Following Glasgow COP26’s ambitious net-zero corporate claims (the Glasgow Climate Pact), its enhanced call for action over non-CO2 greenhouse gases (such as methane), and the significant advances on Article 6 market and non-market mitigation scenarios, COP27 has a vivid legacy for which to be accountable. This year’s COP is moreover embedded into a sense of global distress led by the War in Ukraine and other relevant geopolitical scenarios (e.g., tensions over China-US relations, Brazilian elections), which could shape the future of multilateralism in climate negotiations.

In parallel, environmental reports continue calling for urgent action to redirect the stability of our Planet below levels of dangerous interference for future generations. UNEP’s “Emissions Gap Report”, WMO’s “Provisional State of the Global Climate 2022” and WWF’s “Living Planet Report” bring evidence of the Planet’s poor performance and raise awareness on the need for higher ambition in Nationally Determined Contributions (NDCs) and countries’ action both on mitigation and natural capital conservation (e.g. enhanced pressure on Loss and Damage funding).

In the 2022 edition of the FSR Climate Conference, this policy roundtable will reflect on the achievements, shortcomings and take-home messages from COP27 in Sharm El Sheikh, Egypt. The discussion will touch upon challenges and opportunities of decarbonisation pathways within the current context of geopolitical tensions over resources, trade, and socially just transitions.

Watch the recording:

Host:

• Simone BORGHESI (EUI & University of Siena)

Chair:

• Jos DELBEKE (EUI & KU Leuven)

Speakers

• Karen PITTEL (ifo Institute & University of Munich)
• Jacob WERKSMAN (DG Climate Action)
• Angela CHURIE KALLHAUGE (Environmental Defense Fund)

Check out the programme of the conference

Register here

Many countries look at carbon pricing as part of their climate policy mix. A key development is the emergence of the voluntary carbon market (VCM); a debate is raging about how to improve its environmental credibility. The VCM should facilitate credible investments in carbon removals and the transfer of clean technologies across the globe. Will this lead to a significant increase in market volume? Could voluntary and regulated carbon markets converge? Is a future global carbon price possible?

Date: Tuesday 15 November

Time: 9:30 – 10:30 EET

Location:  EU Pavilion

Speakers are:

• Jos Delbeke, EUI
• Jan Cornillie, EUI
• Mashael AlShalan, AEON
• David Rademacher, E.ON
• Andrea Abrahams, IETA
• Richard Newell, Resources for the Future

Register here to attend the event.

The event presented here is organised by members of the Delegation of the European University Institute to COP27, not FSR directly. 

To meet the ambitious goals of the Paris Agreement, developed and developing economies will need to decarbonize at a fast pace. The ability to channel finance to mitigation activities will be essential in this process. Facilitated by financial institutions, countries need to establish frameworks governed by clear rules to ensure emissions get effectively reduced. Among other mechanisms, pricing carbon is key in achieving an ambitious and just transition in both developed and developing countries. It can also generate income to address equity issues.

This COP27 event will take place on Friday 11 November 2022, at 16:45-18:15 EET in the Room Amon of the UNFCCC Pavilion, and will be live-streamed on Youtube.

The official side event is co-organised by PIK Potsdam, EUI, ICAP and MCC Berlin.

Watch the streaming here:

Chair, introduction and conclusions

• Johan Rockström, PIK

Moderator of the discussion

• Jos Delbeke, EUI

Discussants:

Part 1: Carbon pricing, state of play globally

• Simone Borghesi, EUI and University of Siena
• Stefano De Clara, ICAP
• Martin Hession, European Commission

Part 2: Carbon pricing, climate finance perspectives in developing countries

• Silvie Kreibiehl, IPCC AR6 WG3 Finance Chapter CLA
• Dora Benedek, IMF
• Bernice van Bronkhorst, World Bank (tbc)

Part 3: Discussion with the presenters and Q&A with the audience

Check out the presentations:

• Stefano De Clara, ICAP – Emission trading worldwide
• Simone Borghesi, EUI – Carbon pricing and the social acceptability of climate policies

The European Union Foreign Subsidies Regulation will enter into force at the end of 2022. From September 2023 onwards, companies carrying out concentrations (mergers and acquisitions and JVs where one of the parties has a global turnover exceeding €500 million), or involved in procurement procedures above €250 million, will have to inform the European Commission about ‘financial contributions’ such as subsidies, the tax break that they received from non-EU governments, which exceed relative low thresholds.

