Too early to conclude?
This analysis focused on electricity trade flows between the EU member states and neighbouring countries. Although Russia and Ukraine are net exporters to the European Union, this situation predates 2005, the year the EU Emissions Trading System was introduced; observations of other neighbouring countries give a similar picture. The statistics available to the IEA today do not therefore indicate any clear impact of the EU CO2 caps on electricity trade with neighbouring countries after the introduction of the EU ETS.
This lack of evidence is not surprising at this stage, given the relatively long lead time for the construction of new plants, as well as the relatively low price of EU allowances in the past few years. If there are plans to establish CO2-intensive power generation outside the European Union, the impact on electricity trade will only be measurable after the plants are operational and suitable transmission capacity is built. While there may be economic incentives to do so - i.e., a significant price differential between EU and non-EU countries - plans to build cross-border transmission capacity would most probably include environmental considerations. At present, existing transmission capacities may act as bottlenecks inhibiting competition with countries under a CO2 cap. This aspect also needs further research.
Investment in transmission, especially when electricity decarbonisation will require significant adjustment of power grids, responds primarily to security of supply, and secondarily to the enhancement of economic efficiency through the trading of greater quantities of energy among regions. The example of heavy industry has shown how carbon leakage is a strong argument in negotiating ambitious climate-change goals. The risk that this issue may eventually stand in the way of enhanced security via better transmission should not be minimised. Careful and systematic monitoring of trends in the electricity trade should be undertaken, and should include the factors underlying these trends: the availability of hydro resources, maintenance at large power plants, surge in demand due to extreme weather and changes in relative fuel prices, in addition to the existence of a CO2 price in the European Union. Furthermore, the magnitude of possible emission leakage should be considered. Because the bulk of the European Union's power generation is in countries without borders to non-EU countries (i.e., France, Germany, Italy, the United Kingdom, etc.), emissions mitigation in these countries is less likely to trigger carbon leakage via electricity trading.
Was this article helpful?