European Emissions Trading Scheme The German Experience

Transcription

1 European Emissions Trading Scheme The German Experience Energy Community 8th Environmental Task Force Meeting Vienna, 15 October 2014 Angelika Smuda Emissions Trading Division Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety Germany

2 EU Climate and energy policy targets GHG emissions reduction Share of renewable energy Improvements in energy efficiency % To be defined To be defined % 27 % 30% % 20 % 20 % (as compared to 1990 level) COM proposal Energy roadmap 5050 COM proposal on policy framework 2030 Climate and Energy package ETS Non-ETS 21 % 10 % (as compared to 2005 level) 2

3 Emissions Trading The Principle THE PRINCIPLE: CAP AND TRADE WITHOUT EMISSIONS TRADING: WITH EMISSIONS TRADING: Historic CO 2 -Emissions Permitted CO 2 -Emissions Company A / 5000 t Company B / 5000 t Company A / 4500 t Company B / 4500 t Actual CO 2 -Emissions TRADING: RESULT: Company A can sell 500 t. Sale Company B must buy 500 t. By Cap & Trade t CO 2 were reduced in a defined period. Company A / 4000 t Company B / 5000 t Source: DEHSt 15 October 2014 EU-ETS / German Experience 3

4 Emissions Trading Has Three Major Advantages Companies: flexibility in emissions reduction Advantages of ETS Government: cap ensures emissions reduction National Economy: emissions reduction achieved at least cost 15 October 2014 EU-ETS / German Experience 4

5 Emissions Trading Global Perspective 5

6 EU ETS Why did the EU introduce ETS? Best instrument to reduce GHG-emissions? Choices: Command & Control: e. g. emissions standards for each technology Market based instruments: e. g. tax or emissions trading EU chose Emissions trading, because: Enables EU to meet its commitments under the Kyoto Protocol Allows flexibility within Europe Allows international flexibility by using international offsets as well as by linking to other ETS-schemes 6

7 EU-ETS Scope 1. and 2. Trading Period ( ): Gases: CO 2 only Activities: Energy intensive activities exceeding a threshold, e.g. Combustion of fuels with total rated thermal input exceeding 20 MW Production and processing of ferrous metals Mineral industry (glass, ceramics, lime, cement ) Production of Pulp and Paper Refineries 3. Trading Period ( ): Gases: CO 2, N 2 O, PFC Activities: Inclusion of additional activities large emitters from chemical and aluminium sectors aviation in and from/to EU 7

8 1. Trading Period Soft Start Permanent Consultations with representatives of industry and other stakeholders in the Working Group Emissions Trading Free allocation on the basis of historical emissions (grandfathering) New installations receive allowances from the new entrants reserve Companies and Competent Authority get used to the system Overallocation due to insufficient preliminary data Nevertheless, at the beginning market price gives an incentive to lower CO2 emissions 8

9 2. Trading Period Adjustments Reductions in National Allocation Plans by the Commission Criteria: consistent with each Member State s Kyoto Protocol commitment, emissions development and reduction potential other issues with a view to avoiding undue distortions of competition and of the internal market Most NAPs were reduced in a range from 0.3% to 57.7% e.g. Germany by 6.0 % = 28.9 Mt CO 2e /a Germany: Simplification of allocation rules Proportionate adjustment of free allocation for the energy-sector dependent on the efficiency of the installation Reduction of free allocation for electricity production (40 Mio t CO 2 ) for auctions 9

10 3. Trading Period Harmonized Approach in the EU-ETS EU-wide Cap: linear reduction path of 1.74% /year Harmonised allocation rules within the EU instead of national allocation plans 100% auctioning of allowances for power producers to avoid windfall profits (free allowances are factored in consumer prices) Gradual introduction of auctioning for industry Continued free allocation for industry subject to risk of carbon leakage Free allocation on the basis of benchmarks instead of historic emissions (grandfathering) 10

11 EU ETS Challenges: Oversupply Accumulated surplus of more than 2 billion allowances and decline of CO 2 allowance prices Surplus caused by Financial and economic crisis 2008/2009 resulted in reduction of output and emissions Prognosis of emissions had not foreseen depth of economical crisis Considerable proportion of credits from project-based mechanisms Generally positive countercyclical effect of ETS Scarcity needs to be upheld to give incentives for long-term investments! 11

12 EU ETS Structural reform Short-term: Backloading (BL) already implemented Shift of 900 million allowances to be auctioned in 2014 to 2016 into the years 2019 to 2020 Long-term: Market Stability Reserve (MSR) EU Commission proposal to enhance flexibility of supply to react to extreme demand fluctuation: If surplus is over certain threshold some amounts are not auctioned but shifted to MSR In case of scarcity some amounts are returned to the market Further clarification needed (e.g. threshold values, proposed amount to be returned to the market annually, effect on price expectations, ) DE position: BL volume to be directly transferred to MSR which should be launched significantly before 2020, e.g. in

13 Market Stability Reserve Proposals of Commission and Germany Mio. EUA Surplus According to Commission and German Proposal with Backloading, MSR from 2021/ Backloading in MSR, MSR from October 2014 EU-ETS / German Experience 13

14 EU ETS Achievements ETS infrastructure in place and works well, robust database available EU-wide harmonization from 1 st to 3 rd trading period (e.g. EU-wide cap, standards for emissions monitoring and accreditation of verifiers, Union registry, ) Learned from mistakes (overallocation, windfall profits, criminal actions, ) Emissions reductions have been reached EU: 16% in 2012 compared to 2005 in ETS sector Behavioral changes within companies higher awareness of carbon costs and inclusion in investment decisions Market of EUAs has matured and performs comparably to other markets of related commodities 14

15 Thank you for your attention Angelika Smuda Emissions Trading Division Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety Germany 15