Government Approves Amendment of German Greenhouse Gas Emission Trading Law

The German government yesterday approved an amendment of the Greenhouse Gas Emission Trading Act (TEHG) transposing Directive 2009/29/EC on a greenhouse gas emission allowance trading scheme of the European Community into German law.

Starting from 1 January 2012 all aircraft operators performing flights arriving at or departing from any airport in the territory of the EU will be included in European Union Emissions Trading System (EU ETS).

With the start of the third trading period in 2013, the EU ETS will be further expanded to the petrochemicals, ammonia and aluminium industries and to additional gases.

2013 will also see a centralised EU-wide cap on emissions, which will reduce annually by 1.74% of the average annual level of the cap for the second trading period (2008-2012). The cap is supposed to deliver an overall reduction of 21% below 2005 verified emissions by 2020.

2013 will bring further significant changes compared to the two previous trading periods (2005-2012). Firstly, emission allowances will be allocated according to fully harmonised and EU-wide rules based on a benchmark system. Secondly, auctioning will be the rule for the power sector.

In Germany, five times as many emission allowances will be auctioned, compared to the second trading period (2008-2012), the Federal Ministry for the Enviroment (BMU) points out in its press release. Over 90% of the revenue from the auctions will be used for national and international climate protection projects and for the implementation of the German Energy Concept.

The BMU press release states that it does not expect an increase of electricity prices with the start of the third trading period, as producers had already passed on the costs of emission allowances to customers as of 2005 despite the fact that the allowances were allocated for free.

With further EU harmonisation of the ETS as of 2013, the need for national regulation decreases. Hence, the TEHG amendment also serves to regulate and clarify the competences of the German Federation and the Federal States. In the future the German Emissions Trading Authority (DEHSt) shall be responsible for monitoring emissions and reporting thereon, ensuring a uniform standard.

Small installations emitting less than 25,000 tonnes of CO2 equivalent per year can apply for an exemption from the obligations under TEHG, provided they agree to financial compensation or compensation measures detailed in the TEHG amendment (Section 27 TEHG draft). In this respect the current bill is more lenient than a previous draft that had come under criticism by the German Chamber of Industry and Commerce (DIHK).

Because of its virtual nature, the European Union Emission Trading System (EU ETS) proved vulnerable to security breaches in the recent past. It remains to be seen how this issue is handled in view of the increase in trading in the future.

Source: Federal Ministry for the Environment, Nature Protection and Nuclear Safety

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