Globalisation and Protectionism in the Example of the Emissions Trading System

Transcription

1 Globalisation and Protectionism in the Example of the Emissions Trading System Dresden, 1 November 2012 Dr. Ines Zenke

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3 Dr. Ines Zenke, Rechtsanwältin / Lawyer Dr. Dr. Ines Ines Zenke Rechtsanwältin, Zenke Fachanwältin Rechtsanwältin, Fachanwältin für für Verwaltungsrecht Verwaltungsrecht Partner Partner (since (since 2002) 2002) Contact: ines.zenke@bbh-online.de Contact: Phone: ines.zenke@bbh-online.de Phone: 030/ / One year at a district court Since 1995 with BBH Berlin, since 1998 lawyer 1998 doctoral thesis on energy law concerning the permissibility of state-imposed market entry barriers under the constitution and European law Since 2002 Partner of the law firm Board Member of GEE e.v. (Gesellschaft für Energiewirtschaft und Energiepolitik) Member of the Energy Advisory Board at the Senate Office for Urban Development and Environmental Protection, Berlin Member of Studienvereinigung Kartellrecht e.v. (association of lawyers with a special interest in antitrust law) Vice-Chairwoman of the Sanctions Committee of Greenmarket s Exchange Council Expert counsel for the Bundesrat during the legislative drafting process of the EnWG 2003, expert counsel for the Bundestag during the legislative drafting process of the Act Implementing the Markets in Financial Services Directive 2007, expert counsel for the Bundestag during the legislative drafting process of the Greenhouse Gas Emissions Trading Act (TEHG) 2011 Extensive lecturing activities; numerous books and publications on energy, competition and banking law, and compliance Practice Areas: conduct of court proceedings and legal advice on trading in CO 2 emissions allowances, antitrust and regulation law (in particular merger control and issues of grid usage and fees) and stock exchange and banking law (in particular KWG), compliance advice, political advice UIA /

4 Outline I. What is it all about? The basics of emissions trading II. III. IV. Example 1: The protection of the European industries at risk of carbon leakage Example 2: Air transport and third countries in emissions trading before the ECJ Overall evaluation UIA 4

5 I. What is it all about? The Basics of the Emissions Trading System UIA 5

6 The Basics of Emissions Trading German German Emissions Emissions Trading Trading Authority Authority (DEHSt) (DEHSt) KfW KfW Development Development Bank Bank surrender of emissions allowances depending on the actual quantity of emissions - 1 t CO 2 = 1 emissions allowance allocation in accordance with the allocation rules auctioning in accordance with the action rules installation installation operators operators energy energy industry industry basic idea: determination of a total quantity of CO 2 emissions for Germany (from 2013 for the whole of the EU) distribution of a certain amount of emissions allowances to all participants allocation of another amount in auction procedures participants obligation to surrender the emissions allowances for the actual quantity of their emissions in case of more emissions than allowances: additional purchase or emissions reduction; in case of surplus emissions allowances: sale UIA Target: cost efficient 6 reduction of emissions

7 The Basics of Emissions Trading Basic principle of cap-and-trade Cap: limit on quantity for the whole of Europe As a result: reduction of the emissions by 8 percent in the EU and 21 percent in Germany (compared to the status quo) Trade: sale of surplus allowances or additional purchase of missing allowances emissions will be reduced where it is economically most favourable Responsibility of implementation: German Emissions Trading Authority (surrender, allocation, control, registration) Local authorities: emission permits UIA 7

8 The Basics of Emissions Trading Basic legal framework: (Kyoto Protocol) EU Emissions Trading Directive 2003/87/EC (last amended in 2009) Monitoring and Reporting Regulation Carbon Leakage List Commission Decision on Free Allocation Rules German Greenhouse Gas Emissions Trading Act (last amended in 2011) German Allocation Acts / Ordinances ZuG 2007, ZuV 2007 ZuG 2012, ZuV 2012 ZuV 2020 (based on the Commission Decision) UIA 8

9 Carbon Leakage II. Example 1 Carbon Leakage UIA 9

10 Carbon Leakage So far, no global emissions trading system small, partially voluntary systems in the USA, Australia New Zealand and Japan For this reason: installations in the EU Member States bear a greater burden than their competitors affected are about 11,000 installations in particular the energy sector, but also the industry (including chemical, paper, aluminium, glass, tile and the steel industry, refineries etc) As a result: disadvantage of European companies in relation to other competitors outside Europe UIA 10

