WG 5/6 sub-group on Benchmarking ETG Sector Feedback Jim Rushworth/Anne-Marie Ferguson

Initial Feedback From ETG Sectors Response has been positive, 14 sectors have replied who represent the majority of emissions in phase I. 12 of 14 sectors believe that benchmarks can be developed. Offshore oil/gas and Oil Refining are the only two sectors who initially believe it will be difficult to benchmark installations. EU benchmarks are being pursued by some sectors, however 4 sectors do not believe it would be possible to introduce.

Initial Feedback From ETG Sectors Cont. 5 sectors believe there is the need to have separate benchmarks for incumbents and new entrants, unless this can be catered for in the input variables. Too early to confirm likely number of input variables, but indications from some sectors vary between 3 to 8. Initial meeting on benchmarking scheduled for 10h30 on 22 nd February at DTI. Sector initial feedback is shown on the following slides

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables Aluminium (Primary) Yes, via European Aluminium Association EU benchmarks supported for direct emissions only (i.e. excluding power input to smelting process) YesSeparate into Direct emissions for smelting and other activities (anode production) Any benchmarks would need to distinguish between direct emissions from the smelting and other associated processes and indirect emissions from the power source used to provide electrolysis as this source varies widely across EU smelters (Hydro/Nuclear/Gas /Coal). An additional benchmark would need to be developed for stand alone anode production units should these facilities be included within the scope of the scheme.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables CementIn early stages of discussion. UK based due to different raw material availability in UK YesNo, benchmark based on OPC clinker Parameters needed in BM to cover variation in raw materials, likely to be 5 variables CeramicsIt has been discussed at EU Ceramic meetings but no work done within the sector. I am not aware of any EC work on this but it may be happening, I have not been approached for any data. UK based. UK clays are different to EU clays. Also UK clays generally produce more process CO2 than EU clays Unsure here. We have not had different BMs for New entrants. I cannot see any advantage to having them separated but am prepared to discuss this Yes, we had BMs for brick, tiles and sanitaryware. The brick BM used the 8 variables (see next column). There was a single BM for the other two. Under Standardisation both of these disappeared. The method used in Phase I had 8 variables that covered the industry. Was not perfect but at least gave some measure of a BM that applies to the different process routes. ChemicalsWe are looking at the Neth/Belg experience In principle, EU level to ensure a level playing field UndecidedYes, discussions on scope encompass a number of distinct activities. Decisions on scope could determine feasibility – a broad rather than “narrow and deep” approach could introduce too much complexity.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables CHPNo, but some member states have benchmarked CHP incumbents. EU would be better, unless “benchmarks” are going to favour particular fuels. UK has a higher use of gas than say Germany. It would be preferable to have incumbents treated on the same BM basis as NE. Two benchmarks are required, one for power and the other for the heat for the “host” process. In turn this could require a different heat benchmark for each product. Benchmarking is already used for NE CHP. Benchmarking for UK incumbents was investigated by Defra and found to be too variable.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables Electricity Producers (Large) (>100 MW capacity) NoIt was difficult to devise a UK benchmark for use in Phase 2, so it will be even more difficult to devise an EU benchmark for Phase 3. If there is to be a New Entrant Reserve, which is an issue for careful consideration by Government, there must be clear rules for allocation, and the allocation of allowances to new entrants should be equitable compared to the allocation to incumbents. Not applicable. Variables for LEPs are: - generating technology/fuel - capacity (MW) - load factor (%) emissions factor (tCO 2 /MWh) Electricity Producers (Other) (<100 MW capacity) NoIt was too difficult to devise a UK benchmark for Phase 2, so the feasibility of an EU benchmark for Phase 3 must be questionable. As above. Variables for OEPs are as above.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables Food and Drink (FDF) NoCombustion based BMs could as easily be applied at EU level as well as at UK level – in fact would be preferable in terms of harmonisation No. The range of products from Food and Drink manufacturing sites is very diverse with CO2/te production varying enormously between 0.02 – 7.80 which if used as BM for sector allocation would result in massive distortions in allocation. If you went down the route of production based benchmarks based on product groups you would end up with 30+ sub sectors some of which would only have 1 installation in them! Combustion plant BMs would not be applicable to all sectors where other methodologies would be more appropriate. FDF would be happy to work with other sectors who do think combustion plant BM are applicable to progress this approach

Food and drink (contd) We believe the cost and hugely increased complexity and data requirements make this approach impractical. FDF supports the use of a BM based on combustion capacity similar to UK NAP II NER. There is no reason this could not be developed for all >20MW combustion plant irrespective of sector as it places the focus on the emitting plant not the process or the specific sector. However, it should be applied to reflect sector specific growth, plant utilization hours, fuel mix, boilers/CHP, etc. Further, the work conducted by Entec/Nera on the development of BMs for Phase II, and reported in April 2005, should be revisited as a basis for taking this forward.

