ETS Phase III. 2013-2020
overview
1
1. Directive overview
Based on the internal text no. P6_TC1-COD(2008)0013
approved for first reading in Triloge
(the Comission, the Parliament and the Council)
2. Benchmark overview
3. APPE Board 16 March Telcon draft
supporting documents and detailed agenda not available yet
2
The rules for determination
of the quantity of emission allowances
•
Community-wide quantity of emission allowances in 2013 will be
calculated:


•
E 2008 - community wide quantity of allowances issued in
2008 on the bases of NAPs approved by the Commission;
Enew – independently verified data of new sectors in ETS (to
be published in 2010)
Community-wide quantity of allowances will be reduced by
1,74%/an. from 2013:
E2014= E2013 x 0,9826
3
Emission allowances for companies
•
Community-wide quantity of allowances will be split into 2
categories:
–
–
For free allocation: for companies in sectors eligible for some
quantity of free allowances;
For auctioning: these will be split between Member States (MS)
according to a rule specified by the directive proposal.
•
The Commission will adopt Community-wide and fully harmonised
measures for allocating all allowances using benchmarks .This
means that formulas to calculate the quantity of allowances for
companies in different sectors will be elaborated (sectoral caps).
•
Sectors will be split into 3 category:
Power sector: 100% auctioning – no free allocation;
Energy Intensive Industries (EII) exposed to international competition: 100%
of the allowances calculated on the bases of the “formula” of the
Commission (point 4) will be allocated free;
Others: 80% of the allowances calculated on the bases of the “formula” of the
Commission (point 4) will be allocated free in 2013, 20% should be
obtained by auctioning, free allocation will linearly decreased to 30% by
2020.
4
Energy Intensive Industries exposed sector criteria


•
At the latest by 31 December 2009 and every 5 years thereafter the
Commission shall determine the sectors or sub-sectors
Products deserving free allocation of emission rights should demonstrate
the Carbon Leakage ratio:
•
•
CO2 footprint (kg) / per € of gross value added (GVA) exceeds a given threshold
(1 to 4) or that the ratio
CO2 costs (€)/ production costs or alternatively /gross value added exceeds 5%
Exposure cost criteria were determined assuming a CO2 cost of 30 €/ton

And meet the criteria:
Increase of costs
direct+indirect additional costs
≥5%
GVA
or
direct+indirect additional costs
≥30%
GVA
Non EU trade intensity
and
non EU Export+import
Total market size
≥10%
or
non EU Export+import
Total market size
≥30%
5
Carbon Leakage Ratio
Net product Sales
Changes in own produced stocks
Cost of raw materials
COGS
2006
307 344
-1 022
202 082
17 192
TVK Plc
2007
336 413
3 237
228 794
9 689
2008
322 655
-4 165
234 594
5 935
Gross product Margin (HUF bn)
87 048
101 167
77 960
87 668
101 443
78 259
329 550
402 552
310 019
331 895
403 651
311 209
Gross product Margin (000 €)
direct CO2 emission (with TVK Erőmű) (t)
direct CO2 emission (w/o TVK Erőmű) (t)
CO2 cost w TVK Erőmű (000 €)
CO2 cost w/o TVK Erőmű (000 €)
CO2 cost w TVK Erőmű (%)
CO2 cost w/o TVK Erőmű (%)
CO2 price (€/t)
EUR/HUF
1 328 695 1 376 962 1 311 883
1 157 483 1 203 751 1 132 731
TVK Group
2006
2007
308 052 337 237
-897
3 198
202 082 229 188
17 405
9 803
2008
323 036
-4 205
234 594
5 977
1 328 695 1 376 962 1 311 883
1 157 483 1 203 751 1 132 731
39 861
34 724
12,1%
10,5%
41 309
36 113
10,3%
9,0%
39 356
33 982
12,7%
11,0%
39 861
34 724
12,0%
10,5%
41 309
36 113
10,2%
8,9%
39 356
33 982
12,6%
10,9%
30
264
30
251
30
251
30
264
30
251
30
251
6
Distribution of allowances for AUCTIONING
between Member States
• 88 % according to the relative share of emission scheme of 2005
• 10% for solidarity and growth:states where income per capita is still
significantly below the Community average and whose economies
are in the process
• 2% the GHG emission in 2005 was min. 20% below Kioto Protokoll
• It shall be for Member States to determine the use of revenues
generated from the auctioning of allowances. At least 50% of the
revenues generated from the auctioning of allowances should be
used for given purposes.
