Dutch Pilot Allocation Plan for an European Emission Trading scheme Maurits Blanson Henkemans Ministry of Economic Affairs Netherlands Delhi

What I want to discuss  Dutch position EU directive  Aim of our Allocation study  First results  Conclusions

Cost advantages of European Trade

Dutch position  In General positive to directive  For mandatory system from 2005 but..  Allocation must be fair  Crediting of Early actions  For the Direct approach Dutch industry  EU PSR system no CaP (!) for indirect approach.

Aim of the study  Can we make an Allocation plan?  On the basis of EU Directive/ and PSR indirect Allocation Criteria (Annex III)  Propose improvements on the basis of the study Procedure  Consultant makes study  Advice from Industry/NGO

EU allocation Burden Sharing Agreement participants IPPC + createria/correcties Allocation

Questions  Who are the participants?  What size is covert by EU directive?  How to set the Cap  How to Allocate - Direct or Direct and Indirect Allocate on basis of - Historic emissions/Grandfathering - Performance Standard Rate (PSR)

Definition of Participants  IPPC Def.  Cut through sectors  Lack of info Cogen e.c.  Add sector? > 20 MWth Definition: “installation” “energy activity” en “combustion installation”

What is Covered

 Wide interpretation: 47% of Total Emissions  CHP = Chemical ind. included

Set CAP for 2010 Cap: 90 Mt CO 2 Reductie UK1: Ca. 4 Mt CO 2 Statistieken

Set a Cap 1  National Climate Plan UK1 and UK 2  Benchmark Target = CaP for Participants/ DATA ???  Allocate 9o Mton  450 Mln EURO (5 EURO/CO2) Advantage  Support from Industry  Disadvantage: No Trade?

Direct versus Indirect (1) Advantage Direct  Simple/conform Kyoto Protocol Disadvantage  Market Power for E-sector  What will be Electricity-price

Direct versus Indirect (2) Advantage Indirect:  Conform Benchmark  Stimulate Efficiency User Disadvantage :  CO2 content electrity used unknown

Direct versus indirect

Allocation options  Grandfathering Direct and Indirect  Performance Standard Rate Direct/Indirect

Example of CO 2 emissions and PSR

Allocation on Basis of Historic emissions WKK Production growth New Entrants Data availability Windfall profits Ownership Statistieken

Performance Standard Rates Max. 300 PSRs Corrections for green/nuclear biomass Correction for indirect emissions complicated Europese Benchmarking: different fuelmix

Grandfathering options How to support early actions?  1995 with production adaptation Too many allowances  Allocation = 2005 Emissions. No incentive for trade/ no support early actions  Allocation = Actual emissions * (performance rate / performance standard rate) distance to world top

Conclusions 1  Directive Covers 47%  Cut through sectors ( opt in)  Lack of number on installation level  Indirect approach impossible in one country

Conclusions 2  Grandfathering direct  Actual dates correction for distance to world top (benchmark)  E-sector should not get to much power  Solution: big supply/low price/competition/CHP  Big role Commission for fair competion