Reform of the EU ETS. A EURELECTRIC statement

Transcription

1 Refrm f the EU ETS A EURELECTRIC statement May 2016

2 EURELECTRIC is the vice f the electricity industry in Eurpe. We speak fr mre than 3,500 cmpanies in pwer generatin, distributin, and supply. We Stand Fr: Carbn-neutral electricity by 2050 We have cmmitted t making Eurpe s electricity cleaner. T deliver, we need t make use f all lw-carbn technlgies: mre renewables, but als clean cal and gas, and nuclear. Efficient electric technlgies in transprt and buildings, cmbined with the develpment f smart grids and a majr push in energy efficiency play a key rle in reducing fssil fuel cnsumptin and making ur electricity mre sustainable. Cmpetitive electricity fr ur custmers We supprt well-functining, distrtin-free energy and carbn markets as the best way t prduce electricity and reduce emissins cst-efficiently. Integrated EU-wide electricity and gas markets are als crucial t ffer ur custmers the full benefits f liberalisatin: they ensure the best use f generatin resurces, imprve security f supply, allw full EU-wide cmpetitin, and increase custmer chice. Cntinent-wide electricity thrugh a cherent Eurpean apprach Eurpe s energy and climate challenges can nly be slved by Eurpean r even glbal plicies, nt incherent natinal measures. Such plicies shuld cmplement, nt cntradict each ther: cherent and integrated appraches reduce csts. This will encurage effective investment t ensure a sustainable and reliable electricity supply fr Eurpe s businesses and cnsumers. EURELECTRIC. Electricity fr Eurpe. Dépôt légal: D/2016/12.105/32

3 Refrm f the EU ETS A EURELECTRIC statement May 2016 This Statement n the Refrm f the EU ETS is being published in supprt f EURELECTRIC s Psitin Paper n the EC legislative prpsal t revise the EU Emissins Trading Scheme Directive, published in Nvember KEY MESSAGES EURELECTRIC s members are cmmitted t delivering a carbn neutral pwer supply in Eurpe by 2050, and t ensuring a cmpetitively priced and reliable electricity supply thrughut the integrated Eurpean energy market. We believe that the Eurpean pwer sectr s cmmitment t decarbnise electricity generatin, tgether with the electrificatin f key sectrs, such as heating, cling and transprt, will make a majr cntributin t help Eurpe meet its climate change targets. The smth transitin twards a lw-carbn ecnmy is best facilitated thrugh a clear, reliable carbn price signal that will allw industry t invest in an efficient and sustainable manner. EURELECTRIC supprts a strng EU ETS as the crnerstne f the EU s energy and climate plicy. We supprt the EU ETS as a key driver fr market-based investments in lw-carbn electricity generatin. In ur view, this is the best way t underpin the prvisin f affrdable, reliable and sustainable electricity supply t supprt the EU ecnmy. EURELECTRIC supprts the revisin f the annual linear reductin factr t 2.2% fr Phase IV f the ETS ( ), which is cnsistent with the at least 40% greenhuse gas emissins reductin target under the agreed 2030 Climate and Energy Framewrk. We hwever recgnise that this trajectry wuld place the EU at the lwer ambitin end in its lnger term decarbnisatin ambitin fr The free allcatin f allwances fr certain ETS sectrs shuld be cntinued in Phase IV. We supprt the explicit definitin f the share f auctining in the Cmmissin s prpsal which states that this shuld nt be reduced when cmpared with Phase III. Ensuring a smth transitin twards a decarbnised ecnmy will require apprpriate measures fr energy intensive sectrs as well as thse Member States with carbn intensive ecnmies. Develping apprpriate cmpensatin mechanisms fr different industries (such as the electricity industry in cuntries with a different starting pint and lwer GDP/capita) are a precnditin t mitigate the direct impacts f an increased carbn price n the cmpetitiveness f energy intensive industry and the ecnmies f eligible Member States. The revised ETS Directive shuld incrprate suitable prvisins t enable future adjustments t the EU ETS t reflect any pssible increase in EU climate ambitin resulting frm the UNFCCC 5-yearly glbal ambitin review cycle, thus ensuring that the EU is able t participate fully and cnstructively in effrts t meeting the agreed Paris climate gals. It shuld include prvisins t ensure that the EU keeps all ptins pen fr increasing its climate ambitin in due curse. EURELECTRIC believes that ptins t strengthen the EU ETS shuld be assessed in terms f their effectiveness, efficiency, impact and timing in delivering cst-effective emissins reductins in the EU, cnsistent with the Paris Agreement bjectives and the actins f ur glbal cmpetitrs. We particularly believe that the cnsideratin f any such measures shuld ensure that energy and climate plicies are guided by the need t maintain a strng Eurpean dimensin.

