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Transcript
Regulatory Impact Analysis Biofuels as an example By Senior Adviser Johan Nitter-Hauge Ministry of Finance, Norway Finansdepartementet Rationale for intervention • Rationale for intervention Markets don´t always secure efficiency Eg. externalities, information failure, public goods. • Objectives defined to reflect outcomes (eg. crime reduction) rather than just outputs or inputs (eg. prosecutions, prison staff). • Cost-benefit analysis – some examples: Transportation sector Climate Change Programme Supporting people programmes Finansdepartementet Climate Change Programme - biofuels • According to the Kyoto protocol of 1997, Norway has commitments in relation to its Co2-emissions. • The transportation sector is responsible for about one quarter of energy-related greenhouse gas emissions. • Replacement of conventional hydrocarbon based fuels with fuels made from renewable bio-sources, e.g. rape seed or palm oil could be one way of reducing the emissions. • Appraisal looked at a scenario where 2 % of the fuels consists of biofuels. • The main biofuels today are ethanol and biodiesel. In Norway they are imported. Finansdepartementet Biofuels - benefits • Biofuels have a ”lower carbon footprint” than conventional fuels. 100 % carbon savings assumed. • 2 % biofuels content results in a reduction in total Co2 emitted in Norway of 160 000 tons per year. • The social cost of Co2 is set at 25 euros per ton. • Thus, the value of the annual benefit in Norway is 4 mill. euros. Finansdepartementet Biofuels - costs Biofuels have a lower energy content than conventional fuels. Resource costs of biofuels passed on to consumers. Other (non-monetary) costs: Crops that otherwise would become food might instead become fuel. Biofuel programmes could raise food prices. Higher crop prices could harm the poorest people. Finansdepartementet Costs of a 2 % biofuel scenario Bioethanol Price at the pump (eurocents per litre) Additional cost (eurocents per litre) Total additional cost (mill. euros) Conventional fuel 42,31 Bioethanol 2 % (E02) 42,38 0,06353 1,398 E02 energycorrected 42,69 0,38 8,13 Total volume sold 2004 2139 mill. litres Biodiesel Conventional diesel 49,30 1782 mill. litres Biodiesel 2 % (E02) 49,68 0,38 6,86 E02 energycorrected 49,81 0,508 9,02 Finansdepartementet Benefits and costs in summary • Reduced Co2 emitted: • Total additional cost (8,13+9,02)mill. euros: • Net benefit: 4 mill. euros 17,15 mill. euros - 13,15 mill. euros Cost-efficiency: • Reduced Co2-emissions: • Cost per ton of Co2 abated: • Social cost of Co2 per ton: 160 000 tons 107 euros 25 euros Finansdepartementet Sensitivity analysis • A cost decrease of 30 % means that the cost per ton of Co2 abated could be 64 euros. • According to the Stern report, the social cost of Co2 should be about 60 euros. • An oil-price of 80 dollars per barrel makes biofuels competetive with conventional fuels. Finansdepartementet Conclusion - biofuels • The measure does not pass a cost-benefit test with today´s prices of Co2. • However, a measure should be included in a climate change programme even though it does not pass a cost benefit test if it is anticipated that it will help to secure access to less costly carbon savings in the future. • Thus, the greatest potential for reducing costs lies in the development of next generation technologies to utilize the cellulosic content of the plants. Finansdepartementet Biofuels – what did the government decide? • There will be a biofuel obligation where the fuel sellers have to ensure that at least 2 % of the fuel they sell for road transport is biofuel by 2008. • By 2009 at least 5 % of the fuel sold for road transport shall be biofuel. • New regulations circulated for comments. In addition: • Tax reliefs for biofuels and so-called flexi-fuel cars are already in place. Finansdepartementet The Preservation of Climate