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The document estimates that Phase III of the EU ETS will generate between €150-190bn in revenues across the EU by 2020, potentially rising to €200-310bn if a 30% reduction target is adopted. Germany is projected to receive the highest proportion of these revenues, while Italy, Poland, Spain, and the UK are each expected to accrue over €10bn from the power sector alone. The briefing also explores the financial impact of expanding auctioning to the cement and steel sectors and suggests strategic uses for these funds, including carbon capture and storage (CCS) demonstration, renewable energy RD&D, grid infrastructure, and international climate finance.

The report evaluates the EU ETS, concluding that emissions trading is an effective tool for reducing CO2 emissions with modest macroeconomic impacts. It highlights the risks of free allowance allocation, such as windfall profits and reduced economic efficiency, and recommends a transition toward auctioning. The document also identifies that international competitiveness risks are concentrated in a few carbon-intensive sectors and suggests tailored solutions like benchmarked free allocation or multilateral border adjustments to prevent carbon leakage.

The report analyzes how the EU can move to a 30% greenhouse gas reduction target by 2020. It finds that full implementation of existing renewable energy and energy efficiency targets could lead to a domestic reduction of approximately 30%, though current policy instruments for energy efficiency are insufficient. The report also examines the role of offsets and LULUCF accounting, noting that these could reduce the required domestic effort to approximately 20% while still nominally meeting a 30% target. It concludes that the EU ETS cap would need significant adjustment—potentially to 29-43% below 2005 levels—to remain consistent with these targets.

The document concludes that a federal US carbon market is unrealistic for the foreseeable future, but identifies potential for linking the EU ETS with regional systems like the Western Climate Initiative (WCI) and California. It highlights that while the Regional Greenhouse Gas Initiative (RGGI) is operational, its low prices make it an unattractive linking partner. The authors argue that a bottom-up climate architecture, rather than a single global carbon market, is the most likely trajectory for international climate cooperation.

The paper argues that developing countries face a dual burden of climate mitigation and adaptation alongside existing development challenges, often lacking the institutional capacity to harness necessary technologies. It proposes Climate Innovation Centers (CICs) as facilitators and coordinators that bridge the gap between basic research and full commercialization. CICs are designed to operate as 'system operators' or 'glue' for the innovation ecosystem, partnering with governments, firms, and financial institutions to overcome 'valleys of death' in financing and technical development. The author suggests that CIC design must be tailored to a country's specific economic level and population size, and aligns this model with the UNFCCC's Climate Technology Center and Network established under the Cancun Decision.

The report assesses how a 30% GHG reduction target by 2020 would affect EU energy security compared to a 20% target and a business-as-usual scenario. It finds that more ambitious targets generally improve primary energy security by reducing overall energy demand and fossil fuel imports, particularly oil. However, it notes that the transition may increase risks for specific countries like Poland due to a shift from coal to imported gas, and could negatively impact electricity grid security due to the intermittency of renewables and the need for significant new capacity investments.

The document examines the strategic importance of low-carbon technology for the EU, highlighting the risk of 'high carbon lock-in' if infrastructure decisions today commit economies to high-emissions pathways for 20-30 years. It argues that the current 20% emissions target is insufficient to drive the necessary scale and speed of innovation. The authors propose a 30% target by 2020 to provide certainty for investors and spur the deployment of technologies like electric vehicles and carbon capture and sequestration (CCS). The report also emphasizes the need for a system-wide risk management approach and increased international cooperation, particularly with China, the US, and Japan, to create integrated global markets and avoid protectionism.

The research examines how increasing the EU's 2020 emission reduction target beyond 20% interacts with energy security in Poland, the Czech Republic, and Latvia. It distinguishes between 'objective' energy security (quantifiable parameters) and 'subjective' energy security (political discourse), finding that these often diverge. The authors argue that more stringent targets could improve energy security by reducing import dependency through renewables and energy efficiency, and by providing a clearer policy framework to avoid 'suboptimal investment' and 'stranded assets' in technologies like nuclear and carbon capture and storage (CCS). While Poland and the Czech Republic express high subjective insecurity despite relatively stable objective positions, Latvia remains objectively vulnerable due to its high reliance on Russian imports, though it possesses significant renewable potential.

The report argues that the EU's current Climate and Energy Package is insufficient to reach its 2050 goal of 80-95% emissions reduction at a reasonable cost. It suggests that moving to a 30% reduction target by 2020, combined with proactive investment policies in the building and transport sectors and a more predictable carbon price signal via the ETS, would reduce long-term costs and prevent the EU from losing market share in low-carbon technologies to competitors like China and South Korea.

The paper argues that Sectoral Approaches (SAs)—which the author suggests renaming to Sectoral Approaches, Agreements and Measures (SAAMs)—are most viable when designed as domestic policies first rather than top-down international agreements. Through analysis of the steel sector in China, India, and Japan, the document finds that national sovereignty and diverse domestic priorities make a common international solution unlikely. It concludes that SAAMs can co-exist with carbon pricing and that their implementation is hindered by both political sensitivities and technical challenges, such as data gaps and the difficulty of setting international benchmarks.

