1. Stakeholder meeting Friday 3rd April 2009
Assessment of the possible development of an EU-wide NOx and SO2 emission trading scheme for IPPC installations
Stakeholder meeting
Friday 3rd April 2009

2. Agenda
Aims and objectives
Approach
Deliverables and timescales

3. Aims & Objectives
To assess environmental, economic & social impacts of various possible designs of an ETS for SO2 and/or NOx under certain EU rules for land-based industrial sources in order to potentially replace individual BAT-based permitting of IPPCD / IED for those pollutants
Environmental constraints
impacts on ecosystems & human health should not exceed those under current policies, incl IED Proposal
Air Quality limit values
constraints on scheme's potential due to the NECs to be assessed  incl. option to have more flexible ceilings
Outcome: provide insight on whether a trading mechanism for SO2 & NOx in the EU would be an appropriate MBI If so: under which rules, safeguarding environmental objectives & ensuring practicability & enforceability

4. Approach Overview Evaluation criteria Scope of sectors for modelling
IPPC installation database
Beyond BAU measures
Environmental constraints
Options for trading scenarios
Simulation and modelling impacts
Impact Assessment

5. Overview
Impacts to cover:
2016
2020
2025
2030

6. Evaluation criteria for impact assessment
Impacts relative to reference (IE Directive) scenario:
Economic Impacts
Competitiveness, trade and investment
Competition on the internal market
Operating costs and conduct of business
Administrative costs on business
Innovation and research
Consumers and households
Specific regions or sectors
Third countries and international relations
Public authorities
Macroeconomic impacts
Environmental Impacts
Air emissions
Air quality
Ecosystems
Climate
Social Impacts
Employment and labour markets
Public health

7. Scope of sectors for modelling (1)
Purpose
To identify sectors / activities to be included in emissions trading simulation model  not necessarily proposed scope of scheme
Criteria for inclusion in modelling
average emissions per installation within sector > 50% of the average emissions per installation across all installations / sectors in EPER 2004
total emissions of sector > 1% of total emissions of all installations / sectors in EPER 2004

8. Scope of sectors for modelling (2)
Assessment
IED sectors
Inclusion in simulation model
NOx
SO2
1.1 Combustion >50 MW (> 20 MW in Proposed IED)
Yes >50MW
1.2 Refining of mineral oil & gas
Yes
1.3 Coke
Metal industry
Yes for integrated steel, no for others
Cement, lime, glass, mineral substances or ceramics
Yes for cement and glass, no for others
Yes for cement, no for others
6.1 Pulp and paper
Yes for recovery boilers No
1.4 Gasification or liquefaction of fuels; 3.2 Asbestos; 4. Chemicals; 5 Waste; Textiles etc

9. IPPC installation database (1)
Why is installation specific data required?
to assess potential responses to emissions trading scenarios in more detail than achieved in previous studies
to assess air quality, health and environmental impacts of these responses in detail
to assess cost impacts in detail

10. IPPC installation database (2)
How is installation specific data used?
EMEP
Source-
Receptor
modelling
IPPC
installation
database
Beyond
BAU
measures
Inform geographic / sector aspects
Options for emissions trading scenarios
Specialist
input
Revise trading rules if necessary
Emissions trading simulation model
EMEP + Entec health, env & AQ modelling
Costs & emissions
health & env impacts
Impact Assessment

11. IPPC installation database (3)
Scope of installation data:
Source location & stack characteristics
Current emissions
Current fuel type and quantity
BAU abatement installed / planned
Beyond BAU abatement options
Approach
Development of database with installation specific data
Data gathering to populate database
Installation specific data
General information
Assumptions

12. IPPC installation database (4)
Data sources:
Consultation with MS and sector specialists
MS policy / regulatory contacts
EU industry associations
BREF review lead authors
Databases & studies
Key: LCPD emission inventories; EPER / E-PRTR; CoalPower
Supporting: other Entec / partner studies, in-house data & contacts; GAINS (activity rate trends)
Expert knowledge of project team
Entec, Okopol, Garrigues, IHE
We welcome any outstanding requested information! – by end April 09

13. Beyond BAU measures Identification and selection of data sources
Development of database of abatement measures
Description
Abatement efficiency
Lifetime
Applicability / feasible combinations
Capital / operating costs
For every installation identify relevant measures (& costs & effectiveness)
MRV costs

