Transcript Slide 1

Energy Forum
Allocation rules for Industry in EU ETS 2013
presented by Mukund Bhagwat
Brussels 9 June 2011
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General assessment
• Benchmarks for industry: The right decision
– but benchmarks severe, especially since they apply from 2013
no time for adaptation
• Allocation rules…
– … adequate for installations without production changes between
2005 – 2011
– … result partly in shortage of allowances or wrong incentives for
installations with production changes
EU experience has shown:
 To set up a benchmark system is challenging but feasible
 EU system can be a model for the world

if benchmarks are phased in (time for adaptation) and

allocation is based on actual production levels
•
safeguards right incentives, reduces complexity of allocation rules
significantly etc. while maintaining carbon price signal
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In detail: What’s good or was improved
• Historical Activity Level: some flexibility
• Significant Capacity Extension Threshold: > 10 % or 50.000
EUAs …
• Allocation to heat consumer
• Carbon leakage status of heat consumer considered
• Efficiency improvement / Abatement measures will not lead
to less allocation
• No innovation and technology accelerator
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In detail: What’s not implemented well
• Constraints on production growth
– No additional allocation in case of production growth without a
physical change
– No additional allocation in case of capacity increase below 10%
– Complex and problematic determination of added capacity
– There may be no allocation for new entrants/ capacity extensions in
case New Entrants’ Reserve is used up
– Extension of non-ETS heat consumers not sufficiently considered
(sets inefficient incentives)
– Capacity extensions of up- and downstream plants not considered
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In detail: What’s not implemented well
• Competitive advantage of industrial CHP reduced
• Wrong calculation of “industry cap” may reduce free
allocation
– Total amount of free allocation independent of benchmarks and
allocation rules
• No hardship clause
• No rationalisation rule
• Lack of EU-harmonisation (esp. with regard to “installation”
definition)
Financial Compensation: still the missing link in the system
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