allocation method in Proposed ETS review - view of European Power Producer - Zuzana Krejčiříková European Affairs Director EP conference, 2 December 2008, Brussels

1 NEW EU MEMBERS ARE FACING LACK OF ELECTRICITY GENERATION CAPACITY Source: Eurostat, Eurelectric * 10 EU members without Cyprus and Malta ** Decommissioning of thermal plants older than 45 years  Growing demand and the decommissioning of 28 GW aged capacity will lead to 56 GW capacity deficit  Needed investments over 60 billion euros to build the missing capacity Decommissioning of old plants** Demand Growth 2% 56 GW gap New EU members* electricity balance development Net capacity (GW) < Plant age >40

2 THE COST OF CO2 ALLOWANCES IN THE PERIOD IS 57% HIGHER THAN THE VOLUME OF INVESTMENTS NEEDED EUR bn Source: Pointcarbon * Average Capex 1100 EUR/kW ** Allowance price per 30 EUR/t considered

3 USD ‘000 MWh/year +250 % +69 % Source: World Bank, Eurostat ON THE WAY TO ECONOMIC CONVERGENCE, NEW EU MEMBERS WILL PROBABLY EXPERIENCE SIGNIFICANT GROWTH OF ELECTRICITY CONSUMPTION New EU countries* EU 15 * Excl. Cyprus, Malta

4 NEW EUROPEAN UNION STATES HAVE VERY DIFFERENT GENERATION MIXES TO PARTS OF EU  Denmark and the United Kingdom also rely heavily on carbon intensive power generation Power generation net capacity structure (2007) Source: Eurostat, Eurelectric

5 NEW EU COUNTRIES HAVE ALREADY DECREASED THEIR CO2 EMISSIONS BY 24% COMPARED TO 1990 LEVELS Total CO2 emissions of new EU countries* Mt CO2/year -24 % Source: Pointcarbon, Eurostat * Excl. Cyprus, Malta

6  Auction as a primary allocation method is a logical development of the scheme  Sudden implementation of the auction for power sector (0% → 100%) is a dangerous shock with the risk of a quick phase-out of carbon intensive power plants and lack of capacities in Europe and will draw out necessary funds for modernisation away from industry EU ETS revision – allocation method of emission allowances Gradual auctioning of emission allowances for power sector from 20% in 2013 to 100% in 2020