7
Allowances ratio (national level)
Non exposed sectors
Exposed sectors:
From 2027 no free allowances.
Free allowances based on
benchmark and emission
reduction from 2013
-1,74% /year to 2020.
8
Legislative timeline
•
Dec 2009 : Comission determines exposed sectors
•
2H2009-2010 Comitology procedure
Implementation questions debate with sectors and experts
CEFIC Advocacy
•
June 2010 Rules of Auctioning
•
December 2010 adoptation of implementing measures for
allocating free allowances (i.e. benchmark methodology)
•
2011 Codession
9
Back stairs/uncertainity in legislation
•
„Given
•
Member States may also adopt financial measures in favour of sectors or subsectors determined to be exposed to a significant risk of carbon leakage due to
costs relating to greenhouse gas emissions passed on in electricity prices, in order to
compensate for those costs and where this is in accordance with state aid rules
applicable and to be adopted in this area.
•
The list of exposed sectors may be supplemented after completion of a
qualitative assessment, taking into account, the following criteria:
the extent to which it is possible for individual installations in the sector and/or
subsector concerned to reduce emission levels or electricity consumption,
market characteristics (current and projected),
profit margins as potential indicator of long-run investment and/or relocation
decisions;
–
–
–
that it anticipates a positive outcome to the COP 15 negotiations to be held in
Copenhagen in 2009, the European Union should begin to prepare tougher emission
reduction targets for 2020 and beyond and should seek to ensure that, after 2013, the
Community scheme allows, if necessary, for more stringent emission caps, as part of
the Union's contribution to a new international agreement.”
Increasing reduction target to 30% by 2020
Revision of exposed sectors and free allocation
10
Benchmark principles
• In defining the principles for setting ex-ante benchmarks
in individual sectors or sub-sectors, the starting point
shall be the average performance of the 10% most
efficient installations in a sector or sub-sector in the
Community in the years 2007-2008. The Commission
shall consult the relevant stakeholders, including the
sectors concerned
• It is the base of calculating free allowances both for
sector and company
11
Energy Study Team benchmark work
• Cefic Energy Study Team created a CO2 benchmark
questionnaire for olefin plants
• The benchmark analysis made by Solomon
• Average of TOP4 olefin = free allocation  choosing the best curve
for us
• Review the questionnaire - especially the TOP4 (so good data)
• endorse as the final method at the Board meeting of April 23
• send out (a new) questionnaire – May 2009
• It is necessary to develop a specific work plan to review the
questionnaire and run the official performance curve then verify data
and results by third party. This should be finalized before end of
2009. The benchmark curve will be based on ALL installations
presenting each train independently
• Benchmark must be made based on 2007-2008 data
• Find common agreement on coverage of petrochemicals
• EST discussed and proposed to broaden HVC to include raffinates,
isobutylene, cyclopentadiene, acetylene etc. The list should be
developed (Europia and IEA)
12
Assumptions
CO2 Benchmark perimeters:
• Cracker only:
– Furnace(s)
– Separation
– Other facilities
– WHB (Waste Heat Boiler)
• Boiler / CHP (all heat producers):
– Boilers
– CHP (Combined Heat & Power) – only heating
– Other heat sources
13
Benchmark analysis
•
•
•
•
•
Based on 2007-2008 data
TOP4 2008 data is missing
Selected HVC (High Value Chemicals) as divisor
Selected direct emissions & direct + indirect steam
CO2 cost is 30 Euro/ton (calculated with 300 HUF/EUR)
• Cracker exposed
• Boiler not exposed
14
Perimeter
Cracker only
A1
B1
Direkt kibocsátás
Direkt +indirekt gőz
A2
B2
Direkt kibocsátás
Direkt +indirekt gőz
Cracker+Boiler+CHP
15
TVK-2
TVK-1
SPC
SPC
TVK-2
TVK-1
16
TVK-2
TVK-1
SPC
TVK-1
SPC
