Norwegian emissions trading proposal 2005 2007 and onwards
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Norwegian emissions trading proposal 2005-2007 and onwards. Peer Stiansen Norwegian Ministry of Environment. Emissions distributed by sectors in 1999. Norway’s challenge: emissions/industry/energy profile. No emissions from electricity (EU: >30 %)

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Norwegian emissions trading proposal 2005 2007 and onwards

Norwegian emissions trading proposal 2005-2007 and onwards

Peer Stiansen

Norwegian Ministry of Environment



Norway s challenge emissions industry energy profile
Norway’s challenge: emissions/industry/energy profile

  • No emissions from electricity (EU: >30 %)

  • 20 % of emissions from offshore (EU countries : =< 2 %)

  • 30 % of emissions from heavy industries (EUcountries:<5)

  • High proportion small/medium sized enterprises/entities

  • Conclusion: a trading scheme based on EU averages does not necessarily fit Norway well

  • EU relevance of trading directive ?

    • if so, adjustments for Norway ?


Level of ambition and allocation
Level of ambition and allocation

  • - 20 % compared to same sources in 1990

  • adjustment for closure and increased production capacity/new entries

  • Grandfathering:

    • Established entities: based on historical data

    • New entities: based on norms

  • Restrictions on sale of a portion of the quotas

  • Industry invited to a dialogue on details of the system, given level of ambition and EEA regulations


Considerations
Considerations

  • White paper focus: Reduce emissions domestically prior to 2008

    • realize presumed cheapest measures

    • need stronger incentives in some sectors

    • wider coverage could have reduced incentives since prices are likely to be below present tax

    • revenue

  • ”Clean” allocation system (grandfathering or auction) could be easiest vis a vis EEA (EU) state aid regulations


Compliance system
Compliance system

  • Penalty (fine - level to be decided):

    • level will depend on with how many and which countries Norway cooperates

  • Response regarding violation of requirements to

    • report emissions

    • use appropriate methodology

  • Facilitative functions


Effects 2005 2007
Effects 2005-2007

  • SFT: Potential for 1,6 Mt cheap reductions (3 % of Norwegian emissions)

  • If price = 100 NOK and emissions stable: Industry’s cost is about 160 mill NOK/year

  • Macroeconomic effects: Marginal

  • Employment: Don’t expect significant effects

  • New entries and closures: Nothing particular

  • Early experience with trading and Kyoto mechanisms - establish trading institutions


Safety valves
Safety valves

  • Opening for Kyoto’s AAUs and CERs

  • Possible cooperation with other countries and EU (require negotiations and political will to adjust the system if needed)

  • Limited joint implementation domestically

  • Penalty (balance cost and environmental ambition)

  • Taylor made allocation


System linked to the kyoto protocol from 2008
System linked to the Kyoto Protocol from 2008

  • Compatible with the Protocol, target and registry

  • Broad coverage – >80 % of sources

  • Full use of Kyoto mechanisms

  • Allocation not finally decided – could be auction for some and grandfathering for others

  • Strong penalty


Coverage 2005 2007
Coverage 2005-2007

  • Activities not subject to the CO2 tax:

    • metal production (light metals and ferro alloys)

    • fertilizers

    • petrochemical industry, methanol

    • refineries

    • production of carbides

    • cement, leca and limestone

    • [gas-fired power plants – the Storting: as in EEA ]

      Fisheries and other activities exempted or getting the CO2 tax refunded will be consided in the legal proposal


Some implications for the affected industries
Some implications for the affected industries

  • Report emissions for the previous year

  • Surrender quotas for the previous year

  • Open account in the domestic registry

  • Subject to grandfathering

  • Need to purchase quotas if allocated ”too few” - can sell if allocated more than needed

  • Subject to penalty (a fine) in case of not surrendering a sufficient amount of quotas, other responses for other violations of the system (reporting, use of methodologies)


Further process
Further process

  • Consideration by the Storting (Parliament) – discussion scheduled 18 June

  • Legal framework, including detailed regulations, needs to be in place well before 2005.

  • Legal proposal to the Storting - timing to be decided. Relevant aspects:

    • Comments/requirements from the Storting

    • Progress with the EU directive


Registry
Registry

  • Legal entities mandated to participate need account

  • Others may open account and trade

  • Compatability with the Kyoto Protocol for ”Kyoto quotas”

  • Compatible with registries in cooperating countries


Registry continued
Registry, continued

  • Responsible: SFT, Nat’l Securities Depositary or other ? Legal foundation ?

  • Develop or buy from other country ?

  • Funding: Fees for opening accounts and transfers?

  • Safety issues ?

    Observation: The trading simulations carried out so far required simple registries. UK, DK and US have registries for emissions trading. Marketable ?


Commitment period reserve
Commitment Period Reserve

Problem: If all AAUs are allocated to industry, it could choose to transfer them temporarily abroad for tax or other reasons. Possibilities:

  • Restrict transfers until enough quotas are surrendered to the government. (Annual surrender delivers the whole CPR by 2010-2011 due to underlying growth.):

    • A-quotas: transferable between companies and across borders

    • B-quotas: transferable domestically

  • Restrictions on sales of some grandfathered quotas keep these in nat’l registry (half of process industry emissions = 15% of domestic).

  • Slow allocation – AAUs stay in state account until they are allocated

  • AAUs to cover non-trading sectors (agriculture etc.) 20 % stay in state account


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