This important new piece of legislation is intended to ‘level the playing field for EU companies, competing with undertakings from third companies. It will pose major substantive and procedural challenges for all energy companies, whether EU or from abroad.

During this policy debate, Christof Schoser, the Head of Task Force Third- County Subsidies at the European Commission’s Directorate-General for Competition will present the regulation on foreign subsidies and explain how it is intended to work in practice – notably how companies should prepare to comply with the notification obligation.

Mr Schoser will also highlight how the Commission might interpret the notion of a distortive effect on the EU internal market.

Energy companies already need to start preparing for this Regulation now, and this is a unique opportunity to hear first-hand how they should do so.

Programme:

Introduction and moderation

Christopher Jones | Florence School of Regulation (FSR)

Keynote presentation

 Christof Schoser | European Commission

 Discussant:

Ilaria Conti | FSR

Marzia Sesini | FSR

This webinar will discuss the options for designing a possible mechanism for a wholesale gas price cap. Oliver Koch from the European Commission will give an overview of questions which are being discussed among the European Union (EU) Member States – the state of play, followed by opinions from leading academics and think tanks.

The question of whether and how the EU should install a price cap for natural gas markets is at the top of the EU’s political agenda. Recent prices, around 1000% of the price of gas in 2020, with its knock-on effects on electricity markets, is causing hardship for citizens and business, with energy-intensive industry curtailing production, which threatens supply chains, and employment and is stoking inflation.

The situation is serious. On 30 September 2022, the EU adopted a regulation on an emergency intervention to address high electricity prices requiring Member States to adopt a cap on market revenues of infra-marginal generators and a profit clawback on oil and gas companies.

However, these measures partially treat the symptoms of high gas prices and are not the cause. They will only raise a fraction of the revenues that the Member States would need to properly subsidise citizens and industry over the coming two to three years, and they do not affect the underlying cause of high gas prices.

There is little surprise that many EU Member States are asking the European Commission for a proposal on a gas price cap. Little wonder, however, that other countries, previously reliant on Russian gas, are cautious. Once a price cap is installed, and thus no price competition exists between EU customers, how to ensure that available gas goes to the citizens and industries that need it most?

Programme:

Introduction and moderation

Christopher Jones | Florence School of Regulation (FSR)

Keynote presentation

 Oliver Koch I European Commission

 Discussant:

Alberto Pototschnig | FSR

Ilaria Conti | FSR

Bernd Weber | EPICO

Oscar Arnedillo | NERA Economic Consulting

Conclusions

Andris Piebalgs | FSR

The digitalization of Europe’s energy markets raises numerous questions in different regulatory contexts. This debate will examine novel regulatory issues raised by the drive towards system interoperability. What should be the overarching principles governing a European energy data space? What government interventions or data standards (if any) are required to make specific data use cases successful for achieving green transition goals? What types of regulatory instruments are best suited to achieve these goals?

On 1 June 2022, the European Union Agency for the Cooperation of Energy Regulators (ACER) was asked by the European Commission to submit non-binding framework guidelines setting out clear objective principles for the development of a network code on demand response, including load, storage and distributed generation.  The new rules will aim at enabling market access for demand response, as well as facilitating the market-based procurement of services by distribution and transmission system operators.

The proposed new EU rules on Data governance will aim at enabling market access for demand response, as well as facilitating the market-based procurement of services by distribution and transmission system operators. In the meantime, the European Commission will also publish its Digitalisation of Energy Action Plan to develop a competitive market for digital energy services and digital energy infrastructure that are cyber-secure, efficient and sustainable and ensure interoperability of energy data, platforms and services.

What should be the overarching principles governing a European energy data space? What government interventions or data standards (if any)  are required to make specific data use cases successful for achieving green transition goals? What types of regulatory instruments are best suited to achieve these goals?