TVK-2
17
Petchem CO2 benchmark 2007
(teljes site-ra vásárolt kvóta)
2007 Petchem
CO2 kibocsátás
TOP4 eredeti
fajlagosai
alapján (kton)
(kton)
Tényleges vásárolandó
kvótamennyiség
Ingyenes kvóta
TOP4
fajlagosainak
lineáris
kivetítése (kton)
TOP4 eredeti
fajlagosai
alapján (M Ft)
TOP4
fajlagosainak
lineáris kivetítése
(M Ft)
Cracker only
A1
B1
Direkt kibocsátás
Direkt +indirekt gőz
A2
B2
Direkt kibocsátás
Direkt +indirekt gőz
1 485
1 538
835
868
1 059
1 093
6484
6548
4469
4526
1 715
1 768
893
783
1 143
1 127
7513
8869
5261
5773
Cracker+Boiler+CHP
2007 SPC Olefin
CO2 kibocsátás
TOP4 eredeti
fajlagosai
alapján (kton)
(kton)
Tényleges vásárolandó
kvótamennyiség
Ingyenes kvóta
TOP4
fajlagosainak
lineáris
kivetítése (kton)
TOP4 eredeti
fajlagosai
alapján (M Ft)
TOP4
fajlagosainak
lineáris kivetítése
(M Ft)
Cracker only
A1
B1
Direkt kibocsátás
Direkt +indirekt gőz
A2
B2
Direkt kibocsátás
Direkt +indirekt gőz
319
318
0
371
370
Cracker+Boiler+CHP
2007 TVK Olefin 1 + Olefin 2
CO2 kibocsátás
222
230
0
237
208
991
903
456
367
1206
1461
608
640
Tényleges vásárolandó
kvótamennyiség
Ingyenes kvóta
TOP4 eredeti
fajlagosai
alapján (kton)
(kton)
281
290
0
303
299
TOP4
fajlagosainak
lineáris
kivetítése (kton)
TOP4 eredeti
fajlagosai
alapján (M Ft)
TOP4
fajlagosainak
lineáris kivetítése
(M Ft)
Cracker only
A1
B1
Direkt kibocsátás
Direkt +indirekt gőz
A2
B2
Direkt kibocsátás
Direkt +indirekt gőz
Cracker+Boiler+CHP
1 166
1 221
0
1 343
1 398
614
638
0
656
575
778
803
0
840
828
5494
5645
4013
4159
6307
7408
4653
5133
18
Open issues of benchmark
•
Perimeter
•
The volume ( although fixed for 2013 – 2020 ) based on which
period
•
Decide of the reference year for HVC:
–
–
–
3 best years of 2004-2008
1 best year of 2004-2008
Rolling average
19
Comitology timeline for benchmark setting
Publication of the study (Ecofys) on benchmarking principles
February 2009
Informal technical working group, 1st meeting
13 February 2009
Data collection and further work of consultants
spring 2009
Stakeholder consultation
30 March 2009
Informal technical working group, 2nd meeting
17 April 2009
Stakeholder consultation (tbc)
27 April 2009
Stakeholder consultations (both "bilateral" and "multilateral"
consultations with industry sectors and NGOs)
autumn 2009, spring
2010
Informal technical working groups
Draft benchmarks
spring 2010
Draft decision to Member States
September 2010
Adoption
December 2010
20
APPE Board Teleconference 16 March
draft agenda
• Object: to review the results of the benchmark analysisand the
outcome of the ETS impact assessment (this lead to measurement
of the risk of carbon leakage) – both above
• Aspects:
• A) Scope of products covered by ETS and selection of products
eligible for free allocation of emissions with a benchmark and
without benchmark
• B) Strategy to promote our method and to ensure the largest
coverage of substances deemed to receive free allocation of
emissions
• C) Adjustments needed in the benchmark methodology to cover the
range of substances decided under A
• D) Main positions to advocate during comitology procedure
• E) Next steps - timing - resources.
21
Scope of products covered by ETS
Base principles of the extension to Petrochemicals
•Want to cover 100% of the petrochemicals emissions
•Avoid auctioning or non-ETS classification
•Want to keep it simple
•Minimize benchmarks (like steamcrackers)
•Use reference values where appropriate
•Trade simplicity/less accuracy versus auctioning cost alternative
•The definition of petrochemicals in the ETS directive :
Production of bulk organic chemicals by cracking,reforming, partial or full
oxidation or by similar process, with a production capacity exceeding 100 t/day
•What is the APPE definition (proposal to be made to the APPE board )
APPE Petrochemicals are defined by the production of all products of
steamcracker/PDH units and the associated chemicals and polymers
based on those products which use a significant amount on a mole
basis of one or more of the steamcracker/PHD products.
