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Benchmarking for Phase III of the EU ETS

Benchmarking for Phase III of the EU ETS. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS 14 May 2007 Debbie Stockwell. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS. Benchmarks should be developed giving consideration to the following:

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Benchmarking for Phase III of the EU ETS

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  1. Benchmarking for Phase III of the EU ETS DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS 14 May 2007 Debbie Stockwell

  2. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS • Benchmarks should be developed giving consideration to • the following: • Allowances need to be allocated more fairly so that they reward good behaviour and early action and incentivise the take up of low-carbon technologies. Therefore, post-2012, grandfathering would not be the UK’s preferred allocation methodology. Using benchmarks as the basis for distributing allowances would help to achieve these aims. Benchmarking could be used in addition to auctioning of allowances.

  3. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS • 2. Benchmarks would need to set a sectoral standard to drive emission reductions and investment in new technology across the economy (either by driving investment in abatement technology, purchasing of EU Allowances (EUAs) and/or Clean Development Mechanism (CDM) credits). • 3. Reductions against BAU emissions are likely to be required outside of LEPs in future phases. • There will be a cap on emissions in Phase III, which will be set ex-ante, not ex-post. There are a number of ways in which the cap could be set1; EU-wide sectoral caps could be an option. • 1(see Issues Paper on the review – • http://www.defra.gov.uk/environment/climatechange/trading/eu/future/review/index.htm#5)

  4. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS • 5. Harmonisation of the EU ETS is a priority for the UK and therefore benchmarks could be set at EU level, or on the basis of detailed EU guidance that allows for some national considerations. • 6. The UK would be more likely to support output/capacity based benchmarks unless a strong case is made for input based models.

  5. DRAFT PARAMETERS FOR DEVELOPING BENCHMARKS FOR PHASE III OF THE EU ETS • 7. The UK believes that with the right focus the EU ETS can become the basis of a global carbon market. The development of benchmarks needs to be compatible with this vision. • 8. The administrative burden from implementing benchmarks must be limited. Accounting for sub-sectoral differences would therefore need to be balanced with simplicity and the need to have a limited number of benchmarks.

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