Biomethane from Manure, Agricultural Residues and Biowaste—GHG Mitigation Potential from Residue-Based Biomethane in the European Transport Sector

Biomethane from manure, agricultural residues, and biowaste has been prioritized by many energy strategies as a sustainable way to decrease greenhouse gas (GHG) emissions in the transport sector. The technology is regarded as mature; however, its implementation is still at an early stage. At EU level, there are currently two major instruments relevant for promoting the production of biomethane from waste and residues and which are likely to contribute to unlocking unused GHG mitigation potentials: the Renewable Energy Directive 2018/2001 (RED II) and the European Emission Trading System (EU ETS). Our study analyzes the effects of these two instruments on the competitiveness of biomethane as an advanced transport fuel in relation to different policy scenarios within the RED II framework and under EU ETS conditions. Within the RED II market framework for advanced biofuels, biomethane concepts that use manure as a substrate or as a cosubstrate show significantly lower GHG mitigation costs compared to advanced biofuels. With respect to the current EU ETS conditions for bioenergy, it is helpful to consider the GHG reduction potential from the non-ETS agricultural sector as a way to unlock unused potential for reducing GHG emissions.

Has the EU-ETS Financed the Energy Transition of the Italian Power System?

This paper focuses on the relationship between the European Union Emission Trading System allowances’ prices and the Italian electricity price, aiming at assessing whether such a mechanism has been a driver for the decarbonization of the power sector. To this aim, we calculate the long-run relationships between energy prices, natural gas prices and allowances’ prices, through a VECM model, distinguishing between peak and off-peak prices. The analysis is carried out for the third phase of the EU-ETS, which started in 2013, and for two-year rolling windows that account for changes over time of the pass-through rates. It is shown that the natural gas price has a high pass-through rate of roughly 70%, which is increasing over time. On the contrary, the pass-through rate of the allowances’ price is as low as 7% for the wholesale electricity price, being slightly more and less for the peak and off-peak prices, respectively. However, this rate has been substantially changing over time, starting from a high level and falling significantly, becoming negative in the recent years. This could signal that the EU-ETS has been increasingly more effective in endogenizing emission costs for power producers, inducing them to reduce their production costs associated with emissions by means of a change in technologies. However, the analysis of the impulse response functions hardly supports this finding, eventually casting doubts on the effectiveness of the EU-ETS in Italy to drive the transition toward a less carbon-intensive power supply.

INSIGHTS ON THE ECONOMIC ESTIMATES OF THE CLIMATE COSTS OF THE AVIATION SECTOR DUE TO AIR MANAGEMENT IN 2018-19

Air navigation service providers ensure that aircrafts keep safely apart by prescribing vertical and horizontal distances to each other. In the European Union and its associated members, regulation is carried out via a performance scheme which measures and sets targets for the different key performance areas. For the environmental area, targets in terms of CO2 and other pollutants were set by assuming that there would be continuous improvements for the Key performance Environment indicator based on actual trajectory. However, although a higher Horizontal Flight Efficiency (HFE) measurement usually means a more direct flight trajectory, this does not necessarily translate into a climate optimal trajectory. Thus, vertical flight efficiency also needs to be considered. There is also an interdependency be¬tween airspace and Air Traffic Man¬agement Capacity and Environment: when the offered capacity falls short of the demand for flights, ground delays, holdings and traffic shifts to adjacent areas occur. This entails detours and a deterioration of the HFE-indicator. Results show that total climate costs for 2018 and 2019 may be as high as 1 bn EUR, of which about 34% is due to CO2 emissions. In particular, the climate costs of CO2 emissions due to capacity constraints range from 54 to 301 million EUR, depending on whether CO2 costs are measured in terms of avoidance costs or under the EU Emissions Trading System (EU ETS). Following the first criterion and the short to medium run up to 2030, the estimated costs would amount to 112 million EUR. In the long run, from 2040 to 2060, these costs would amount to 301 Million EUR. With the estimates of the EU ETS, the cost by 2030 would be close to 54 million EUR and 153.5 million EUR for the long run. Volatility of carbon pricing may play a very significant role, but fortunately can be hedged. Therefore, a shortfall of capacity leads to delay costs and considerable environmental costs. As capacity is planned in the medium to long-term, traffic forecasts are a crucial element. This means that further research is warranted into the interdependency of traffic forecasts, capacity and environmental costs. Keywords: climate economic cost, aviation sector, capacity management