EU Emission trading – better job second time around?

The EU Emission Trading Scheme (EU ETS) for CO2-emissions from energy and industry installations reflects a paradigm shift towards market-based instruments for environmental policy in the EU. The centerpieces of the EU ETS are National Allocation Plans (NAPs), which individual Member States (MS) design for each phase. NAPs state the total quantity of allowances available in each period (ET-budget) and determine how MS allocate allowances to individual installations. The NAPs thus govern investments and innovation in energy efficient technologies and the energy sector. In terms of distribution, they predetermine winners and losers. In this paper we analyze and evaluate 25 NAPs submitted to the European Commission (EC) for phase 2 (2008-2012) of the EU ETS. At the macro level,we assess whether the submitted ET-budgets are stringent, and whether they imply a cost-efficient split of the required emission reductions between the EU ETS sectors (energy and industry) and the remaining sectors (transportation, tertiary and households). Comparing the submitted ET-budgets with those already approved by the EC suggests that the EC’s decisions significantly improved the effectiveness and economic efficiency of the EU ETS. But given the high share of Kyoto Mechanisms companies are allowed to use, the EU ETS is unlikely to require substantial emission reductions within the EU. At the micro level, we assess (across countries and phases) the allocation methods for existing and new installations, for closures and for clean technologies. A comparison of the NAPs for the second phase and the first phase (2005-2007) provides insights into the (limited) adaptability and flexibility of the scheme. The findings provide guidance for the future design of the EU ETS and applications to other sectors and regions

An early assessment of national allocation plans for phase 2 of EU emission trading

No description supplie

An early assessment of national allocation plans for phase 2 of EU emission trading

Based on 18 National Allocation Plans (NAP) for phase 2 (2008-2012) of the EU Emission Trading Scheme (EU ETS), we explore to which extent individual Member States (MS) intend to use the ETS effectively and efficiently to reduce CO2 emissions. Our analyses at the macro level of these NAPs show that on average the ET-budgets in phase 2 are only about 3 % lower than the budgets in phase 1 (2005-2007), historical emissions in 2005 and projected emissions in 2010. While on average, the old MS intend to reduce emissions by about 10 %, compared to projected emissions, the im-plied excess allocation in the new MS is more than 20 %. When compared with a cost-efficient split of the required emission reductions, the ET-budgets in the EU-15 MS are generally too large. Thus, the burden for non-trading sectors (households, tertiary and transport) will be too high. Noteworthy are also the high shares of governments' intended and companies' possible use of Kyoto Mechanisms, which challenge the traditional position held by the EU on supplementarity. In general, our analyses at the micro level of the allocation methods (across countries and phases) suggest that MS tend to stick with the oncepts and methodologies developed in phase 1, unless these actually contradict rulings by the European Commission. Thus the progress made towards more efficient and more harmonized allocation rules is generally small. With some variation, all NAPs include persistent inefficient rules for closures and new installations which distort dynamic innovation incentives and tend to preserve existing production structures. Observed improvements include a (rather small) increase in auctioning and the use of benchmarking for existing and new installations. Also, the NAPs of a few old MS have simplified special provisions for process-related emissions or combined heat and power. In contrast, new MS have often introduced such provisions in phase 2. We conclude that potentials to improve environmental effectiveness and economic efficiency are far from being tapped. Improvements crucially hinge on the outcome of the European Commission's review process. --

Incentives for energy efficiency in the EU Emissions Trading Scheme

This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008-2012) suggests that the price and cost effects for improvements in carbon and energy efficiency in the energy and industry sectors will be stronger than in phase 1 (2005-2007), but only because the European Commission has substantially reduced the number of allowances to be allocated by the Member States. To the extent that companies from these sectors (notably power producers) pass through the extra costs for carbon, higher prices for allowances translate into stronger incentives for demand- side energy efficiency. With the cuts in allocation to energy and industry sectors these will be forced to greater reductions, thus the non-ET sectors like household, tertiary and transport will have to reduce less, which is more in line with the cost-efficient share of emission reductions. The findings also imply that domestic efficiency improvements in the energy and industry sectors may remain limited since companies can make substantial use of credits from the Kyoto Mechanisms. The analysis of the rules for existing installations, new projects and closures suggests that incentives for energy efficiency are higher in phase 2 than in phase 1 because of the increased application of benchmarking to new and existing installations and because a lower share of allowances will be allocated for free. Nevertheless, there is still ample scope to further improve the EU ETS so that the full potential for energy efficiency can be realized. --Climate policy,emission trading,energy efficiency,innovation

Increasing the ambition of EU Emissions Trading. A report to Greenpeace International

No description supplie

Entwicklung eines nationalen Allokationsplans im Rahmen des EU-Emissionshandels

The main objective of this project was to support the development of the National Allocation Plan for Germany for the first trading period 2005-07. For this purpose the allocation options had to be analysed and evaluated on the levels of the nation, the sectors, and the installations, considering the legal and political framework as well as the available data bases. In addition, the political process of negotiations in Germany and in Europe had to be accompanied scientifically. Emphasis was placed on the conceptual basics of the allocation planning, on issues of the necessary data bases, the alternatives for the calculation of the macro plan, the general and special allocation rules, and institutional questions. Furthermore, continuous work was required to give support und advice to the Federal Government for the concrete development of the allocation plan and to communicate with stakeholders, in particular with representatives of the German industry

Social innovation supports inclusive and accelerated energy transitions with appropriate governance

Accelerating energy transitions that are both sustainable and just remains an important challenge, and social innovation can have a key role in this transition. Here, we examine the diversity and potential of social innovation in energy systems transformation, synthesizing original mixed methods data from expert interviews, document analysis, social innovation experiments, a representative survey, and an expert survey. Based on a thematic analysis of these data, we advance four key findings: (1) the diversity of social innovation in energy is best understood when recognizing core social practices (thinking, doing, and organizing) and accounting for changes in social relations (cooperation, exchange, competition, and conflict); (2) governance, policy networks, and national context strongly shape social innovation dynamics; (3) processes of social innovation are implicated by multidimensional power relations that can result in transformative changes; and (4) social innovation in energy generally has strong social acceptance among citizens, benefits local communities and is legitimized in key community and city organizations. We discuss an agenda for 9 future research directions on social innovation in energy, and conclude with insights related to national context, governance, and acceleration

EU emissions trading: an early analysis of national allocation plans for 2008-2012

Based on 18 national allocation plans (NAPs) submitted to the European Commission for phase II (2008-2012) of the EU Emissions Trading Scheme (EU ETS), we find that, on average, the ET budgets in phase II are only about 2.6% below historical emissions in 2005, about 3.1% lower than the budgets in phase I (2005-2007), and 3% below projected emissions in 2010. While the EU-15 Member States (MS) intend to reduce emissions by about 8-11%, the implied excess allocation in the new Member States lies between 17% and 31%. Compared with a cost-efficient split of the required emission reductions, the ET budgets in the EU-15 MS are generally too large. Thus, in total, the burden for the non-trading sectors (households, tertiary and transport) is too high. Furthermore, the high shares of governments' intended and companies' possible use of Kyoto mechanisms challenge the supplementarity principle. Our detailed analyses of the allocation methods of these NAPs (across countries and phases) suggest that MS should adhere to the concepts and methodologies developed in phase I. This implies that only a little progress has been made towards achieving more efficient and more harmonized allocation rules across MS. Untapped potentials to improve environmental effectiveness and economic efficiency crucially hinge on the outcome of the Commission's review process

Implications of announced phase II national allocation plans for the EU ETS

No description supplie