1. ETG subgroup on New Entrants: Report to EU WG
Bill Thompson
EU WG Meeting
Wednesday, 29 June 2015

2. New Entrants & NER in Phase 4
NER & new entrants in Phase 4 ignored so far in Commission’s proposal.
Small number of New Entrants so far
Phase New Entrants use 20% of total NER reserve.
But NER key to industry investment in EU

3. Summary: Need for certainty on the date defining New Entrants
Simplicity in Free Allocation
NER must not run dry
Accredit Member States to allocate from the NER – where deemed competent

4. 1. Need for certainty on the date defining New Entrants
Current date is 30 June 2011
No change proposed in Commission proposal
But need for a date in Phase 3

5. 2. Simplicity in Free Allocation Actual ex post allocation, not via estimated activity
Free Allocation to equal ex post verified emissions, less any CSCF, less any sector carbon leakage factor
Assumption is that a New Entrant is at sector benchmark level – no one builds inefficient new installations.
No change to Power Generation Sector receiving zero allocation
Where fallback approaches are used, allocation would be at heat / fuel / process emissions benchmark level
Prevents coal/lignite fuelled installations receiving a full allocation
Duration of ex post allocation?
Depends on gap between installation activity and allocation
Probably at least three years, could be for remaining phase.

6. 3. NER must not run dry
NER is 250m EUA + unused industry share Phase 3.
It is the only source of allocation available to New Entrants and for significant extension.
The fact it could run dry is a deterrent to new entrant investment
Phase 4 ‘significant production increases’ will also be drawn from the NER.
If needed, NER to be topped up from auctioning / MSR reserve / other source, to prevent rationing
Irony of innovation funding sources available, but risk of no allocation for a new entrant!

7. 4. Accredit Member States to allocation from the NER – where deemed competent
Aim is to relieve Commission’s role as NER administrator
where Member States are competent and accredited
Allows Commission to concentrate on policy, audit and investigation matters
Clear distinction between definitions of
‘new entrants’ , ‘significant extension’ and
‘significant production increases’
Definitions have different thresholds, thus risk of gaming