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KLIMAATARCHITECTUUR EN DOELSTELLINGEN

Overall GHG target by 2030, wrt 1990

From -40% (excl. LULUCF, incl. international aviation) to -55% by 2030, wrt 1990 (incl. LULUCF, incl. intra-EU aviation and maritime)

Sectoral targets by 2030, wrt 2005 ETS from -43% to -61%

ESR from -30% (-29% without UK) to -40%

LULUCF from no-debit rule (net absorption of 225 Mt in 2030) to target of 310 MtCO2 in 2030 (225 Mt is max. contribution to -55% (cf. Climate Law)) Energy targets

RES: from 32% to 40% of renewables in EU energy mix

EE: +9% increase wrt new 2020 Reference scenario (from 32,5% wrt 2007

Reference Scenario, new target corresponds to 36% (final) and 39% (primary) wrt 2007 Reference Scenario

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KLIMAATARCHITECTUUR EN DOELSTELLINGEN

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EFFORT SHARING REGULATION

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• Binding annual GHG emission targets for MS for 2021-2030

• Sectors: buildings (direct fuel use, not electricity), transport (direct fuel use, except aviation and international maritime), non-CO2 emissions (agriculture, energy supply, F-gases), industry not included in ETS (mainly SMEs)

= almost 60% of EU GHG emissions

• EU target: -29% (without UK) to -40% wrt 2005 (in line with cost-effective projections)

• National targets: from -10% to -50%

=> BE target of -47%

• Emissions trading in buildings and transport (see further)

to complement proven architecture: carbon price signal as a measure in a cost- effective package to deliver increased ambition

=> double coverage (ESR scope maintained): incentive for complementary MS policies

=> Social Climate Fund introduced (see further)

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TARGET SETTING APPROACH

Updated GDP/cap + bounded for outliers = maintaining fairness and taking into account capacity to act

• -49% for BE based on GDP/cap

Limited corrections to reflect cost-effectiveness (reduction potential)

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TARGET SETTING APPROACH

Limited corrections to reflect cost-effectiveness (reduction potential)

• High income MS (but capped at -50%):

• -0,5 pp for FR, LU, SE

• no correction for BE (-43% target based on cost-effective scenario), FI, DE, NL

• 3 pp for AT, DK

• 9 pp (based on GNI target) for IE

• Low income MS:

• corrections to less ambitious targets for cost-effectiveness reasons for those MS with wide and modest gap: 3 pp for EE, CY / 1pp for LV, LT / 19 pp for MT

Limitation of maximum target increase of 12 pp (achievability and fairness)

• IE by a further 4 pp / BE, CZ, NL by 2 pp / SI by 1 pp

• -0,7 pp for EL, ES, HR, IT, HU, PL, PT, RO, SK

=>Result is no overall convergence of targets (still 40% spread), but overall, the proposed targets lead to stronger convergence of per capita emissions in the ESR sectors

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TARGETS

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« FIT FOR 55 » CONFERENCE•6/10/2021

TARGETS

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TRAJECTORY + FLEXIBILITIES

• Target trajectory (Article 4)

• 2021-2022: existing trajectory

• 2023-2024-2025: deviate towards 2030 target

• 2026-2030: update, take into account uncertainty of emissions due to COVID crisis rebound

• Flexibilities

• Banking & borrowing maintained as in existing ESR + flex between MS continued (ETS BRT might induce extra reductions => increase supply, to be bought by MS such as BE)

• ETS-flex for high income MS: maintained and increased for MT (BE eligible)

• LULUCF-flexibility is adapted to take into account Climate Law

• Limit contribution of LULUCF towards 2030 target to 225 MtCO2eq

• Net use of credits limited by higher LULUCF ambition & split LULUCF flex in 2

• But also new additional reserve: with unused net removals from 2026-2030 in excess of targets. Possibility to opt-out for MS. Only used after all other flex (cf.

existing safety reserve) + Climate Law safeguard

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EMISSIONS TRADING SYSTEM FOR BUILDINGS AND

TRANSPORT (ETS BRT)

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EMISSIONS TRADING SYSTEM FOR BUILDINGS AND ROAD TRANSPORT (ETS BRT)

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Context

• 30% of EU emissions, more than half of ESR emissions + increasing between 2014-2019

• Carbon price signal to internalize external costs (polluter pays principle)

