The power sector will face auctions for carbon credits under Europe’s emissions trading scheme (ETS) if new measures proposed by the European Commission are adopted.
The new proposals are part of the Commission’s latest climate action package, presented on 23 January, which aims to transform the EU into a low-carbon economy by meeting ambitious targets for greenhouse gas emissions and renewable energy.
In the package the Commission proposes strengthening the current ETS by implementing full auctioning of credits in the power sector by 2013. Other sectors, such as aviation, will gradually follow suit while some industries may be exempted altogether.
Other measures to be taken include increasing the reach of the ETS to cover all major industrial emitters and the inclusion of greenhouse gases other than carbon dioxide (CO2). The emission allowances put on the market will be reduced year-on-year to allow for emissions covered by the ETS to be reduced by 21 per cent from 2005 levels in 2020.
Key elements of the new package also include a new legal framework for carbon capture and storage (CCS) and legally binding targets for each country to increase renewable energy production.
Unveiling the package, Commission President, José Manuel Barroso said, “Responding to the challenge of climate change is the ultimate political test for our generation. Our mission, indeed our duty, is to provide the right policy framework for transformation to an environment friendly European economy and to continue to lead the international action to protect our planet.”
The package aims to deliver targets agreed by EU nations in 2007: a reduction in greenhouse gas emissions of at least 20 per cent and to increase the share of renewable energy in overall energy consumption to 20 per cent by 2020. The Commission hopes that the package will be adopted by 2008.
Commissioner for energy policy, Andris Piebalgs said, “In a time of growing oil prices and climate change concerns, renewable energy sources is an opportunity that we cannot miss. They will help us to reduce our CO2 emissions, strengthen our security of supply and develop jobs and growth in a high tech developing sector. If we do the effort now, Europe will be the leader in the race towards the low carbon economy that the planet so desperately needs.”
The Commission says that the ETS is central to bloc’s climate change goals and that the proposed changes will make the trading scheme simpler, more transparent and more attractive for other countries to link up to it.
The Commission will introduce one EU-wide cap on the number of emissions allowances instead of 27 national caps, with the annual cap decreasing along a linear trend line. National Allocation Plans will therefore be scrapped in favour of more harmonised rules.
While some allowances will still be allocated free, the Commission wants auctioning to become the basic principle for allocation from 2013 and estimates that 60 per cent of the total number of allowances will be auctioned in that year.
The power sector will lead the way in auctioning because, says the Commission, it is best placed to pass on the increased cost of emission allowances. By 2020, no free allocations will be made.
To meet its targets on renewable energy, the Commission has proposed individual, legally enforceable targets for each member state. Countries will be given credit for developing renewable energy projects in other member states under a Guarantees of Origin (GO) scheme, which aims to ensure that investment are efficiently made.
Every member state is required to increase its share of renewable energy in its overall energy consumption by at least 5.5 per cent from 2005 levels by 2020. EU countries are free to decide their preferred mix of renewables in order to take account of their different potentials, but must present national action plans (NAPs) outlining their strategies to the Commission by 31 March 2010.
