VE Quarterly

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Spring spotlight: a practical guide to emissions trading, an assessment of the impact of Brexit on the energy sector and more

Since our last update, we have co-authored the Emissions Trading System (ETS) handbook for the World Bank Partnership for Market Readiness (PMR). The handbook assists policymakers across the world with the design and implementation of an ETS, adapting international practice to the local context. It is a practical guide that outlines a step-by-step process for policy design. The handbook has been downloaded over 3,000 times since its launch last month and can be found here.

Below you'll find some of the other projects we have delivered in the past few months. For more information on these, or any of our other projects, please email us.

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The impact of Brexit on the UK energy sector: National Grid asked us to assess the impact of the UK leaving the EU (“Brexit”) on its energy sector, focusing on the consequences of leaving the Internal Energy Market (IEM). This report found that the impact of Brexit on the energy sector is likely to be negative, although relatively small, due primarily to less efficient interconnection. It found limited evidence of benefits from Brexit resulting from freedom from EU rules, since the UK's domestic commitments on decarbonisation and air quality targets are equal to or greater than EU requirements.

Building on this work, we recently published a note that discusses the potential impacts beyond departure from the IEM. We found that uncertainty arising from Brexit negotiations could further increase energy costs through higher interest rates (and hence investment costs) during a period of large expansion in energy infrastructure. The report received extensive media coverage, including in the Financial Times here.

Supporting Nigeria's ambitious carbon emissions reductions: Vivid Economics has been delivering support on climate change to the Nigerian Government, in conjunction with the Nigerian Infrastructure Advisory Facility and in collaboration with the Nigerian Federal Ministry of Environment.

Recent highlights of Vivid Economics and NIAF support include:
- Technical assistance to set up a Climate Finance Unit at the Federal Ministry of Environment to channel climate finance into Nigeria.
- Technical assistance to access international climate finance, by supporting accreditation and project development for the Adaptation Fund.
- The development of a communication strategy and press briefings for the Minister of Environment and the President at the 2015 Paris climate summit.
- Capacity building on inter-ministerial co-ordination including governance structure and Action Plans, underpinned by experience of what has worked internationally.

Further information on Vivid Economics and NIAF's work in Nigeria can be found here.

The role of insurance-based mechanisms in promoting climate resilience: Vivid Economics, supported by the Climate Investment Funds (CIF), examined the evidence for the use of insurance-based mechanisms in promoting climate resilience. Our report provides an overview of climate insurance practices, contrasting the use of traditional property insurance in OECD countries with greater use of index-based products in non-OECD countries. It also examined how to embed climate insurance in a risk-layering approach that combines multiple risk management approaches to encourage appropriate responses to different risk types and levels.

The report presented four options for the Pilot Project for Climate Resilience's (PPCR) involvement in climate insurance. These included enabling support for the collection of better information, and for the development of integrated risk management strategies; as well as direct support for product development, market infrastructure, and scale-up of deployment. Special focus was given to MDB involvement and experience with climate insurance.

More details are available here.