• Role in optimal and cost-effective policy framework as it tackles main barrier (negative externality)

• Complementary policies and measures needed to tackle all barriers, so:

• ESR scope maintained: incentive for complementary national policies

• EU-level complementary policies and measures (for instance CO2 for cars and vans,

…)

Practicalities

• Upstream system, regulating the fuel suppliers

• Building on existing provisions regulating taks warehouses and fuel suppliers for excise duty reasons, to reduce administrative burden and regulation costs

• Emissions will be determined indirectly via the fuel quantities put on the market

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EMISSIONS TRADING SYSTEM FOR BUILDINGS AND ROAD TRANSPORT (ETS BRT)

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Cap and linear reduction factor

• Set from 2026 to allow smooth start + deliver clear signal about trajectory until 2030

• Cap in line with cost-effective contribution: -43% GHG emissions by 2030, wrt 2005 =>

LRF of 5,15% (from 2024)

• Cap initially based on ESR/GHG inventory data

• From 2028: LRF applied to reported and verified data: LRF of 5,43% compared to the comparable 2025 value (adjustment of LRF under certain conditions)

Auctioning and revenue use

• No free allocation, because no carbon leakage risk

• All MS auction revenues to be spent for climate- and energy-related purposes,

including for addressing challenges in buildings and road transport + social impacts

• Main part of allowances distributed among MS on basis of avg distribution of emissions in the sectors covered during 2016-2018

• expected BE revenues: 5,8 bn over 2026-2030 period (7,7bn over 2026-2032

period) (estimations, with a carbon price of 50 euros, excluding revenues transferred to Social Climate Fund)

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EMISSIONS TRADING SYSTEM FOR BUILDINGS AND ROAD TRANSPORT (ETS BRT)

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Smooth start + MSR and mechanism to counter fluctuation risks

• Higher cap initial years: front-loading of auction volumes: in 2026: 30% higher auction volumes than total quantity of allowances for 2026 (deducted from volumes 2028- 2030)

• Market Stability Reserve for new sectors = rules-based

• initial volume of 600m allowances + volume-based thresholds (210/440 million)

• Additional price increase-based mechanism to counter risks of excessive price fluctuation

• when for more than 3 consecutive months the avg price is more than twice the avg price during the six preceding consecutive months: 50 million allowances released from the MSR

• If three times the price => 150 mio

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SOCIAL CLIMATE FUND

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Wat?

 Nieuw voorstel

 Europees fonds om de sociale impact van een koolstofprijs voor gebouwen en

wegtransport (ETS-BRT invoering) aan te pakken

 Looptijd 2025-2032

 Voor wie?

 Kwetsbare huishoudens

 Kwetsbare micro-ondernemingen

 Kwetsbare transportgebruikers

 BE: €1,84 mia = 0,05% BBP 2020 / jaar

 Social Climate Plans

 Minstens 50% cofinanciering

 Koppeling van klimaatmaatregelen met economische groei en economische en territoriale cohesie

Emission Trading System

Buildings Road Transport (BRT)

 ~25% vloeit naar SCF

 = € 72,2 mia (current prices) periode 2025-2032

 ! Start ETS: 2026

 Totale nationale inkomsten ETS BRT alle EU lidstaten: € 206,1 miljard (behoudens wijziging MFF va 2028)

 Verwacht wordt dat BE zo’n 7,6 miljard euro zal ophalen met het nieuwe stelsel (Preliminaire schatting, obv €50 / tCO²)

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Hoe kwetsbare bevolking ondersteunen?

 Tijdelijke inkomenssteun

 Afhankelijkheid fossiele brandstoffen op middellange tot lange termijn verminderen

 Grotere energie-efficiëntie van gebouwen

 Koolstofvrij maken van verwarming en koeling gebouwen ->

integratie hernieuwbare energie

 Betere toegang tot emissievrije en emissiearme mobiliteit en vervoer

 ! Sociale tarieven en directe inkomenssteun: immediate relief MAAR gerichte structurele maatregelen, met name energierenovaties, kunnen blijvende oplossingen bieden

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Social Climate Plan (I)

 2 doelstellingen

 Kwetsbare huishoudens, micro-ondernemingen en transportgebruikers voorzien in middelen voor het financieren en uitvoeren van investeringen

