1. Interim report of WG 5/6 subgroup: Review of Phase 2 NAPs Mark Johnson 22/02/07

2. Purpose of the Review  Inform ETG members Assessments of Phase 2 for internal use Develop positions and arguments for Phase 3  Provide Defra and DTI with industry view on key issues relating to Phase 2 NAPs Supporting evidence for EC review Highlight similarities and differences  Put the UK in perspective

3. Status of NAPs – An interim position Countries whose NAP not yet submitted Countries whose NAP being assessed by EC Countries whose NAP “approved” Bulgaria Denmark Cyprus Austria Czech Republic Estonia Finland France Hungary Italy Poland Portugal Romania Spain Belgium Germany Greece Ireland Latvia Lithuania Luxembourg Malta Netherlands Slovakia Slovenia Sweden United Kingdom

4. Phase 2 Caps  Of those on target for Kyoto: Finland (18%), Belgium (11%), UK (11%) and Greece (9%) all sought significant reductions against BaU. UK, although part of this group, does not stand out.  However, the EC’s decisions tend to bring all caps down to around 10 -20% below BaU (some minor exceptions). UK’s position is therefore no exception after EC decisions.  BaU data not available for all NAPs.

5. Auctioning  The UK is taking the lead in terms of percentage to be auctioned: UK (7%) Italy (6%) Hungary (5%) Luxembourg (4.8%) Netherlands (4%)  However, when expressed in absolute terms the UK is planning to go much further.  Germany?

6. Use of Project Credits  Most MSs have applied limits  Most are around 10% of total allocation  Main exceptions: Ireland (proposed limit of 50% reduced to 21% by EC) Spain proposes 39%, but… Italy and Poland both propose 25%, but… Germany now propose 20%, but…  The UK is broadly comparable with most other MSs  Most limits applied at installation level (except Belgium-Flemish, Spain, Finland and Portugal)

7. Roles of sectors  Power sector: Most MS seeking reductions UK reduction factor is more severe than most  Industrial sectors Little information on detailed differentiation However, of 12 MSs with data available, only 4 intend to allocate BaU to all industrial sectors, including the UK Of the 4, Slovakia and Sweden have since had further national reductions imposed by EC

8. Allocation methodology  Within power sector there is a mix of grandfathering (13) and benchmarking (8).  Remainder either projections or not available.  For industrial sectors very little use of benchmarking.  Grandfathering baselines vary, but of 8 largest emitters: Most do not use data before 2000 Half exclude data from one or more years Half use 2005

9. New entry  Most countries have NER in range 5-10% allocation.  Those intending much larger NERs had cap reductions imposed by EC, so position may change…

10. Way forward Discussion today Update and issue to WG5/6 (incl DTI and Defra), as Interim Report Revise Report once all NAPs approved