11 Carbon Leakage The effect we fear: carbon leakage Movement of the domestic industrial production to third countries without emissions trading the country becomes less attractive for investors decrease in the market growth loss of jobs products are manufactured in third countries (with high emissions) and imported again to the EU This complex of problems was already discussed in the 90ies; back then it was referred to as pollution haven and race to the bottom UIA 11

12 Carbon Leakage Possible solutions: International climate protection agreement to impose caps on emissions all over the world agreement of Doha in 2012 or later is unlikely to happen carbon import tariffs problematic in political terms and, to some extent, inconsistent with international law actual impact of CO 2 emissions is unclear Increase of the free allocation of emissions allowances decrease in absolute costs does not affect climate change; emissions reduction as a result of quantity control UIA 12

13 Carbon Leakage EU s current strategy to avoid carbon leakage: 100% free allocation to industry sectors that are at risk of carbon leakage about 40% more than to other installation operators A sector is at risk of carbon leakage if there is: an increase in production costs to at least 5%, intensity of trade with third countries of 10% a cost increase of 30% or an intensity of trade with third countries of 30% Commission s Carbon Leakage List determined by the EU Commission decision dated 24 December 2009 ref.: 2010/2/EU will be verified again in 2014/2015 UIA 13

14 Carbon Leakage Evaluation: No reduction of the pressure on the affected sectors to reduce their emissions the benchmark-based allocation covers the demand only for highly efficient installations decrease of the absolute costs associated with the CO 2 emissions for the affected sectors Overall evaluation: positive UIA 14

15 Emissions Trading and Air Transport III. Example 2: Emissions Trading and Air Transport UIA 15

16 Emissions Trading and Air Transport Ever-growing aviation traffic: contribution of the aviation to the greenhouse effect is 9% 93% more flights than in 1993 Since 1998, fruitless negotiations at the ICAO aiming at establishing global emission reduction measures Since 2012, the EU on a solo run: emissions trading for flights departing and landing in EU countries (+ Norway and Iceland) (Directive No. 2008/101/EC) including the emissions of the entire route, not only in the EU territory 4,000 international aircraft operators have already participated 85% free allocation, 15 % auctioning of emissions allowances (2012) Starting from April 2013, the emissions trading scheme shall apply to its full extent UIA 16

17 Emissions Trading and Air Transport The rule also affects non-european airlines that have a stop over (e.g. New York Frankfurt Moscow) depart (Berlin Beijing ) or arrive in Europe (Sao Paolo Hannover) Considerable administration effort in particular, comprehensive reporting obligations Additional costs for flights until now: 1.50 per flight from Berlin Majorca there is the fear that prices will increase considerably starting from 2013 UIA 17

18 Emissions Trading and Air Transport Low acceptance level outside the EU China s aviation authority (CAAC) prohibits Chinese airlines from participating in the EU ETS Lawsuit by United States airline against involvement in the EU ETS European Court of Justice concluded in its judgment of 21 December 2011 that the involvement of the airlines in the EU ETS was lawful, ref.: C-366/10) the Court found neither an infringement of the Open Skies Agreement of 2008 nor of the Chicago Convention of 1944 According to the ECJ, the emissions trading rule does not affect competition and only applies to commercial flights Talks about counteraction in July 2012, in Washington surcharges for European airlines refuse to negotiate with the EU about new flight routes and overflight rights in the future UIA 18

19 Emissions Trading and Air Transport What is going to happen next? The Federal Government calls for international solutions The European Commission sticks to the inclusion of non-european airlines in the system Hardening of the fronts, no political solution in sight Hostile actions of third countries likely to happen Overall evaluation: difficult! UIA 19

20 Overall Evaluation Europe s solo run restricts competition opportunities for companies from the EU The solution in relation to carbon leakage : relief for the domestic industry successful approach, minor potential for conflict, no disadvantage for climate change objectives Solution in relation to aviation : involvement of third parties in EU measures approach with little success, considerable potential for conflict UIA 20

21 Thank you for your attention! Contact: Dr. Ines Zenke BBH Berlin Magazinstraße Berlin Tel.: Fax: BBH Brüssel Avenue Marnix Brüssel/Belgien Tel.: Fax.: bruessel@bbh-online.be BBH Köln KAP am Südkai Agrippinawerft Köln Tel.: Fax: koeln@bbh-online.de BBH München Pfeuferstraße München Tel.: Fax: muenchen@bbh-online.de BBH Stuttgart Industriestraße Stuttgart Tel.: Fax: stuttgart@bbh-online.de