 Energie-efficiëntie

 Decarbonisering van verwarming en koeling

 Zero en lage emissie voertuigen en mobiliteit

 Verzachten impact van de stijging van kost van fossiele brandstoffen op kwetsbaren + voorkomen energie- en transportarmoede gedurende de transitieperiode tot zulke investering uitgevoerd zijn

 Inhoud plan

 Te financieren maatregelen

 Geraamde kosten

 Nationale bijdrage

 Mijlpalen

 Doelstellingen

 Maatregelen en investeringen respecteren het do no significant harm beginsel

Beoordeling effectief uitvoeren van maatregelen

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Social Climate Plan (II)

 Lidstaten moeten minstens 50% van de totale kosten van het plan financieren.

 Suggestie gebruiken nationale opbrengsten ETS BRT

 Komt voor BE op € 3,7 miljard

 Uitbetaling middelen SCF

 Afhankelijk van volbrenging mijlpalen en doelstellingen

 Betalingsverzoeken 1 of 2x /j uiterlijk op 31 juli

 Elke lidstaat dient een Social Climate Plan in te dienen bij de Commissie samen met de update van het NEKP

 Indiening: mid - 2024

 Progress reports (2j)

 afgestemd op updates NEKP onder Governance Regulation

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Social Climate Plan (III)

 Plan consistent met

 European Pillar of Social Rights Action Plan en European Social Fund Plus (ESF+)

 Programma’s onder cohesiebeleid

 Herstel en veerkrachtplan – Recovery and Resilience Facility

 Renovatiestrategieën

 Geüpdatet en geïntegreerd Nationaal Energie en KlimaatPlan (NEKP)

 Just Transition Plan

 Europese steun opstellen plan mogelijk

 Exchange good practices

 Technical support via

 ELENA faciliteit

 Technical Support Instrument

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 België

 Totaal: 1,84 miljard gehele periode (+ 50% = € 3,7 mia)

 2025-2027: € 605,5 miljoen

 2028-2032: € 1,2 miljard

 Inkomsten voor BE zitten ongeveer op het EU gemiddelde voor gehele periode

 BE: €159/inw tov EU27: €162/inw

Figuur 1: toewijzingen aan lidstaten uit het Social Climate Fund, per inwoner (2025-2032)

Financieel (I)

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Financieel (II)

 BE is een netto betaler aan SCF (gemiddeld € 9/inw/j)

 LU (62), NL (19), DE (14), FR (6)

 Bijdragen SCF/MFF

 BE: 4,1%, NL (3,9), FR (4,6), DE (4,9)

 Oost-Europese lidstaten dragen relatief meer bij aan het SCF dan aan het MFF

Figuur 2: netto-bijdragen/ontvangsten per inwoner (2025-2032)

Figuur 3: verhouding netto-bijdragen aan het SCF / en bijdragen aan het MFF (2025-2032)

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Timing

Ad Hoc Working Party on the Social Climate Fund (AHWP SCF)

 08/09 Goedkeuring mandaat op COREPER

 15/09 Eerste samenkomst AHWP SCF

 06/10 ENVI Raad

 2021 (?) : Own resources package inclusief voorstel tot amendering MFF

 Aanpassing van het begrotingskader van de Unie voor de oprichting van het sociaal klimaatfonds

 Voor het einde van het jaar: Proposal for a Council Recommendation on how to address the social aspects of the desired green transition

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6/10/2021

Fit for 55 – Distributive impacts of carbon pricing in (current) non-ETS sectors

Some preliminary analyses

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OUTLINE

1. Introduction

2. Carbon revenues 3. Carbon payments

4. Potential compensation schemes

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INTRODUCTION

• Important to analyse impact of Fit for 55 package on distributive issues; legislative elements include new ETS (buildings and road transport) and the Social Climate Fund

• Carbon pricing as a key instrument in a set of coherent and complementary policies

• Distributive issues arise independently of carbon pricing ; carbon pricing can help mitigate distributive impacts

• We look here only at direct impact of carbon pricing; several other, positive and negative indirect impacts of carbon pricing may arise, e.g. through pricing of goods and services, macroeconomic effects, etc.

