Related News:
EU Draft on Free CO2-Emission Allocations to Include About 50 Benchmarks
The European Union has identified about 50 efficiency benchmarks for industries including steel and chemicals in a draft regulation for allocating nearly 100 billion euros ($127 billion) of emission permits.
The 27-nation EU has given away most allowances since it started the world’s largest emissions market in 2005. It plans to sell a majority of them after the second phase of the program ends in 2012.
The European Commission, the Brussels-based regulator for the EU, is finishing a draft to determine allocation of about 6 billion free allowances in the eight years through 2020, according to Hans Bergman, a specialist in the climate department. Under the EU plan to reduce the supply of CO2 permits through 2020 to fight climate change, the benchmarks will be based on the average performance of the top 10 percent most-efficient installations.
“These benchmarks are not emission limits or targets, but thresholds for what installations will get for free,” Bergman told a briefing in Brussels today. “A benchmark value will be multiplied by historic production to determine the amount of free allocations for the installation.”
Benchmarks will be set for products rather than for inputs, the commission has said. The EU agreed last year that benchmarks will consider the most efficient techniques, substitutes, alternative production processes, use of biomass and capture and storage of CO2.
Best Installations
The best installations in a given industry won’t need to purchase more allowances, while those that emit more than the benchmarks will need to buy permits on the market, Bergman said.
The EU emissions trading system, or ETS, is the cornerstone of European climate-change policy and covers about 12,000 facilities that produce energy or goods from paper to cement.
Emitters including E.ON AG, Germany’s biggest utility, and Royal Dutch Shell Plc, Europe’s largest oil company, need an allowance for each ton of carbon dioxide they emit in burning fossil fuels. Those that produce more than their allowance need to buy more; those that emit less can sell their surplus.
“The main question is how much cement and steel sectors will get,” said Sanjeev Kumar, an associate at climate- protection group E3G. “They were massively overallocated in the second phase, and if they get high benchmarks in the third, it will undermine the value of the ETS. They’re subsidizing those two sectors in times of financial crisis.”
Preliminary Cap
The bloc will auction around 60 percent of the total number of allowances in 2013, according to the commission estimates, and the proportion will increase in coming years. The EU has set the preliminary cap for emissions at 1.927 billion metric tons for 2013. It will be adjusted later this month, including limits for airlines that are due to join the program in 2012 and chemicals and aluminum companies to be included from 2013.
“The total number of free allowances is limited,” Bergman said. “We’ll do a bottom-up calculation, we’ll set benchmarks, multiply by production figures and we’ll sum it up to get a total number of allowances for everybody. If the number exceeds the total value, there will be reductions for everyone.”
The EU will propose using “a number of years between 2005 and 2010” to determine historic production, excluding the worst and the best year for the installation, he said.
To prevent businesses from shifting production elsewhere because of emission restrictions -- a process known as “carbon leakage” -- the EU agreed last year to grant 164 manufacturing industries a greater share than other companies of free CO2 permits after 2012. Those industries will receive 100 percent of benchmarked allowances for free. The list will be valid through 2014 and any second list would apply for the 2015-2019 period.
Benchmarked Allowances
Manufacturers that aren’t on the list will receive 80 percent of benchmarked allowances for free in 2013 and face an annual decline in that share to 30 percent in 2020, while most utilities will face 100 percent auctioning as of 2013.
“The benchmarks we identified will cover about 75 percent of relevant emissions,” Bergman said. “For other products we will use at heat use or fuel use and set benchmarks for that.”
The draft regulation is in internal consultation and will be presented to the EU 27 member states once it is approved by the commission. Following an approval by the Climate Change Committee, comprised of national experts and chaired by the commission, it will be subject to a three-month scrutiny by the European Parliament and EU governments.
To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net
Rate These Stories
Rate this Page