4 Table f Cntents EURELECTRIC s Cmmitment t Decarbnisatin... 1 Develpments in the EU ETS... 1 EU ETS refrm... 2 Apprpriate Cmpensatin Mechanisms and Updated Rules fr the Use f ETS Auctining Revenues... 3 Fllw up t the Paris Agreement... 3

5 EURELECTRIC s Cmmitment t Decarbnisatin The Eurpean electricity sectr believes that achieving the decarbnisatin bjectives agreed in the Paris Agreement is essential t guarantee the lng-term sustainability f the glbal ecnmy. EURELECTRIC s members are cmmitted t delivering a carbn neutral pwer supply in Eurpe n this timescale, and t ensuring a cmpetitively priced and reliable electricity supply thrughut the integrated Eurpean energy market. This cmmitment t decarbnise electricity generatin, tgether with the electrificatin f key sectrs, such as heating, cling and transprt, will make a majr cntributin t help Eurpe meet its climate change targets. Electricity is n track t becming a carbn neutral energy carrier and, if used mre widely, will pen the dr fr many mre psitive changes, spill-vers in sectrs which currently have n prspect f becming fully sustainable. EURELECTRIC believes that market-based mechanisms such as carbn markets are the mst cst-effective and efficient tl fr mitigating greenhuse gas emissins and stimulating investments in lw carbn technlgies and energy efficiency. Only the cmbinatin f an effectively refrmed EU ETS and imprved EU electricity market design can lead t sustainable and credible carbn price signals t drive investments t mature lw carbn technlgies. The smth transitin twards a lw-carbn ecnmy is best facilitated thrugh a clear, reliable carbn price signal that will allw industry t invest in an efficient and sustainable manner. EURELECTRIC has therefre cnsistently supprted a strng EU ETS as the crnerstne f the EU s energy and climate plicy. We supprt the EU ETS as a key driver fr market-based investments in lw-carbn electricity generatin. In ur view, this is the best way t underpin the prvisin f affrdable, reliable and sustainable electricity supply t supprt the EU ecnmy. The EU ETS ensures technlgical neutrality and it is als the nly climate plicy instrument fr the electricity sectr that is implemented in an EU-wide manner and is cnsistent with the internal energy market in the Energy Unin. Develpments in the EU ETS Up t 2020, the ETS sectrs will deliver the greenhuse gas (GHG) emissin reductins required under the Phase III cap. We are cnvinced that thrugh its cap and trade apprach, and after a successful cmpletin f the prpsed refrm, the ETS can als ensure cmpliance with the GHG emissin reductin bjectives fr Phase IV, as cntributin frm these sectrs twards achieving the current EU s agreed climate targets fr Hwever, there is currently a serius lack f cnfidence amng many plicymakers, stakehlders, investrs and market participants in the ability f the ETS t deliver lng term EU decarbnisatin bjectives by underpinning lw carbn investment. The ecnmic crisis, verlapping energy and climate plicies and bjectives, and the greater than anticipated use f ffsets, has resulted in lwer than frecast emissins, decreased demand fr ETS allwances and the resulting versupply, which has led t a depressed carbn price. The Market Stability Reserve (MSR) will be intrduced frm 2019 nwards and will enable the gra dual decrease f the versupply f allwances and will reduce the risk f future versupply. Hwever, the current surplus f allwances is s large that many prjectins f market analysts indicate that it will take significant time fr the MSR t bring this dwn and thereby deliver a mre balance market with a strengthened carbn price. The pursued stability band will indeed mst likely nt be reached until the secnd half f the next decade. The ETS has therefre nt yet sent the necessary price signals t trigger a fuel switch in the energy sectr r t incentivise lw carbn investments, as had been hped. As a cnsequence, mst Member States have been cnsidering natinally-based initiatives as alternative drivers fr fuel switching and lw carbn investments. These culd prvide mre certainty fr investrs at the natinal level, but nt at a Eurpean 1