• Methodology has some limits, including quality of households budget survey;

preliminary analysis

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OUTLINE

1. Introduction

2. Carbon revenues 3. Carbon payments

4. Potential compensation schemes

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695

1074

2028

231 206

486 663 17

1105

0 500 1000 1500 2000 2500

ETS BRT at 44 €/t

Current ETS at 44 €/t

ETS BRT at 60 €/t

ETS BRT at 100 €/t

Yearly revenues

Social Climate Fund (2025-

2032)

Yearly budget gas social tariff (2021) / heating oil fund (2019)

• Revenues from the Social Climate Fund amount to max. 1.844 bn € over 2025- 2032 or 231 M € on average per year

• Expected revenues in year 2030 excluding Social Climate Fund amount to:

• 0.7 bn € at 44 €/t

• 1.1 bn € at 60 €/t

• 2.0 bn € at 100 €/t

• For comparison purposes:

• SCF revenues are of the same order as resources devoted to the social tariffs on gas and the heating oil fund (energy poverty)

• (Current) ETS revenues in 2030 would amount 0.5, 0.7 and 1.1 bn € at respectively 44, 60 and 100 €/t

EXPECTED REVENUES FOR BELGIUM

Expected revenues for Belgium excluding revenues from SCF in 2030 for different carbon prices (M € in 2030; average 2025-2032 for SCF)

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OUTLINE

1. Context

2. Carbon revenues 3. Carbon payments

4. Potential compensation schemes

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Food and drinks 14%

Drinks alc.&other 2%

Clothes 5%

Housing - other 24%

Housing water&waste 2%

Housing electricity Housing gas 2%

1%

Housing oil Furniture and devices 1%

5%

Health 5%

Transport - other 9%

Transport diesel 1%

Transport benzine 1%

Communications 3%

Culture 7%

Training 1%

Restaurant-horeca 7%

Care 10%

Households’ 2018 annual spendings – shares (total is 35764 euros/year per household)

• Fossil fuel (FF) spendings amount to less than 5% of total spendings

• Buildings:

• 2.0% FF spendings for BUI (4.4% with electricity)

• Out of 30.3% total spendings for buildings

• Transport:

• 2.8% FF spendings for transport

• Out of 11.4% of total spendings for transport

HOUSEHOLDS’ CURRENT SPENDINGS ON FOSSIL FUELS

Housing 30.3%

Transport 11.4%

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INDICATIVE IMPACT OF CARBON PRICES ON FOSSIL FUEL PRICES

Source: Own calculations on the basis of IPCC emission factors, Weekly Oil Bulletin (Jan.-Sept. 2021 averages) and CREG data for heating gas (Jan.-Aug.

2021 averages)

1.45 1.44

0.60 0.00

0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

2.00 In €/l

+0

+0,12+0,16 +0,27

+0

+0,10+0,14+0,23

+0,02

+0,12+0,16 +0,27 +0,25

(prof.

diesel)

5.52

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

10.00 In c€/kWh

+0,23

+0,89 +1,21

+2,02

Final 2021 prices Increase ETD (incl. VAT)

44 €/tCO₂e 60 €/tCO2e 100 €/tCO2e

Diesel Petrol Heating oil Heating gas

In €/l In €/l

Preliminary analyses

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0 50 100 150 200 250 300 350 400

Average 1 2 3 4 5 6 7 8 9 10

Carbon payment buildings Carbon payment transport

EXPECTED CARBON PAYMENTS BY HOUSEHOLDS IN 2030

Households’ carbon payments in 2030 for carbon prices of 44 (left), 60 (middle) and 100 (right)

€/tCO2e – average and per decile (in € per HH)

• Assumption: GHG reduction of 45% in 2030 w.r.t. 2005

• On average (per HH per year)

• 125 € at 44 €/t

• 170 € at 60 € /t

• 280 € at 100 € /t

• From 80 € (per HH per year) at 44€/t in the 1st decile

• … to 380 € (per HH per year) at 100€/t in the 10th decile

Source: HBS 2020, own calculations

0 50 100 150 200 250 300 350 400

Average 1 2 3 4 5 6 7 8 9 10

Carbon payment buildings Carbon payment transport

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OUTLINE

1. Introduction

2. Carbon revenues 3. Carbon payments

4. Potential compensation schemes

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-100 -50 0 50 100 150 200 250

Average 1 2 3 4 5 6 7 8 9 10

Carbon payment (build and transp) Carbon revenue

Net gain

Scenario 1 – Equal redistribution to all households (in 2030, in €/HH)