Glass Container Glass (Draft unendorsed position) Yes. TNO Netherlands. But not all UK furnaces part of this assessment process. UK Bench Mark i. Different cullet (recycled glass) availability compared to rest of Europe ii. UK has different product mix cf. EU. iii. The definition of the technical unit differs between member states in container glass sector. Affects associated emissions. Sufficient UK container glass furnaces to produce a successful UK BM. Required if not covered by BM variables. Yes Some container products differ greatly from each other e.g decorated scent bottle v wine bottle. i. Different Products = different CO2/t ii. Different glass composition = different CO2/t iii. Different cullet use profile = different CO2/t iv. Different product colour profile = different CO2/t v. Different product campaign length = different CO2/t 6 highly critical i. Furnace age & throughput ii. Furnace Design iii. Cullet: Availability and Use. iv. Product characteristic and quality constraints, e.g. colour. Customer controlled. v. Frequency of job changes. Customer controlled. vi. Fuel profile. (Specific issue in Northern Ireland where natural gas not available.) Flat Glass (Draft unendorsed position) Yes. TNO Netherlands. Few furnaces in UK therefore EU more applicable Required if not covered by BM variables. Float glass: May require effective standardisation to nominal product characteristic. Rolled glass: outside scope of this BM. 5 highly critical i. Furnace age & throughput ii. Furnace Design iii. Cullet: availability and usage limitations cf. product. iv. Fuel profile. v. Product characteristic and quality constraints LimeYes – relatively early stages (more work has been done in the UK.) EU Benchmark – assuming a simple and equitable system can be agreed. YesYes – must account for both high calcium and dolomitic lime products. Parameters needed for fuel type, kiln type, moisture.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables Offshore oil and gas No - although benchmarking has been used for new entrants to the EU ETS but clearly there has been little experience so far to validate, or otherwise, the benchmarks used. There are concerns about what happens as these new fields age See final column Benchmarking of the sector is very difficult to achieve because oil and gas reservoirs are all different from one another and their behaviour changes as they age – there is very little which remains constant. Consultants who have examined this have come to similar conclusions. If benchmarking is to work in this sector, there would probably need to be quite complex, multi-factor benchmarks

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables Oil RefiningYes, it is being studied by the industry, although it is not proving easy to reach satisfactory conclusions. Benchmarking should be EU-wide, because our prime concern is a level playing field within EU. Yes – there should be some recognition of inherited technology No. It is extremely difficult to BM refineries which simultaneously make multiple products with very different levels of processing to different product yields Need to recognise different fuel mix at different refineries. Also a variable mix of combustion and process emissions. PaperOur European Association (CEPI) is investigating this but will not have results for a number of months UK based. There are different types of mills in the UK compared with other EU MS – particularly producers of speciality products e.g. teabags. No. A BM applicable to all players should incentivise NEs to use BAT in their investment. It would also provide a fair result for any NE drawn into the sector by passing a threshold (i.e. not necessarily a brand-new investment in capacity). Yes. Different paper products – and certain products within a notional product grouping - have specific energy consumptions that differ by more than an order of magnitude. Will need to cover different types of steam-raising equipment, different types of driers etc – likely to be 3-5 variables per BM.

SectorAre you aware of any work on an EU wide Benchmark (BM) for your sector? Preference for EU vs UK based BM (include reasons for UK based BM) Separate BM for incumbents vs NEs Separate BM for different products required Specific issues/indication of the likely number of variables SteelYesEU, eventually global benchmark No, but transition arrangements for “outliers” among incumbents Yes (BF/EAF)Current EU steel industry baseline proposal takes into account of all relevant inputs and outputs. Other combustion i.e. not ESI (specifically automotive manufacturing) Preparations and data gathering in UK. Discussions just begun at EU level. EU ideallyTBCTBC, depends how detailed it has to be to be fair. Each site has different mix of major activities (paint shop, foundry, panel pressings etc.) TBC