No More Free Emission Allowances for Power Sector As of 2013

With the beginning of 2013, the third trading period of the greenhouse gas emission allowance trading scheme of the European Community (EU ETS) spanning 2013 to 2020 started, bringing various important changes especially for the power sector.

As of 2013 the EU ETS  covers additional gases and additional industries like the petrochemicals, ammonia and aluminium industries.

2013 will also see a centralised EU-wide cap on emissions, which is supposed to deliver an overall reduction of 21% below 2005 verified emissions by 2020. The 2013 cap for emissions from power stations and other fixed installations in the 31 countries participating in the EU ETS has been provisionally set at 2,039,152,882 allowances, the EU Commission informed. For each year after 2013, this cap will decrease by 1.74% of the average total quantity of allowances issued annually in 2008-2012. In absolute terms this means the number of general allowances will be reduced annually by 37,435,387, the Commission said.

Furthermore, emission allowances will be allocated according to fully harmonised and EU-wide rules based on a benchmark system. Besides, auctioning, not the free allocation of allowances will become the method for allocating allowances. In 2013 more than 40% of allowances will be auctioned, and this share will rise progressively each year. For the power sector auctioning will be the rule as of 2013.

To make these changes happen in Germany, Germany amended the Greenhouse Gas Emission Trading Act (TEHG), which transposes the European Directives on the EU ETS into German law, in 2011. In August 2011 the federal government submitted a draft ordinance on the Allocation of Greenhouse Gas Emission Allowances for the Trading Period 2013 to 2020 (ZuV 2020), which has meanwhile entered into force. Recently, the Federal Administrative Court in Leipzig (BVerwG) decided in four proceedings on the allocation of CO2 emission allowances. The court held that the cuts in free allowances for power plant operators comply with the statutory allocation requirements, the superseding EU regulations, and the German Constitution (Grundgesetz).

Referring to information by the Chamber of Industry and Commerce of the City of Dortmund, the newspaper Rheinische Post said Germany utilities had to buy emissions allowances worth EUR 2.1 billion in 2013. Besides emission allowances had to be acquired for 2,000 manufacturing installations. Costs for the manufacturing sector would amount to EUR 210 million.

Source: Rheinische Post

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