Background

The proposed network code applies to all resource providers, all transmission and distribution system operators, and all wholesale markets and covers balancing and congestion management. A number of its draft articles (see the ACER framework guideline of June 2020) will apply to system operation and data management (articles 51 -74) and to congestion management (articles 84-104).  These articles envisage, inter alia, new EU rules on Data governance including data quality, responsibilities, data privacy and confidentiality and interoperability.

Albeit highly technical, these provisions raise important ‘high-level’ questions about data management and transparency. For example, it may be argued that even if transparency towards market parties is important to support the development of liquid and efficient markets, the publication of detailed grid and market data can also be problematic in some cases as the ability to predict congestions could cause gaming and market power abuse opportunities.

On 23 February 2022, the European Commission published a proposal for a Regulation on harmonized rules on fair access to and use of data (hereafter referred to as the “Data Act”), to complement previous initiatives, including the EC communication entitled ‘A European strategy for data’ of 19 February 2020, and its Regulation 2022/868, commonly referred as the ‘Data Governance Act’. The proposed ‘Data Act’ will be legally binding and directly applicable in all member states. Its applicability to those active in the electricity markets at all levels is potentially very broad.  The Commission is also expected to publish its roadmap on the Digitalisation of Energy Action Plan  – to develop a competitive market for digital energy services and digital energy infrastructure that are cyber-secure, efficient and sustainable and ensure interoperability of energy data, platforms and services.

How will these more general initiatives interact with the specific issues to be covered in the proposed network code –  if at all?   The EU DSO Entity has for example already questioned a provision in the FG that TSOs shall receive all the data exchanged between the grid users and the SOs.  It is argued that data exchange between system operators should be bi-directional and limited to necessary data, and further that it might be better to highlight that the new rules must be in line with higher-level data regulation (including the new Data Act).

This FSR debate seeks to explore several broad themes arising out of these new regulatory developments with experts on the regulation of the European Union’s electricity market.

Agenda: 

Introduction & opening presentations

Leigh Hancher | Florence School of Regulation (FSR) and Tilburg University

Astrid Brunt | Statnett

Sonya Twohig | ENTSO-E

Panel discussion

Paul de Wit | EU DSO Entity

Marco Pasquadibisceglie | ARERA

Georg Harnter | Geode

Savannah Altvater | Eurelectric 

Concluding remarks

Leigh Hancher | FSR and Tilburg University

Alberto Pototschnig | FSR

This debate will host Matthew Baldwin, Deputy Director-General in the Directorate-General for Energy (DG ENER), at the European Commission to discuss the implementation status of the REPowerEU Plan.

The European Union (EU) REPowerEU Plan is the response to the hardships and energy market disruption caused by Russia’s invasion of Ukraine. The plan has four primary areas of action: energy supply diversification, energy savings, clean energy transition acceleration, investment and reform.

As Russia escalates the war, implementing the plan is necessary to provide households and industries with affordable energy. The plan requires strong coordination between the EU Member States and efficient implementation of agreed measures at the national level. The EU can find the best response to the energy crisis by acting together.

Short bio of Matthew Baldwin:

Mr Baldwin has been the Deputy Director-General of DG ENER since 1 June 2022. He oversees the work of the ‘Energy Platform Task Force’. Previously, he was Deputy Director-General in the Directorate-General for Mobility and Transport (DG MOVE), where he ran the Commission’s Horizon Europe Mission for 100 Climate Neutral and Smart Cities by 2030 and was the coordinator for road safety and sustainable urban mobility. He has an extensive experience in EU policy issues. He served in the Cabinets of the European Commission’s President Barroso, Commissioner Lamy and Commissioner Hill.

This debate examines to what extent capacity subscription contracts could be part of enhancing the current electricity target model.

The event will examine to what extent the engagement of consumers explicitly to choose and pay for their preferred level of continuity of supply, beyond a guaranteed minimum, could be part of the enhancement of the current electricity target model better to face the challenges posed by an increasing penetration of renewables in the electricity system, with the resulting need for this system to become more flexible, and, more generally, to address the increasing resource adequacy concerns.