6 level, thereby inevitably reducing the effectiveness f the EU ETS as a cst-effective Eurpean-wide mechanism thrugh cmplex and verlapping carbn pricing. These develpments run the risk f undermining the EU ETS in delivering the lng term EU climate & energy plicy gals; delivering emissins abatement in a less ecnmically efficient manner; distrting the internal electricity market, making its achievement mre challenging and increasing the cst f transfrming and even maintaining the energy system. This situatin leads t the achievement f ur climate and energy targets mre expensively acrss the EU as a whle, thereby weakening public supprt fr the transitin. A strng EU ETS system is thus an essential element in rder t avid further fragmentatin f EU climate plicy thrugh natinal measures, and t facilitate further market integratin. EU ETS refrm In the cntext f the current prpsal frm the Eurpean Cmmissin t review the EU ETS Directive fr Phase IV, we supprt the revisin f the annual linear reductin factr t 2.2% fr Phase IV f the ETS ( ), which is cnsistent with the at least 40% greenhuse gas emissins reductin target under the agreed 2030 Climate and Energy Framewrk. We hwever recgnise that this trajectry wuld place the EU at the lwer ambitin end in its lnger term decarbnisatin ambitin fr EURELECTRIC als believes that the free allcatin f allwances fr certain ETS sectrs shuld be cntinued in Phase IV. We supprt the explicit definitin f the share f auctining in the Cmmissin s prpsal which states that this shuld nt be reduced when cmpared with Phase III. We believe that the carbn leakage list shuld be fcused t cver nly thse sectrs which are clearly expsed t such risk. The list shuld be revised peridically t take accunt f ecnmic and technlgical develpments (keeping in perspective the final bjective f full auctining f allwances fr all sectrs as well as effrts made at the internatinal level by ther cuntries in achieving the glbal decarbnisatin bjectives). In the light f recent discussins n the Cmmissin s prpsal, EURELECTRIC is cnvinced that the discussins n the current ETS refrm shuld fcus n effrts t strengthen the EU ETS t ensure that it is the key plicy instrument t deliver decarbnisatin and lw carbn investment in Eurpe s ecnmy in the shrt, medium and lnger term. This shuld be dne by: Learning frm the implementatin f the previus Phases f the ETS by ensuring that adjustments can be made t address the full impact f verlapping EU and natinal plicies that undermine the EU ETS; Ensuring the MSR is capable f addressing the surplus f allwances currently in the system, and that unallcated allwances at the end f Phases are mved t the MSR; Preventing allwances frm the MSR being placed back n the market within Phase IV fr any ther reasn than explicitly stated in the Directive. Allwances frm the MSR shuld be auctined in a manner that des nt endanger the stability f the market. Accelerating the electrificatin f ther sectrs f the EU ecnmy: Using electricity fr transprt and heating and cling wuld nt nly cst-effectively reduce greenhuse gas emissins, but it wuld effectively cap the emissins f these sectrs by de fact bringing them under the EU ETS, besides bringing health, envirnmental and ther benefits. 2

