IAPSC CONFERENCE 4 DECEMBER 2003 EU EMISSIONS TRADING SCHEME

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1 IAPSC CONFERENCE 4 DECEMBER 2003 EU EMISSIONS TRADING SCHEME Chris Leigh Global Atmosphere Division Department for Environment, Food and Rural Affairs

2 Context The UK s target under the Kyoto Protocol/EU bubble is to: reduce emissions of greenhouse gases by 12.5% below 1990 levels by In addition, the UK Government has set a national target to: reduce emissions of CO2 by 20% below 1990 levels by 2010 The UK Government s Energy White Paper published in February 2003 commits the UK to a path to a reduction in CO2 emissions of some 60% from current levels by 2050.

3 UK emissions of greenhouse gases

4 The UK Climate Change Programme - policies and measures Published November 2000 Key elements: Climate Change levy arrangements Renewable electricity Combined Heat and Power capacity Fuel efficiency of cars 10 Year Transport Plan Energy efficiency in residential buildings Building performance standards UK emissions trading scheme

5 Why trade emissions? Command and control (ELV) v emissions trading Kyoto Protocol mechanisms UK Emissions Trading Scheme first mover advantages EU trading advantages of larger market

6 UK greenhouse gas emissions trading scheme Voluntary Scheme launched in April year cap and trade scheme 34 successful direct participants in auction 6,000 Climate Change Agreement participants able to use UK Scheme to meet targets Covers a basket of 6 greenhouse gases

7 UK trading scheme the first year s experience 4.64 million tonnes CO2e reduction achieved in first year by direct participants more than committed for the full 5 years of the scheme 22 of 34 direct participants over achieved their targets and retain for banking / sale 4.1 million allowances 866 climate change agreement participants used trading scheme either to buy allowances to meet target (743) or to be allocated allowances for overachieving target (123) 2001 transfers took place involving 7,216,105 allowances

8 EU Emissions Trading Scheme Commission proposal in October 2001 for an EU wide cap and trade Scheme Political agreement December 2002 Adopted in July 2003 following agreement with European Parliament EU wide Scheme involving all Member States and Accession Countries to begin 2005

9 First phase Sectors Combustion installations greater than 20MW, Oil refineries, ferrous metals, minerals, pulp and paper (10,000+ installations) Gases - CO2 only (covers 45% of EU CO2 emissions) Opt out Banking discretion

10 Second phase Possible Commission proposal to extend sectors and gases Opt in No opt out Banking assured

11 Competent Authorities Each Member State required to appoint competent authorities for administering the Scheme Competent authorities to issue permits and manage Scheme administration UK proposes to appoint EA, SEPA and DOE(NI) for onshore installations, DTI for offshore installations. Regulations on competent authorities and permitting arrangements into force by end December

12 First phase Permits to be issued by 31 March 2004 National Allocation Plan to Commission by 31 March 2004 At least 95% free allocation Allowances issued by end February and surrendered by end April each year

13 National Allocation Plan Sets out total cap on emissions, means of distributing cap between installations and caps for installations New entrants Plant closures Clean technology Draft for consultation early January

14 Penalties First phase 40 euro per tonne for which no allowance surrendered Second phase 100 euro per tonne for which no allowance surrendered

15 Changes to existing UK policies? First phase ( ) opt out? UK Scheme direct participants incentive payment and banking provisions on move to EU Scheme UK Scheme agreement participants Levy discount on move to EU Scheme Second phase ( ) Future of Climate Change Agreements

16 Chris Leigh Contacts UK Department for Environment, Food and Rural Affairs echange/trading/