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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
  • 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
  • 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