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EU Emissions Trading

EU Emissions Trading. Context. European Climate Change Programme (ECCP) Directive on Greenhouse Gas Emissions Trading (2003/87/EC) Agreement with automobile manufacturers CO2 emission objective for the average new passenger car sold in EU 140 gCO2/km by 2008/2009

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EU Emissions Trading

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  1. EU Emissions Trading

  2. Context • European Climate Change Programme (ECCP) • Directive on Greenhouse Gas Emissions Trading (2003/87/EC) • Agreement with automobile manufacturers • CO2 emission objective for the average new passenger car sold in EU • 140 gCO2/km by 2008/2009 • Approximately 5.8 l petrol/100 km or 5.25 l diesel/100 km. • DIRECTIVE 2001/77/EC on renewable electricity energy • Renewables 12 % of gross domestic energy consumption by 2010

  3. Cap and Trade System • Cap: • total tons of CO2 emissions, equivalent number of allowances • Distribution: • regulated facilities received allowances • Trade in allowances: • Those with excess emissions/high marginal cost of abatement buy • Those with less emissions/low marginal cost of abatement sell

  4. National Allowance Plans • Member states (MS) set national cap: total quantity of allowances for 2005-07 and 2008-12 • Allocate allowances to individual installations • NAPs reviewed by Commission • Issues of subsidization and competitiveness • MS can buys GHG reduction units to meet its overall commitment – affects national cap, hence burden on industry • Grandfathering: • 95% of allowance free of charge for 2005-07 • 90% of allowances free of charge for 2007-12

  5. Regulated Entities • Approximately 12,000-13,000 installations • Sectors • Energy: electric power, oil refineries, coke ovens • Metal: ore, iron, steel • Minerals: cement, lime, glass, ceramics • Pulp and paper • 46% of estimated EU CO2 emissions in 2010 Source: Krueger & Pizer 2004, Lefevere 2005

  6. Permits and Allowances • GHG emission permit: • Description of installation • Raw and auxiliary material • Sources of GHG emissions • Reporting and monitoring measures • Allowance: allowance to emit one ton of CO2 equivalent during specified period

  7. Enforcement • No permit to sell allowances till emissions verified • Penalty for exceeding emission allowances • Euro 40/ton for 2005-08 • Euro 100/ton for 2008-12 Estimated allowance price Euro 26/ton (no offsets) to Euro 13/ton (with unlimited offsets) • Publish names of violators • Computerized registry of allowance count information • Public access to data on emissions and allowances?

  8. Linking Directive • Link JI and CDM to ETS • Use credits generated by projects-based mechanisms to offset obligations under the EU ETS • Excludes sinks • Excludes Kyoto emission trading units • Limit on CDM and JI units used? • 6% -> comitology process for setting a cap

  9. Challenges • Source: http://europa.eu.int/comm/environment/climat/gge_press.htm

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