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Benchmarks for industry: The right decision

Energy Forum Allocation rules for Industry in EU ETS 2013 presented by Mukund Bhagwat Brussels 9 June 2011. General assessment. Benchmarks for industry: The right decision but benchmarks severe, especially since they apply from 2013 no time for adaptation

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Benchmarks for industry: The right decision

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  1. Energy ForumAllocation rules for Industry in EU ETS 2013presented by Mukund BhagwatBrussels 9 June 2011

  2. General assessment • Benchmarks for industry: The right decision • but benchmarks severe, especially since they apply from 2013 no time for adaptation • Allocation rules… • … adequate for installations without production changes between 2005 – 2011 • … result partly in shortage of allowances or wrong incentives for installations with production changes • EU experience has shown: • To set up a benchmark system is challenging but feasible • EU system can be a model for the world • if benchmarks are phased in (time for adaptation) and • allocation is based on actual production levels • safeguards right incentives, reduces complexity of allocation rules significantly etc. while maintaining carbon price signal

  3. In detail: What’s good or was improved • Historical Activity Level: some flexibility • Significant Capacity Extension Threshold: > 10 % or 50.000 EUAs … • Allocation to heat consumer • Carbon leakage status of heat consumer considered • Efficiency improvement / Abatement measures will not lead to less allocation • No innovation and technology accelerator

  4. In detail: What’s not implemented well • Constraints on production growth • No additional allocation in case of production growth without a physical change • No additional allocation in case of capacity increase below 10% • Complex and problematic determination of added capacity • There may be no allocation for new entrants/ capacity extensions in case New Entrants’ Reserve is used up • Extension of non-ETS heat consumers not sufficiently considered (sets inefficient incentives) • Capacity extensions of up- and downstream plants not considered

  5. In detail: What’s not implemented well • Competitive advantage of industrial CHP reduced • Wrong calculation of “industry cap” may reduce free allocation • Total amount of free allocation independent of benchmarks and allocation rules • No hardship clause • No rationalisation rule • Lack of EU-harmonisation (esp. with regard to “installation” definition) Financial Compensation: still the missing link in the system

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