1. 1st ECCP WG Meeting on EUETS Review: 8/9 March 2007
John McElroy

2. Agenda of 1st EUETS Review Meeting
Expansion to other sectors and gases
Unilateral inclusion of additional activities and gases by MS
Streamlining the current scope (definition of an installation)
Improving cost-effectiveness with regard to small installations
Domestic emission reduction projects within the Community
Carbon capture and geological storage activities
RWE npower • 06/04/2019

3. Expansion to other sectors and gases
A wide range of views was noted with varying degrees of enthusiasm for expansion, all with some element of conditionality.
A sectoral approach is appropriate. Need a harmonised approach for sectors subject to competition. Better legal clarity and simple definitions are important.
Harmonisation in terms of expansion will not happen before 2013, with opt-in by MS or groups of MSs as the only prior option.
Opt-in in phase 2 may provide a trial to test robustness of case for expansion
Performance standards, benchmarking, early action, link with IPPC/BAT, international competitiveness and robust MRV all seen as major issues
Need to consider international competitiveness impacts versus the appropriateness of alternative instruments.
RWE npower • 06/04/2019

4. Unilateral inclusion of additional activities and gases by MS
Opt-in is a solid option but not widely used to date. It has MS support and will stay as a longer-term option, although a harmonised approach is needed to avoid competitive distortions.
Sectors opted-in can remain opted in. Strong message from Commission that sectors (or parts of sectors) not opted in will face other measures such as taxation.
The need to reduce administrative complexity is strongly supported by the Commission and progress has been made in phase 2 NAPs.
District heating schemes can be considered as a ‘single installation’. ‘Pooling’ has not been taken up probably due to definition of the legal entity or who takes responsibility.
N2O is a good candidate for opt-in (as per the French example). Could be precursor to full inclusion post-2013.
BAT/IPPC link needs clarification for reasons of flexibility and better regulation and to avoid double regulation.
RWE npower • 06/04/2019

5. Streamlining the current scope (definition of an installation)
Agreement that there was a need to improve further on the definition of an installation although real progress was achieved in the phase 2 NAPs.
The pragmatic approach adopted by the Climate Change Committee in reviewing the phase 2 NAPs should be consolidated and improved and incorporated into the Directive.
Strong call for harmonisation and need for legal clarity and certainty. Simplification should be the objective where possible (e.g. sites rather than installations with thresholds for smaller installations), while recognising international competition issue.
The Commission invites sectors/MSs to input now in writing on definitions. There will then be a one-off meeting of technical experts from industry, MSs and the Commission to review. Submissions will need to be well considered and prepared.
RWE npower • 06/04/2019

6. Improving cost-effectiveness with regard to small installations
Recognition of the case surrounding small installations (or small emitters) and support for action driven by the issue of costs.
Improvements in MRV etc. have had a beneficial effect in terms of the cost issue. Need to exercise caution before striking out small installations.
Should small installations be determined on the basis of capacity (aligned to the Directive) or emissions (current or past)? Need to resolve what is practical while ensuring a level playing field.
Should there be MS flexibility or full harmonisation? Cases for specific exclusions need to be convincing. There could be harmonisation on certain installations e.g. hospitals, military sites. Need to draw up this list to see where agreement can be achieved and include in Directive.
The Commission favours a harmonised approach, but there is variety across MSs, so a combination of opt-out and opt-in could be one option to provide MS discretion.
The Directive needs to be clear on alternative means of control where opt-out is chosen e.g. national ETS, IPPC, taxation.
RWE npower • 06/04/2019

7. Domestic emission reduction projects within the Community
Very mixed reception to domestic projects with strongly held views
FOR: opportunities in non-EUETS sectors, improving liquidity, promoting emission reductions inside the EU.
AGAINST: administrative complexity, price effects, proving environmental additionality, double dipping and interaction with other policies and measures.
Access to project-based mechanisms should be restricted (to maintain EUETS allowance prices!). Needed to identify a specific cap or specify project areas to manage this risk.
Could use a pilot schemes initially as a limited approach, with a suggestion of transport and sinks.
What can be harmonised or left open to MSs? Baselines and criteria for additionality would need to be set out very clearly in NAPs by MSs along with proposed methodologies.
Domestic projects must not be to the detriment of other MSs or competitiveness.
RWE npower • 06/04/2019

8. Carbon capture and geological storage activities
Overwhelming consensus that CCS is important and promising but not a ‘silver bullet’. It was recognised that there was a question over whether it should be done in a ‘mandatory’ or ‘incentivising’ way.
EUETS could be a way of providing a long-term incentive and CCS will need to be recognised in EUETS at some point. This may not be sufficient to stimulate CCS in the short term.
There are two timeframes that need to be considered. Is there a need to consider an opt-in procedure or should CCS be tackled via a more harmonised approach?
Different CCS applications and technologies needed to be tested and there was a range of risks that needed to be assessed which could impact on short term versus longer-term considerations.
There was a need to explicitly recognise CCS in phase 3 of the EUETS.
RWE npower • 06/04/2019

9. Other Issues
There were no unexpected or novel viewpoints put forward. In general, the discussion was dominated by industry and NGOs with many MSs making very limited contributions.
The need for harmonisation came up repeatedly in relation to the various topics reviewed at the meeting.
There was a clear message that EUETS needed to be kept simple and transparent with a view to building a global carbon market, especially in relation to expansion and small installations. This was not picked up in the Commission’s summing up.
The issue of the impact of EUETS on electricity prices was raised frequently by the major energy users, but parked by the Chairman on the basis that it will be covered by the 3rd meeting.
There was more time for discussion than apparent from the agenda. Will this format work for 3rd meeting?
RWE npower • 06/04/2019