The study uses the Imaclim-R model to analyze the economic trade-offs of EU emissions targets. It finds that a -20% target by 2020 may lead to prohibitive costs and negative GDP growth between 2040 and 2050 due to technological inertia and 'lock-in' of carbon-intensive infrastructure. While a more ambitious -30% target can reduce long-term risks and provide energy security co-benefits—especially in oil-constrained scenarios—it may impose significant short-term macroeconomic costs. The authors argue that carbon pricing alone is insufficient for 'inert' sectors like transport and residential buildings, recommending complementary sectoral policies, such as passenger car mobility reduction, to lower overall costs and avoid industrial decline.

The document assesses various Sectoral Approach (SA) models for the Chinese iron and steel (I&S) industry, concluding that ex-post crediting based on carbon intensity reduction targets is the most suitable methodology. It identifies the I&S sector as a critical area for China to meet its 2020 carbon intensity reduction target of 40% to 45%. The study projects that under a 'technology penetration enhanced scenario', emission intensity could decrease by 34% by 2020 compared to 2005 levels, generating up to 709 million tons of CO2 emission reduction credits by 2030. Key barriers to implementation include poor data availability, commercial sensitivity, and the high heterogeneity of technology levels across enterprises.

The report argues that significant emissions reductions in Japan's steel sector require breakthrough technologies or CCS, as current efficiency is already high. It proposes two SAAM variants: one based on a fully-resourced research, development, diffusion and deployment (RDD&D) plan, and another based on regulating CO2 limits for plants. The analysis suggests that the sector's financial resources could support a significant scale-up of RDD&D, though the high cost of implementing CCS remains a major hurdle. The report also reviews the role of the Nippon Keidanren's voluntary plans and international partnerships like the Asia-Pacific Partnership (APP) and the World Steel Association (WSA).

The report argues that the UNFCCC process became dysfunctional following the 'debacle' of COP 15 in Copenhagen, specifically regarding the use of small negotiating groups and 'chairs' texts'. To remedy this, the author proposes a 'politically balanced' model for selecting representatives to small groups to ensure legitimacy and inclusiveness. The report also suggests increasing transparency for informal consultations through calls for expressions of interest and virtual participation (webcasting). Finally, it recommends a structured approach to High-Level Segments, where ministers provide political guidance on a small number of 'crunch issues' through a sequential schedule of briefing, negotiating, and debriefing, while keeping heads of state and government in 'extracurricular' roles.

The study analyzes how EU ETS carbon pricing and allowance allocations influence the strategic decisions of manufacturing firms. Key findings indicate that while many firms implement basic energy-saving measures, a significant portion of EU ETS participants engage passively with the market. Crucially, the research identifies a causal link between the stringency of emissions caps and 'clean' product innovation, suggesting that generous free allowance allocations may actually hinder innovation by reducing the signaling effect for senior management.

The paper examines the accounting deficiencies in the EU Emissions Trading Scheme (EU ETS) under IFRS, specifically the lack of authoritative guidance following the withdrawal of IFRIC 3. It critiques the common 'net liability approach' where free allocations are recognized at nil, arguing that this hides the economic value of assets and windfall profits. The authors propose a framework where allowances are initially recognized at fair value, balanced by a government grant as deferred income, and subsequently measured based on whether they are held for compliance or trading. This approach aims to treat CO2 emissions as a cost of production and increase transparency for investors regarding a firm's low-carbon transformation.

The study finds that climate policy elements, including the EU ETS and long-term targets, are generally rated as less relevant to corporate investment decisions in the power sector than market factors and technology-specific regulations like feed-in tariffs. For technology providers, long-term targets are significantly more relevant than the EU ETS for both RD&D and sales. Power generators show a high correlation between the perceived relevance of the EU ETS and long-term targets. The research also indicates that technology providers' reliance on technology-specific policies is strongly linked to their product portfolios, while power generators' relevance ratings are less dependent on their technology portfolios. Higher long-term CO2 price expectations and greater certainty about those prices correlate with a higher perceived relevance of the EU ETS for new plant investments.

The report evaluates the Clean Development Mechanism (CDM) and its impact on the EU Emissions Trading System (EU ETS) and developing nations. It finds that a significant portion of CDM projects lack additionality, leading to global emission increases and reduced domestic abatement in Europe. The authors argue that the CDM has failed to facilitate meaningful technology transfer or support a systemic shift to low-carbon development in host countries, often subsidizing carbon-intensive activities instead. To address these failures, the report proposes supply-side restrictions on project eligibility and demand-side reforms in the EU, such as auctioning the right to use CERs, to ensure the mechanism serves as a transitional tool rather than a permanent subsidy regime.

The briefing examines the operational requirements for implementing the Cancun LCA Agreement, specifically focusing on the design of the Green Climate Fund (GCF) and the creation of a Standing Committee on finance. It argues that the GCF's Transitional Committee lacks necessary multi-sectoral expertise and suggests an 'International Air Passenger Adaptation Levy' as a viable start-up funding mechanism to avoid the fund being 'stillborn' by the December 2011 Durban COP. Additionally, it critiques the current scope of the Standing Committee for lacking explicit oversight and accountability functions over the financial mechanism's operating entities.

The report analyzes the aluminium sector's exposure to carbon leakage, finding that while the sector as a whole is trade-intensive, the risk varies by product. Unwrought non-alloy aluminium is identified as particularly vulnerable due to high trade and CO2 intensity, whereas secondary aluminium and semi-fabricated products pose lower risks. The study highlights a shift in primary production capacity toward China and the Middle East, while the EU27 remains a leader in recycling but continues to export scrap to China.