ILLUSTRATIVE SCENARIOS

Computations based on 60 € /t in 2030

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ILLUSTRATIVE SCENARIOS

There is some heterogeneity within income classes

Average and interquartile carbon payments per decile at 60 €/t (in €/HH in 2030)

Preliminary analyses Source: HBS 2020, own calculations

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Other scenarios than scenario 1 can be analysed with (i) overcompensation and/or (ii) targeting

Example : doubling the carbon payment leaves virtually no household uncompensated within the first three deciles

ILLUSTRATIVE SCENARIOS

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425

Distribution of 2030 carbon payments BUI+TRA @ 60€ carbon price - first three deciles

Distribution % (all -45%)

Average payment (first 3 dec.- all -45%)

Average payment (total HH- all -45%)

2x average payment (total HH- all -45%)

Average

payment all hh

2 x average payment all hh Average

payment 1st 3 deciles

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Other scenarios than scenario 1 can be analysed with (i) overcompensation and/or (ii) targeting

Example : doubling the carbon payment leaves virtually no household uncompensated within the first three deciles

ILLUSTRATIVE SCENARIOS

Preliminary analyses Source: HBS 2020, own calculations

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

0 25 50 75 100 125 150 175 200 225 250 275 300 325 350 375 400 425

Distribution of 2030 carbon payments BUI+TRA @ 60€ carbon price - first three deciles

Distribution % (all -45%)

Average payment (first 3 dec.- all -45%)

Average payment (total HH- all -45%)

2x average payment (total HH- all -45%)

Distribution % (-60% first 3 deciles)

Distribution % (-30% first 3 deciles)

Average

payment all hh

2 x average payment all hh Average

payment 1st 3 deciles

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-300 -200 -100 0 100 200 300 400

Average 1 2 3 4 5 6 7 8 9 10

Scenario 2 - Equal redistribution to all HH x 2 (in 2030, in €/HH)

ILLUSTRATIVE SCENARIOS

-200 -100 0 100 200 300 400

Average 1 2 3 4 5 6 7 8 9 10

Scenario 3 – Redistribution x2 to deciles 1-3 and x1 to other (in 2030, in €/HH)

-200 -100 0 100 200 300 400

Average 1 2 3 4 5 6 7 8 9 10

Scenario 4 – Redistribution x2 to deciles 1-3 only (in 2030, in €/HH)

-300 -200 -100 0 100 200 300 400

Average 1 2 3 4 5 6 7 8 9 10

Scenario 1 – Equal redistribution to all households (in 2030, in €/HH)

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Summary of budgetary implications (in 2030, in M €)

ILLUSTRATIVE SCENARIOS

-500 0 500 1000 1500 2000

Scenario 1 Scenario 2 Scenario 3 Scenario 4

Total budget carbon compensation

Revenues excluding SCF SCF

Remaining revenues

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REDISTRIBUTION TOWARDS SME ^S

• To our knowledge, it is currently not possible to precisely identify emissions by SMEs in Belgium

• Figures show that SMEs are active in many sectors, including manufacturing industries, construction, … and that most of them are, by large, composed of 1 person

0 50000 100000 150000 200000 250000 Industrie manufacturière

Horeca TIC Activités de services administratifs et de

soutien

Autres activités de service Construction Commerce Activités spécialisées scientifiques et

techniques

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Aucun salarié

1-9 salarié(s)

10-49 salariés

50-249 salariés

Number of SMEs for the main activity sectors (2019) Size of SMEs in the main activity sectors (2019)

Source: Statbel

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REDISTRIBUTION TOWARDS SME ^S

Based on experiences abroad, possible options to explore are:

• As a preliminary step: gather as much information on energy consumption/efficiency as possible, through targeted assistance for SMEs (e.g. UK providing several useful tools, FR providing a free scan to individual companies)

• Tax credit, possibly to be used for

• Improving the energy efficiency of tertiary buildings (e.g. FR up to 30% of eligible expenses and up to 25,000€/enterprise);

• (Temporarily) compensating for increased energy costs;

• National debate on carbon pricing: « The support could take different forms, from the provision of

information, financing of audits, etc. to a direct participation to financing part of the investments and could build on existing programmes. »

=> Specific projects/programmes/funds to support SMEs could be set up and could also benefit from revenues stemming from the SCF

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www.climatechange.be/2050

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