Cooperation mechanisms of the EU renewable energy directive and flexible mechanisms of the Kyoto Protocol
Cooperation mechanisms of the EU renewable energy directive and flexible mechanisms of the Kyoto Protocol: comparison and lessons learnt / Dorian Frieden, Andreas Tuerk and Daniel Steiner. Graz : Institute for Water, Energy, and Sustainability, July 2013, 35 p. (working paper)
Authors’s abstract :
This working paper discusses similarities and differences between the cooperation mechanisms of the EU renewable energy directive (RES directive) and the flexible mechanisms of the Kyoto Protocol. The cooperation mechanisms allow the (virtual) trade of renewable energy and were introduced with the RES directive to provide Member States (MS) with greater flexibility to achieve their national targets for renewable energy sources (RES). A similar kind of flexibility is known from the flexible mechanisms of the Kyoto Protocol which aim at the cost efficient achievement of emission reduction targets. Lessons learned from the Kyoto mechanisms may allow conclusions to be drawn on the design and implementation of the renewable energy cooperation mechanisms. This paper first gives an overview of the cooperation mechanisms regarding their potential, advantages and disadvantages, barriers and preconditions. This is followed by a brief explanation of and a systematic comparison with the flexible mechanisms of the Kyoto Protocol – Joint Implementation (JI); Clean Development Mechanism (CDM); and International Emissions Trading (IET). A gamut of factors influenced the success of the Kyoto mechanisms in general and in specific national contexts. Therefore, it is not possible to directly transfer past experiences with the Kyoto mechanisms to the capability of specific nations to make use of the renewable energy cooperation mechanisms. A comparison of specific features, such as the mechanism type (transfer, project-based, support scheme), price building and specific barriers can, however, help anticipate the possible dynamics and challenges of the cooperation mechanisms. Experiences with the Kyoto mechanisms show that predictions based on supply-demand analysis were valid only to a limited extent and that specific factors such as institutional capacity constraints or legal uncertainties delayed or prevented the use of the mechanisms in some cases. Similarly, for the cooperation mechanisms, anticipated supply-demand balances may provide an indicator of future market dynamics but implementation barriers may dominate these in specific cases. Quickly available RES surpluses available for virtual transfer may be limited while RES and transmission capacity expansion under the other cooperation mechanisms require a lead time. In addition, unlike emission rights under the Kyoto Protocol, renewable energy cannot be purchased in advance and banked for later use. Therefore, the use of the RES cooperation mechanisms should be planned well in advance.