•This means that the APPE petrochemicals are defined around the
steamcracker/PDH units. (See next slide)
•Currently 24 products have been identified under APPE Petrochemicals.22
APPE definition of Petrochemicals
Polyethylene (kT) : 12.200
Ethylene
(kT) 21.600
GVA:?
CO2:
Trade:
•
Butanols ?
Plastizers ?
Melamine ?
MEG (kT) : 10.200
Ethylene-oxide (kT) : 2.800
MDI
PUR
EDC (kT) : 10.200
VCM (kT) : 10.200
PVC
1.
2.
3.
4.
EPDM
Polypropylene (kT) : 9.400
Propylene
(kT) 10.900 (1)
Petrochemicals list
Cumene (kT) : 3.000
Propylene-oxide (kT) : 2.300
Phenol (kT) : 2.300
Caprolactam
Acetone (kT) : 1.500
TDI
PUR
Acrylonitrile
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
2-ethylhexanol
15.
Raw C4
butadiene (kT) : 2.200
EB/SM (kT) : 5.500 (2)
Benzene (kT) : 5.100
Toluene (kt) : 2.100
Mix-xylene (kt) : 4.250
P-xylene (kt) : 2.210
Butadiene-polymers
16.
17.
18.
19.
20.
21.
22.
23.
24.
PS
Cyclohexane (kT) : 1.050
PTA/DMT(kT) : 2.800
Polyesters
Crackers/PDH
Aromatics from
crackers
Cyclohexane
Aniline ( including
nitrobenzene)
Para-Xylenes
PTA/DMT
Butadiene
PE (LD,LL,HD)
PP
PS
PVC
EO
MEG
VCM ( including
EDC)
Styrene (including
EB)
Acrylonitrile
Cumene
Phenol
Acetone
Propylene oxide
2- Ethyl hexanol
PET
Caprolactam
EPDM
Nitrobenzene/Aniline (kT) : 1.200
APPE Petrochemicals
Chemicals
(1)
Excluding propylene from refinery : 4.600 kT
Excluding benzene ex-refinery ( 2.100 kT )
23
APPE Petrochemicals and Exposure (Nace codes link)
Link of APPE petrochemicals with Nace code 3 & 4 level

Sector exposure needs to be proven at Nace code level 3 or 4

Scope of both is very broad and they cover a very high number of products




It is understood that is is not needed that for all products falling under the chosen
Nace codes, performance/reference values will need to be determined.
The Nace code 3 (= 241) is very well suitable for Chemicals. Only 3 out of 7
Nace code 4 subdivisions of “241” are needed for APPE petrochemicals
coverage








Estimate that more than 1000 products fall under Nace code 3
About 210 products fall under the petrochemicals Nace code 4 combination
2411
2412
2413
2414
2415
2416
2417
Industrial gases
Dyes & pigments
Other inorganic basic chemicals
Other organic basic chemicals (200 products)
Fertilizers and nitrogen compounds
Plastics in primary forms (11 products)
Synthetic rubber in primary forms (2 products)
APPE
PETROCHEMICALS
APPE intended to determine the exposure criteria on Nace code 3 level only. It is
understood that exposure and performance/reference value determination need
to not be aligned.

EST requests to perform exposure validation also at the 2414+2416+2417 level
24
Exposure perimeter is broader than performance perimeter
No issue anticipated due to limited performance/reference value perimeter versus exposure
perimeter
Petrochemicals
performance/reference values
determination will related to
following Nace codes
Petrochemicals exposure
1.
2414 (203 subcodes present)
1.
24.14.11.30
determination perimeter
a.
b.
Code 3 = 241
Code 4 = 2414+2416+2417
2.
EST
Preferred exposure criteria
Since exposure and performance/reference perimeter
are more aligned
3.
2.
24.14.11.40
3.
24.14.11.50
4.