Programme

Introduction to the Debate and Opening Presentations

Alberto Pototschnig | Florence School of Regulation (FSR)

Michael Pollitt | Judge Business School, University of Cambridge

Laurens De Vries| TU Delft

Panel Discussion: Introductory Remarks, Polls and Comments

Leigh Hancher | FSR and Tilburg University (Moderator)

Peter Claes | IFIEC

Breda Kutin | Slovene Consumers’ Association (ZPS)

Jana Haasová | ERU and CEER

Concluding Remarks:

Leigh Hancher | FSR and Tilburg University

Alberto Pototschnig | FSR

Background Information

Resource adequacy concerns have grown in the face of the increasing penetration of variable renewable energy generation and its impact on the distribution of prices in the wholesale electricity market and, more recently, following the Russian invasion of Ukraine and the reduction of energy flows to Europe which have resulted and will result from the imposition of sanctions and the unilateral breach of contracts by Russian companies.

The Clean Energy for all Europeans Package introduced the requirement for annual European resource adequacy assessments[1]  and national resource adequacy assessments[2].

These assessments are aimed at identifying resource adequacy concerns that Member States shall address by removing the regulatory distortions or market failures which cause these concerns.

Beyond the removal of these distortions and failures, resources should be harnessed to ensure the balance between demand and supply at all times. Demand response can play an increasing role in this context, due to advances in technology and digitalisation, as it is likely to be the cheapest resource providing flexibility. Another way in which demand can engage and contribute to adequacy, or at least lower its cost, is by choosing the level of continuity of supply, rather than being provided with a standard one, irrespective of its value for the different consumers.

In fact, different consumers might attach different values to the guarantee of continuity of electricity supply[3]. This is especially the case when considering consumption for non-essential uses in excess of what is necessary to cover basic needs (lighting, cooking and heating). Therefore, schemes have been proposed where consumers can choose their preferred level of continuity of electricity supply and pay for it. Those opting for higher continuity will pay higher charges than those who are ready to have the power supplied to them reduced at time of scarcity.

This idea is not new, as it was conceptualised already more than thirty years ago as the priority service contracting approach or multi-level demand subscriptions[4], or, more recently, as the privatisation of reliability[5]. Lately, the approach was proposed again as the internet subscription model applied to electricity markets[6].

Beyond the basic idea, at the implementation stage a number of issues would need to be addressed, including some related to the long-term nature of the investments needed to improve service continuity. This could create a service continuity demand-supply mismatch if consumers were allowed to adjust their chosen level of service continuity frequently. Other implementation aspects relate to whether such an approach should be implemented in a centralised or decentralised manner and to consumer switching.

[1] Article 23 of Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity.
[2] Article 24 of Regulation (EU) 2019/943.
[3] In this context, the guarantee would refer to resource adequacy and would clearly not cover disruptions caused by transmission or distribution failures or other force majeure events.
[4] For example, H. P. Chao and R. Wilson, Priority Service: Pricing, Investment and Market Organization, The American Economic Review, 1987, vol. 77, no. 5.
[5] For example, Shmuel S. Oren, Privatizing Electric Reliability through Smart Grid Technologies and Priority Service Contracts, Proceedings of the IEEE PES Annual Meeting, Minneapolis, MN, July 25-29, 2010
[6] For example, Michael Pollitt in his chapter in Jean-Michel Glachant, Paul L. Joskow, Michael G. Pollitt (eds.), Handbook on Electricity Markets, Edward Elgar Publishing, November 2021.

Moderated by Andris Piebalgs from the Florence School of Regulation (FSR), the debate will convene leading experts on methane emissions to review important scientific updates on methane and discuss the priority actions that are critical to achieving the Global Methane Pledge.

Methane is a powerful greenhouse gas responsible for over one-quarter of the climate warming we are experiencing today. The fossil fuel sector is one of the largest sources of human-made methane emissions and is the sector with the greatest potential for cost-effective, readily available emissions reductions. While we have enough information to act towards reducing these emissions today, better data will enable the targeted, ambitious action that is needed to reduce emissions in line with the levels needed to achieve the Paris Agreement, as well as tracking changes in emissions over time as mitigation strategies are implemented.