7 Apprpriate Cmpensatin Mechanisms and Updated Rules fr the Use f ETS Auctining Revenues EURELECTRIC believes that ensuring a smth transitin twards a decarbnised ecnmy will require apprpriate measures fr energy intensive sectrs as well as thse Member States with carbn intensive ecnmies. Develping apprpriate cmpensatin mechanisms fr different industries (such as the electricity industry in cuntries with a different starting pint and lwer GDP/capita) are a precnditin t mitigate the direct impacts f an increased carbn price n the cmpetitiveness f energy intensive industry and the ecnmies f eligible Member States. The ETS refrm shuld therefre ensure mre stringent requirements fr the use f revenues frm auctining f allwances and partial free allcatin. Bth shuld be geared t be used fr climate change and energy related purpses, cmpensatin mechanisms and the mdernisatin f energy infrastructure t ensure a sustainable lw carbn transitin. Against this backgrund, EURELECTRIC als fully supprts the establishment f the Mdernisatin Fund, which we believe shuld be cntrlled primarily by the beneficiary Member States. We als supprt the revised mechanism fr the free allcatin f allwances fr the prmtin f energy system mdernisatin which shuld guarantee lw carbn investments in eligible Member States that are fair, cst-efficient and effective. Fllw up t the Paris Agreement Furthermre, we believe that in light f the utcme frm COP21 in Paris, the EU must assess, in the cntext f the ambitin mechanism, its cntributin twards the achievement f the glbal lng-term gals in the Paris Agreement. Whilst the Paris Agreement is an imprtant step, it is clear that much mre needs t be dne in plicy terms t get emissins dwn t the cst efficient pathways t hld the glbal average temperature increase t well belw 2 C abve pre-industrial levels. A clear emissins gap exists between the bjectives agreed in the Paris Agreement and the current decarbnisatin scenaris and cmmitments f the EU and ther parties t the UNFCCC. Fr the sake f investr predictability in the medium t lnger term, EURELECTRIC therefre calls fr the EU t carry ut a timely study f all ptins t bring the EU s decarbnisatin ambitin under the 2030 Climate and Energy Framewrk, as well as under the 2050 decarbnisatin scenaris, in line with the ambitin f the Paris Agreement as part f the EU s expected cntributin t the UNFCCC 5-yearly glbal ambitin review cycle. Against this backgrund, we believe that the revised ETS Directive shuld incrprate suitable prvisins t enable future adjustments t the EU ETS t reflect any pssible increase in EU climate ambitin resulting frm the UNFCCC 5-yearly glbal ambitin review cycle, thus ensuring that the EU is able t participate fully and cnstructively in effrts t meeting the agreed Paris climate gals. It shuld include prvisins t ensure that the EU keeps all ptins pen fr increasing its climate ambitin in due curse. Varius stakehlders, including several Member States and Members f the Eurpean Parliament, have already cme frward with pssible ptins t strengthen the EU ETS in the light f the Paris utcme. A number f ther stakehlders have at the same time stressed the need nt t intrduce further mdificatins t the ETS at this pint in time. EURELECTRIC believes that these ptins t strengthen the EU ETS shuld be assessed in terms f their effectiveness, efficiency, impact and timing in delivering cst-effective emissins reductins in the EU, cnsistent with the Paris Agreement bjectives and the actins f ur glbal cmpetitrs. We particularly believe that the cnsideratin f any such measures shuld ensure that energy and climate plicies are guided by the need t maintain a strng Eurpean dimensin. 3

8 Optins that culd be the mst effective in terms f impact and timing include, amng thers, strengthened design parameters f the MSR; an increase f the linear reductin factr beynd the prpsed 2.2%; an apprpriately designed EU-wide price cntrl mechanism cmbined with the functining f the MSR; an imprved gvernance prcess where impacts f ther Eurpean and natinal plicy measures n the ETS are assessed. EURELECTRIC believes that such ptins shuld be cnsidered and assessed, and, althugh we d nt currently have a psitin n any f these ptins, we will cntinue t analyse and explre the pssible challenges and benefits fr the electricity sectr and the EU ecnmy as a whle which such measures may invlve. 4

9 EURELECTRIC pursues in all its activities the applicatin f the fllwing sustainable develpment values: Ecnmic Develpment Grwth, added-value, efficiency Envirnmental Leadership Cmmitment, innvatin, pr-activeness Scial Respnsibility Transparency, ethics, accuntability

10 Unin f the Electricity Industry - EURELECTRIC aisbl Bulevard de l Impératrice, 66 - bte 2 B Brussels Belgium Tel: Fax: VAT: BE EU Transparency Register number: