EU ETS IN THE PARIS VISION

Transcription

1 EU ETS IN THE PARIS VISION IETA SIDE EVENT COP23 / CMP13 / CMA2 16 November 2017,

2 International Emissions Trading Association Global cross-sectoral business association Over 130 companies Members from oil, electricity, banking, industry, traders and brokers, law, consulting, project developers, exchanges, verifiers, etc. Supports emission trading as the most efficient mechanism to reach environmental goals Scarcity Long-term predictability

3 Strengthening of the EU ETS Market stability reserve: Withdrawal rate increased to 24% for first five years in operation ( ) Invalidation of allowances: As from 2023, allowances held in the reserve above the total number of allowances auctioned during the previous year should no longer be valid. Linear Reduction Factor: Annual cap reduction of 2.2 % per year

4 Voluntary cancellation and CSCF Voluntary cancellation of allowances to account for national measures: Member states can cancel allowances to account for domestic policy measures (such as coal phase-out) corresponding to the average verified emission of the previous five years. Cross-sectoral correction factor (CSCF): Ø Uniform application of CSCF if demand for free allocation exceeds supply. Ø Flexibility of auction share to prevent CSCF: 3 percent of cap can be moved from auctions to free allocation. Ø If CSCF is not triggered, the allowances will be used for increasing the innovation fund (by 50 million) and the modernisation fund (0.5% of cap equal to 77.5 million).

5 Special fund for power sector and industry Innovation Fund: Ø 400 million allowances. 325 million would be sourced from the free allocation share, 75 million from the auction share. Ø Up to 50 million EUAs will be made available from unused flexibility allowances in case not needed to prevent CSCF

6 Fund for lower-income Member States Modernisation Fund: Ø 2% of the cap, equal to 310 million allowances Ø Just Transition Funding as part of the Modernisation Fund Ø May get increased by 0,5% of the cap from the flexible auction share if allowances are not needed to prevent CSCF (approximately 77.5 million according to our calculation). Ø Will not support energy facilities using fossil fuels except investments in highly efficient cogeneration in Bulgaria and Romania if these also use a corresponding amount for derogation projects as outlined by Article 10c

7 Free allocation for the power producers (lower-income MS) Article 10c: Ø Maximum allowed is 40% of auction volume Ø Can be increased to 60% of auction volume if a member state also receives solidarity auction volume and uses a corresponding amount of allowances from the solidarity volumes Ø Projects above 12,5 million must meet stricter investments criteria and will be selected in a competitive bidding process Ø Cannot be used for emission-intensive electricity generation nor increase dependency on emission-intensive fossil fuels

8 Provisions for Greece and shipping Solidarity provision for Greece Greece will receive 25 million allowances from unallocated Phase 3 NER allowances to co-finance up to 60% of decarbonising the electricity supply of islands. These allowances will be auctioned in accordance with Modernisation Fund modalities. Shipping emissions European Commission to monitor IMO efforts and to provide annual progress report to Parliament and Council Action from the IMO or the EU should start from 2023, including preparatory work on adoption and implementation and due consideration by all stakeholders

9 NER and dynamic allocation New Entrant Reserve Unallocated allowances taken from Phase 3 (deducted by special allowances for Greece) and 200 million allowances from the MSR. This means the NER will have a starting value of approximately 350 million allowances. If NER is not entirely used by the end of Phase 4, up to 200 million will be returned in the MSR. Further, the NER will be adjusted by allowances needed or provided from production changes. Production changes Production changes above 15% as rolling two-year average compared to initial levels used as basis for free allocation.

10 NER and dynamic allocation Allocation to non-exposed sectors and carbon leakage: Sectors and sub-sectors where the product from multiplying their intensity of trade by their emission intensity is above 0,2 are considered as carbon leakage endangered until 2030 and receive up to 100% of their benchmark as free allocation Qualitative assessment possible for sectors landing between 0.15 and 0.2 Up to 30% free allocation of benchmark until 2025, linear phase-out of free allocation to non-exposed sectors during in the second half of Phase 4, reaching zero allocation by 2030.

11 Benchmarks and indirect costs compensation Benchmark update Flat-rate update of between 0.2% and 1.6% of the benchmark values used for phase 3: that will lead to a benchmark improvement leading of between 3% to 24% compared to the value applicable in the period And of between 4% an 32% for the period 2026 to 2030 Free allocation shall be given to district heating as well as to high efficiency cogeneration Indirect costs No more than 25% of auction revenues to be used for indirect carbon cost compensation. As of 2018, if a member state exceeds 25%, it has to provide reasons in a report.. Possibility of further harmonisation to be considered.

12 PARIS VISION Accounting for international climate action Regularly review whether to replace, adapt or complement any existing measures to prevent carbon leakage with carbon border adjustments or alternative measures

13 Thank you