German greenhouse gas emission inventories vs. EU emissions trading system in Germany

1. German greenhouse gas emission inventories vs. EU emissions trading system in Germany Michael Strogies Dr. Volker Kathöfer German Environmental Agency (UBA, Berlin, Dessau) Copenhagen, 09. February, 2006

2. State of the art

3. OUTLINE — Brief description of the National Authority (NaKo), — Brief description on the Emission Trading Agency (DEHSt) —tasks and functions and timing

4. NaKo Single National Entity  Federal Environmental Agency (I 4.6) focal point and national coordination draft reports Implementation / update of „Zentralised System on Emission“ZSE consistent data management for all existing obligations Implementation of a „Quality System Emissioninventories“QSE QA/QS – system Responsibilities / cooperation regulation on climate statistics (KlimaStatG - in preparation)

5. NaKo Quality System Emissions inclusion of whole process determination of methods, data gathering, data processing and estimation, reporting Should be followed by all participants of the national system agency  “in house standard” (internal regulation) others  regulated by “KlimaStatG”

6. NaKo Content and parts of QSE (11/2005 and KlimaStatG): single national entity responsibilities for specific source and sink categories time schedule for all steps of data flow minimum requirements for data (documentation, QA/QC) cooperation for review procedures specific tasks treatment of confidentiality

7. GERMAN EMISSIONS TRADING AUTHORITY: TARGETS • Ambition is to set up Emission Trading as environmentallyand economically effective as possible ... that requires ... • — to ensure the ecological integrity of the instrument • — to avoid market distortions • — to minimize transaction costs • — to facilitate the trading by an efficient interaction between traders, trading platforms and registries

8. GERMAN EMISSIONS TRADING AUTHORITY: ORGANISATION Division E German Emissions Trading Authority (DEHSt) Department E 1Industry Sector Allocations, Customer Service and Legal matters Department E 2Energy Sector Allocations, Reserve Management, and Registry Industry Installations I Industry Installations II Energy Installations I Energy Installations II Customer Service, Communications Process Control,Quality Control Reserve Management, Reports, National Allocation plans Central Registry IT, Quality Control Emissions TradingLegal Office JI/CDM (optional) Total Staff: 75

9. GERMAN EMISSIONS TRADING AUTHORITY: TASKS —to allocate and issue allowances — to control operator‘s Monitoring Reports — to operate the ETS Registry (Account management); + Kyoto — to draft national and international Reports — to co-operate with the EU and the UNFCCC — to contribute and to develop future National Allocation Plans (NAP) — to support the integration of the Kyoto-Mechanisms (CDM/JI)

10. LEGAL FRAMEWORK (GERMANY) • — Greenhouse gas emission allowance trading law (TEHG), 15th July, 2004 (legal und institutional basis for ETS) • — Allocation law 2007 (ZuG 2007), 31th August, 2004 (ET-Budget and allocation rules for 2005-2007) • — additional ordinances • Allocation Ordinance • Cost Ordinance, 01st Sept., 2004 • Registry Ordinance

11. GERMAN NAP —Total amount of allowances to be allocated: 495 million t CO2 annually +3 million tons CO2 national reserve — Allocation method for existing installations:Grandfathering, based on emissions in 2000-2002 —Allocation method for new entrants:Benchmarking, based on BVT-Benchmarks —Special rules for early action, process emissions, CHP

12. 31. August 2004 – 20. September 2004 (Electronic) Application Procedure 21. September 2004 – December 2004 2,300 Applications under examination – allocation of allowances free of charge for the first commitment period 2005 1. January 2005 Start of the first commitment period Early March, 2005 Issuance of allowances (1st trench) TIMETABLE FOR ALLOCATION / ISSUANCE On the basis of the provisions of the EC Directive and German national legislation (TEHG, ZuG)

13. FIRST RESULTS OF ALLOCATION —1,849 allocation notices — total of allowances for 1,485 million tons CO2 for commitment period 2005-2007 (495 million tons per year) — proposed amount exceeds defined maximal budget by 42 million tons (14 million tons per year, 2.8 %) -> proportionate adjustments for certain installations —reason: surprisingly high rate of companies applying based on the allocation rule for „new entrants“(~ 77 million tons CO2 per year)

14. GHG and ETS Stationary Combustion Emission Trading Scheme CO2 CH4 N2O HFC PFC SF6

15. NIR, ET, EB National Inventory Report ET Monitoring (each installation) National Energy Balance

16. ET Allocation Energy Balance Energy Sector Consumption hard coal 1.007.950 1.592.641 431.867 2.024.508 50% Lignite 1.258.449 1.461.718 82.395 1.544.113 81% Mineral oil 187.392 391.089 4.147.264 4.538.353 4% Natural gas 416.020 472.303 2.333.192 2.805.495 15% Other fuels 236.113 274.955 200.511 475.466 50% Comparison total consumption (TJ, 2000)

17. 1.007.950 1.592.641 63% hard coal 1.258.449 1.461.718 86% Lignite 187.392 391.089 48% Mineral oil 416.020 472.303 88% Natural gas 81.596 274.955 86% Other gases 154.516 Other fuels AR, Energy Sector (TJ, 2000) ET Allocation Energy Balance

18. AR – hard coal, energy sector (2000) National Energy Balance 64.630 TJ National Inventory Report 61.000 TJ ET Allocation 64.630 TJ

19. Emission Value (ET Allocation) t CO2/TJ 200 150 100 50 0 hard coal lignite oil gas other

20. Result We assume some new time series that are yet not estimated, due to detailed information by certain installations We assume new mapping of fuel types and installations We do not assume changes in total, pending from monitoring We are not amused reporting many changes in time series in the next Inventory  base year problematic

21. Interaction between ETS and Inventory (I) emission factor set for CO2 comparability issue, analysis for solid fuels  implementation of annual different EF for brown and hard coal basic set of EF, taking into account the region and specific fuel characteristics annually mixed EF is used in the inventories (basis import statistic)slightly modifications behind the dot

22. Interaction between ETS and Inventory (II) “new” sources completeness issue, analysis of information provided by operators for NAP 1(implemented in the inventories 2006)limestone and dolomite use: (+ appr. 6 Mio t CO2 1990) iron and steel large combustion plants others (e.g. ceramic industrie) detailed refinery process: (+ appr. 4 Mio.t CO2 1990) H2 generation use of catalysts reallocation between energy and process related emissions)

23. Methodological: top down vs. bottom up First: I had a dream…take validated plant specific information, where available, run statistic estimates for the remaining sourcesbut….No clear information what share of a specific source category is covered by ETS future dealing:use ETS data only for verification and methodological questionsclear need: improved characterization of ETS facilities on detailed level according to detailed IPCC systematic (checked by the authority)

24. Need: dealing the confidentiality big issue treatment on level of operator and authorityFor regulation update it would be very helpful to have a EU-given obligation to use information provided by ETS for the purpose of improving the emission inventories.

25. FUTURE WORK 2006 – 2007 — harmonized monitoring and reporting on emissions trading in Germany needs to be established (implementation of EU Monitoring Guidelines, coordination with international reports on climate protection - national) — harmonizing Emission and Activity Data of greenhouse gases , CAFE and ET (EU and national) — harmonization between ET Monitoring and Energy Balances (national)

26. … Thank you very much for your attention!