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EMISSIONS TRADING: BENCHMARKING FOR INCUMBENTS

Explore benchmarking strategies in emissions trading for sector incumbents, including differentiated and non-differentiated cases. Understand benchmark allocation calculations and alternative methodologies for assessing carbon efficiency.

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EMISSIONS TRADING: BENCHMARKING FOR INCUMBENTS

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  1. EMISSIONS TRADING: BENCHMARKING FOR INCUMBENTS Nicola Kirkup Department of Trade and Industry 07 January 2020

  2. Non-differentiated case • Government’s overall sector cap on emissions (teCO2) • Divide by sector capacity (MW) • Equals benchmark allocation (teCO2/MW) • Each station receives that amount, multiplied by its individual capacity

  3. Differentiated case • Capacity • Multiplied by Loadfactor • Multiplied by Carbon factor • Equals Absolute allocation • Multiplied by Scale factor

  4. Benchmark: Absolute allocation Load factor Carbon/MW MWh/year Carbon factor Capacity Carbon/hour

  5. Scale factor • Total sector cap • Divided by • Total sector BAU projection • Equals • c. 70%

  6. Alternative approach: Post-hoc determination Your actual production/total sectoral production Multiplied by Sector cap Or: Your actual production Multiplied by A fixed tCO2 per unit of production

  7. Alternative methodology: Discussion Con: Post hoc detemination: Restricted predictability. May lead to last-minute adjustments and instability at reckoning points Pro: Improves the incentive to assess your carbon efficiency vs. the sector average and/or your competitors, and adjust accordingly Leads to the “right” outcome

  8. Thank you Nicola Kirkup Department of Trade and Industry 09 February 2007

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