At COP 26, the US and the EU announced the Global Methane Pledge with over 100 signatories committing to achieve a collective methane emissions reduction of 30% by 2030. As core implementing partners of the Global Methane Pledge, the UN Environment Programme’s International Methane Emissions Observatory (IMEO) and Climate and Clean Air Coalition (CCAC) collaborate to provide countries with the data, information, and support necessary to achieve these targets.

UNEP launched IMEO to improve the global understanding of methane emissions and connect findings to action on transparency, science, and mitigation. IMEO is a data-driven, action-focused initiative that takes an innovative approach to addressing the methane emissions problem by collecting, integrating, and reconciling methane data from different sources, with particular emphasis on measurement-based data. IMEO is creating a public global dataset of empirically verified methane emissions to provide a sound scientific basis for the Pledge.

The CCAC is a voluntary partnership of governments, intergovernmental organizations, businesses, scientific institutions and civil society organizations committed to improving air quality and protecting the climate through actions to reduce short-lived climate pollutants. Using the science-based findings of IMEO, CCAC supports the development of country profiles, national methane roadmaps, and mitigation plans through its Methane Roadmap Action Programme.

Agenda

Opening remarks:

Christopher Jones | FSR

Latest scientific findings on methane emissions:

Daniel Zavala | Environmental Defense Fund / IMEO

Manfredi Caltagirone | IMEO

Implementing the Global Methane Pledge: How UNEP’s IMEO and CCAC are building capacity to improve science, transparency, and policy:

Giulia Ferrini | IMEO

Martina Otto | CCAC – TBC

Q & A

Closing remarks:

Brendan Devlin | European Commission

Ilaria Conti | FSR

#FSRDebates

The European Union’s (EU) energy policy has been giving increasing priority to biogas and biomethane, and this has accelerated significantly with the RePowerEU Communication, where the Commission proposes increasing the ‘Fit-for-55‘ ambition of producing 17 bcm of biomethane by 2030 to 35 bcm, with already the production of 3.5 bcm by 2022.

Biomethane will need to be an important part of the EU’s net-zero strategy. As evidenced in the Sustainable Carbon Cycles Communication, when its use is combined with CCS, it can lead to negative emissions. It will be an integral part of developing a sustainable farming sector, and financing can come partly from energy and partly from agricultural revenues.

The industry is however in its infancy compared to other energy sources in Europe and will need huge scaling up and cost-efficiencies to contribute at the scale and speed envisaged by the Commission.

This debate looks to unpick these challenges, asking what are the bottlenecks that need to be overcome, what needs to be done in regulatory terms to realise the RePowerEU target in practice, and what should be the longer-term EU biomethane strategy.

Introduction 

Galin Gentchev | The European Commission

Daan Peters | Common Futures (Keynote)

Panel

Ilaria Conti | Florence School of Regulation (FSR)

Cyril Harry |  Engie

Marilda Dhaskali | Birdlife Europe

Conclusions

Christopher Jones | FSR

#FSRDebates

This Debate will aim at identifying which steps are still required for Ukraine to join the Internal Energy Market.

Following the invasion of Ukraine by the Russian Federation’s army, repeated statements have been made, at the highest European political level, about the prospect of Ukraine joining the European Union. While Ukraine’s accession will not happen immediately, there may be an opportunity for Ukraine to participate in part or even in full in the Internal Energy Market even before it becomes a member of the European Union.
Ukraine is already a contracting party of the Energy Community and has been making steady progress in implementing the energy acquis communautaire.

During the event we will discuss the current state of play in that process and aim at identifying which steps are possible – especially at regulatory and market design level – in order for Ukraine to participate actively in the Internal electricity and gas Markets in the short term.

The event will be available with live translation in English and Ukrainian.  

