Peter Rørmose Statistics Denmark Tradable CO2 Emission Permits and Environmental Accounting. A Danish Perspective. Peter Rørmose Statistics Denmark

Background for this presentation Report from project at Statistics Denmark: Integrated Environmental and Economic Accounts for Tradable Carbon Dioxide Emission Permits. (by Thomas Olsen) Funded by European Commission, Eurostat Grant no. 71401.2005.001-2005.292, Action 3 Completed in December 2006.

Background for the project Kyoto Protocol, February 16, 2005 EU member states must reduce CO2 emissions by 8 pct on average Common European market for tradable CO2 emission permits, since January 2005 Now, transactions will occur in the market and we as statisticians can record them. Measure prices and quantities. Purpose of this project was to establish economic environmental accounts for CO2 emission permits.

Status on how to treat tradable permits. Ongoing discussion about how to treat it in the National Accounts. Should it be recorded as: A tax A volume change in other non-financial assets Chapter 10, Capital Accounts, 1993 SNA rev. 1 section 19.182, actually defines CO2 emission permits as an asset. SO2 allowances are treated as assets in the US SEEA recommend to treat it as assets. So this report sees it as an asset as well

Status on how to treat tradable permits. Open for discussion – gray zone. If government collects money and it is not a tax, there must be an “underlying asset” The AEG group (revision the SNA) think that the atmosphere should not be considered an asset Thus in the revised SNA tradable emission permits will be treated as a tax! However, do not “throw away the baby with the bathwater”! Statistics on permit trading is still valuable for environmental purposes!

How can we use it? Since there is an obligation to collect data about the trade with and use of permits, lots of useful data will keep being produced. The project establishes economic environmental accounting for emission permits. In a satellite account both the physical and the monetary aspect of using emission permits are described.

Emissions Trading Scheme Other Agents Government Foreign Economies CDM / JI Mechanisms ECONOMY Losses Emissions Trading Scheme The Tradeable CO2 Emissions Permits’ Flow Through the Economy Grandfathering Sold to residents Trade Investments Used permits Unused permits Surrendered Siderne 6 + 11 i rapporten kan bruges til at sige noget om disse flows

Data source CO2 allowance register. All market participants must set up an account with EPA Registers transactions from sellers to buyers account (nothing about the economics of it) The following information is recorded for each transaction

Transaction details in the register The ID number of the transaction ID number etc. about the seller ID number etc. about the buyer Other details Number of permits, country of origin, type and period The time and status of the transaction

Permit accounts Combination of the ID-numbers in the register with ID-numbers in the Business register and an aggregation to national accounts level facilitates permit statistics by industry Use of permits, trade with permits, emissions excessive of permits, comparison with actual emissions etc. Asset accounts, balance sheets imports and exports etc.

Monetary accounts of permits A lot of “market places” on the European allowance market e.g. www.co2e.com www.europeanclimateexchange.com www.eex.de www.exaa.at www.nordpool.com www.powernext.fr www.dongenergy.dk

Nordpool allowance spot market price

Monetary permit accounts The data in the physical accounts can be valued using various prices from the markets Value of surrendered allowances, e.g. broken down by type of energy used by the companies surrendering them. How do the allowance prices affect behavior of companies?

Conclusion The emission permit trading has a wealth of data produced that should be exploited in our accounts. The most detailed data can be difficult to get like in the Danish case Treatment in the NA as taxes creates problems with asymmetries and inconsistensies, so if that is the case work needs to be done on how to record them right