24.14.11.65
5.
24.14.12.13
6.
24.24.12.23
7.
24.14.12.25
8.
24.14.13.43
9.
24.14.12.45
10.
24.14.12.47
11.
24.14.12.50
12.
24.14.12.60
13.
24.14.12.70
14.
24.14.13.71
15.
24.14.23.10
16.
24.14.23.20
17.
24.14.24.15
18.
24.14.73.50
2416 (11 subgroups present )
1.
24.16.10
2.
24.16.20
3.
24.16.30
4.
24.16.40
5.
24.16.51
2417 (2 subgroups present)
1.
24.17.10.50
2.
24.17.10.90
25
APPENDIXES
26
Open/unclear issues for CEFIC 1.
Art.
Juristes-linguistes - Open/Unclear issue
Comitology planned
3
Definition ‘new entrant': what is basis for ‘10% capacity
increase’?
Definition ‘Combustion'?
Definition ‘Electricity generator‘… produced electricity
for sale to third parties?
IPPC permits are equivalent to requirement for ETS
permits in some MS only
Seek clarification for what is ‘significant change’.
What is ‘mid point’ (time or average of allowances)?
Harmonised rules for the application of the definition of
« new entrant ». By 31 Dec 2010 regulatory procedure with
scrutiny.
4-7
9
9a
10a
The competent authority may notify a lower amount of
emissions according to their emission reduction potential
to Installations emitting greenhouse gases other than
CO2. Why?
Principles for setting ex-ante benchmarks:
the starting point shall be the average performance of the
10% most efficient installations in a sector or sub-sector
in the Community in the years 2007-2008. Unclear
interpretation.
Free allocation for high efficiency cogeneration
Unclear: free allocation for heating/cooling would start
with 80% based on BM to go down to 30% in 2020 plus
-1.74% reduction? - Plus possibly on top a correction
factor?
Perimeters of installations need definition (to include
CHP)!
‘Exposed’ Indirect emitters
Need to define: EU power mix (better: based on
‘marginal’ mix)
Eligible due to only indirect ETS costs? Or also direct?
What about new electricity from (chemical industry)
waste gases?!
‘Exposed sectors’ criteria
Trade intensity: National formula was used for EU:
wrongfully includes double counting!
What is ‘average carbon price’ in EC’s impact
Codecision planned
As from 2020, where appropriate,
review of the linear factor
Transitional Community-wide rules for harmonised free
allocation (art. 10a.1). By 31 Dec 2010 regulatory procedure
with scrutiny.
10a
Definition of exposed sectors on the basis of criteria (art.
10a.8). By 31 Dec 2009 and every 5 years, after discussion
in the European Council, Regulatory procedure with
scrutiny.
Criteria for the selection of CCS projects (art. 10a.8).
Regulatory procedure with scrutiny.
Every year the Commission may add (sub)sectors to the list
of exposed sectors (art. 10a.13). Regulatory procedure with
scrutiny.
27
Open/unclear issues for CEFIC 2.
Art. Juristes-linguistes - Open/Unclear issue
Comitology planned
14
Regulation for the monitoring and reporting of emissions
(art. 14.1) By 31 Dec 2011 Regulatory procedure with
scrutiny.
Regulation for the verification of emission reports, for
accreditation and supervision of verifiers. By 31 Dec 2011
Regulatory procedure with scrutiny.
Amendments to Annexes with the exception of Annexes I,
IIa and IIb. Regulatory procedure with scrutiny.
Approval of unilateral inclusion by a Member State of
additional activities and gases on Annex I. Regulatory
procedure with scrutiny.
15
22
24
If needed Regulation on the monitoring of gases and
activities not included in Annex I. Regulatory procedure
with scrutiny.
Measures for issuing allowances for projects outside the
Community Scheme. Regulatory procedure with scrutiny
24a
28
Adjustments applicable upon the
approval of a future international
agreement on climate change
(expected by June 2010). The
Commission shall submit a
legislative proposal to the European
Parliament and to the Council
amending the present directive.
29a
Ann
ex I
Codecision planned
Measures in the event of excessive price fluctuations (art.
29a). Management procedure.
Accumulation rule
Is this about installations also outside annex I?
How can BM for small units or their accumulation be
established (better grandfathering?)?
28