Draft Programme

Introduction to the Debate and Opening Presentations

14.00 – 14.05     Introduction to the Debate

Alberto Pototschnig | Florence School of Regulation

14.05 – 14.15     An introduction to the issue

Olena Pavlenko| President, DiXi Group

14.15 – 14.25     The perspective of the Ukrainian regulator

Kostiantyn Ushchapovskyi | Chairman, National Commission for State Regulation of Energy and Utilities of Ukraine

14.25 – 14.35     The perspective of the Energy Community Secretariat

Dirk Buschle| Deputy Director, Energy Community Secretariat (TBC)

Panel Discussion: Introductory Remarks, Polls and Comments

Moderator: Leigh Hancher | Florence School of Regulation and Tilburg University

Panellists:  Sonya Twohig| Secretary General, ENTSO-E

Claude Mangin | Market Development Manager, ENTSOG

Jan Haizmann | Member of the Board, EFET

14.35 – 15.00     Introductory remarks from the panellists

15.00 – 15.05     Polls

15.05 – 15.25     Comments on the polls outcome and Q&A from the audience

Panellists

15.25 – 15.30     Concluding remarks

Leigh Hancher | Florence School of Regulation and Tilburg University

Alberto Pototschnig | Florence School of Regulation

#FSRDebates

Hosts: Leigh Hancher and Alberto Pototschnig (FSR)

The focus of this series is on recent court cases, regulatory decisions, EU legislation, or public consultations to be discussed by a panel of experts.

“Carbon lock-in refers to the self-perpetuating inertia created by large fossil fuel-based energy systems that inhibits public and private efforts to introduce alternative energy technologies.”

“Carbon lock-in” has been characterized as an equilibrium in which certain carbon-intensive technological systems or practices persist over time, either “locking out” the potential for change or braking further movement towards low or zero carbon . This equilibrium directly or indirectly hinders the deployment of low-carbon technologies, which either cost more upfront or cannot compete with the lower prices of high-carbon technologies. The literature refers to various categories of lock-in effect.

Infrastructures and energy technologies often lock societies into carbon-intensive emission pathways because of the length of time before investments pay off . Oil and gas extraction projects are usually not only capital intensive but also require many years of planning, exploration, and development, and only once the projects have been explored, appraised, and developed, revenues can be earned.

Institutional carbon lock-in can shape choices and limit the actions of state institutions, and institutional choices sustain the competitive advantage of fossil-fuel technologies, inhibiting public and private investment in clean energy

Since a sustainable energy transition is complex and uncertain, it is also claimed that behavioural carbon lock-in must be absent in order for individual and collective decision-making to be made in accordance with principles of sustainability.

Carbon Lock-in and State Aid

The EC’s new Guidelines on climate energy and environmental state aid (the CEEAG) adopted in 2022, provide the framework for public authorities to support the European Green Deal objectives efficiently and with minimum distortions of competition. These Guidelines provide that when approving state aid for. ‘transiton fuels’ such as natural gas, the Commission may require commitments to ensure the ‘lock in’ of fossil fuels is avoided and fossil fuel installations are compatible with the 2030 and 2050 targets. This may include for example commitments related to the future deployment of Carbon Capture and Storage (CCS).

Carbon Lock-in and the Taxonomy

The concept of ‘carbon lock-in’ is also topical in relation to the proposed Taxonomy Regulation (TR). Article 10(2)c of the present draft states that an economic activity should not lead to the lock-in of carbon-intensive assets.

The definition of ‘transitional activities in’ Art. 10(2) TR explicitly states the need to avoid environmentally harmful carbon lock in-effects. However, the measure allows for the greenfield construction of fossil-based energy infrastructure with ambitious targets for low-carbon/renewable phase-in only at a later stage.

It has been observed that as these forward-looking assumptions cannot be validated as of 2022, the risk of creating stranded fossil-based energy assets in Europe should be highlighted- going against the TR principle of avoiding stranded assets in Art.19 1(i) TR. Asset stranding or extended operation at high emissions levels may result if insufficient quantities of low-carbon gaseous fuels are available. Negative consequences for financial market stability and concerns about greenwashing arise . Next to financial market impacts arising from stranded assets, there could be a risk of crowding out necessary investments in renewable energy generation capacities and development of alternative low-carbon technologies , given the ability to shift sustainable finance towards financing fossil gaseous fuels, particularly until 2030.

This Debate will discuss how the risks associated with carbon-lockin can be avoided. How should regulators identify these risks and what tools are available to assess the nature and extent of the risks? How can forward-looking assumptions be validated in an effective way?

Programme

#FSRDebates

Host: Leigh Hancher | Florence School of Regulation and Tilburg University