14. Environmental constraints
NECD
2010 ceilings
potential 2020 ceilings
option to make ceilings more flexible, applying to groups of MSs
BAT equivalence
Same environmental ambition level compared to IED proposal
Should not lead to increased overall emissions compared to IED proposal
Targets should be equivalent to applying BAT-based permit conditions
Air quality limit values
NO2
SO2

15. Options for trading scenarios (1)
General approach
Generate long-list of options
Assess performance against evaluation criteria to develop short-list
Obtain feedback from stakeholders
Main aspects to cover
Type of scheme
Allocation method
Emission rate
Trading zones
Coverage
Opt-in and opt-out
MRV

16. Options for trading scenarios (2) Type of Scheme
Cap & Trade: Design Risks
Higher cost/ unit of product than projected
Cap and Trade
Allocation = Emission rate * Production (historical / projected)
Baseline and Credit
Allocation =Emission rate * Production (actual)
Hybrid
Allocation = Emission rate * Production * Adjustment Factor
(to achieve emissions target)
Windfall profit (under free allocation)
Baseline & Credit: Design Risks
Lower emission reductions than anticipated

17. Options for trading scenarios (3) Allocation Method
All allocation methods apply to all types of trading schemes

18. Options for trading scenarios (4) Emission Rate
Upper BREF BAT AEL
Intermediate BREF BAT AEL
Lower BREF BAT AEL
Notes:
No distinction between Cap & Trade and Baseline & Credit
Expect to apply to allocation to individual installations and overall cap

19. Options for trading scenarios (5) Trading zones
Geographic scope of trading zones for IPPC installations
MS level
Different groups of MSs
EU 27

20. Options for trading scenarios (6) Coverage
All IPPC installations covered by the EU ETS (revised)
All IPPC installations covered by the EU ETS >=50 MW capacity
Installations that meet specific coverage criteria

21. Options for trading scenarios (7) Opt-in and opt-out
Depends on coverage: full mandatory coverage is not compatible with individual installation opt-ins and opt-outs
Depends on type of scheme: under Cap & Trade opting in entails gaming risks
Depends on MRV provisions and treatment of small emitters
May entail opt-out provisions for MS, depending on MRV provisions

22. Options for trading scenarios (8) Monitoring, reporting and verification (MRV)
Collate and review MRV requirements for SO2 and NOx for IPPC installations
Review practices in SO2 and NOx trading schemes
Assess EU ETS MRG for CO2
Determine desirable features of MRV of SO2 and NOx in an emissions trading scheme
Identify preferred options

23. Simulation & modelling impacts (1) Trading simulation model
For each installation a list of beyond BAU measures will be assigned together with % abatement and costs
For various scenarios and constraints (caps, NECs, etc), model will minimise costs for each zone covered by trading system, selecting least cost methods first
Outputs:
emissions
allowance deficit / excess levels
compliance responses
abatement costs / cash flow impact
allowance price

24. Simulation & modelling impacts (2) General structure of trading simulation model

25. Simulation and modelling impacts (3) Environmental modelling
EMEP model (Met.no)
Applications
Source–receptor analysis to inform initial geographic / sector aspects of trading scenarios
Detailed AQ, health and env impact modelling of trading scenarios to inform potential refinement of scenarios and Impact Assessment
Outputs:
50x50km2 for source–receptor analysis
10x10km2 for impact modelling
Ecosystem damage: exceedences of critical loads
Health damage: YOLL from PM; O3; AQ impacts of SO2, NO2, PM2.5, PM10
Identification of areas with exceedences of AQ LVs & contributors
Emissions data
IPPC installations – from database mentioned earlier
Non-IPPC sources – EMEP / TNO estimates
Finer resolution AQ modelling where exceedences
ADMS 4 dispersion model
Monetary valuation
Health, crops, materials

26. Impact Assessment
Impact Assessment drawn up following Commission Guidelines
Identify the problem
Define the objectives
Develop main policy options
Analyse their impacts
Compare the options
Outline policy monitoring and evaluation
Significant data from emissions trading simulation model and previous tasks
Supplemented by additional analysis to meet full requirements of specification

27. Request for stakeholder inputs
Any outstanding requested IPPC installation data
Cost data for beyond BAU measures – or signposting to such data
Comments on options for emissions trading scenarios, especially:
Coverage
Opt-in / opt-out
MRV
Trading zones
By 30 April 2009
To: Alistair Ritchie at
Thank you for your co-operation!