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There's been a bit of chat recently about the creation of the new Energy and Climate Change department, Carbon Capture and Storage, etc., so thought I'd post some of the news from the European Parliament yesterday.
Highlights include:
- A carbon dioxide limit of 500 g/kWh for electricity generation from 2015, effectively outlawing new coal fired plants from that date unless they are fitted with Carbon Capture and Storage (relevant to several proposed plants in the EU including here in the UK)
- Full auctioning of EU ETS emission allowances for the power sector from the start of Phase 3 in 2013 has been confirmed, preventing further windfall profits for electricity companies who have been adding their cost to bills despite receiving most of their permits for free
- energy intensive industry purchasing 15% of allowances in 2013, ramping up to 100% by 2020, to prevent these industries losing out or relocating to less heavily regulated parts of the world (so called carbon leakage)
- Around E10 billion from the auction revenue (total ~50 bn p.a. by 2020) used to finance 12 commercial scale CCS plants by 2015
- support for increasing the EU target for emission reductions from 20% to 30% of 1990 levels by 2020 if there is a wider international agreement for this level of action.
- longer term emission reduction targets of 50% by 2035 and 60-80% by 2050
- limiting the use of the (highly flawed, according to many recent reports) Kyoto protocol international offset mechanisms to account for emission reductions in the EU. This will now be limited to the equivalent of 8% of 2005 emissions over the whole 2013-2020 period, instead of the previously suggested 3% per annum between 2013 and 2020.
Meanwhile in the UK, the Climate Change Committee (the independent advisory/regulatory board set up under the Climate Change Bill) officially recommended that the UK target be raised to at least 80% by 2050, including for the first time aviation and international shipping in some form.
See, e.g. http://www.guardian.co.uk/environment/2008/oct/07/carboncapturestorage.carb...
http://news.bbc.co.uk/1/hi/world/europe/7656478.stm
http://www.planetark.com/dailynewsstory.cfm/newsid/50518/story.htm
http://www.planetark.com/dailynewsstory.cfm/newsid/50521/story.htm
Highlights include:
- A carbon dioxide limit of 500 g/kWh for electricity generation from 2015, effectively outlawing new coal fired plants from that date unless they are fitted with Carbon Capture and Storage (relevant to several proposed plants in the EU including here in the UK)
- Full auctioning of EU ETS emission allowances for the power sector from the start of Phase 3 in 2013 has been confirmed, preventing further windfall profits for electricity companies who have been adding their cost to bills despite receiving most of their permits for free
- energy intensive industry purchasing 15% of allowances in 2013, ramping up to 100% by 2020, to prevent these industries losing out or relocating to less heavily regulated parts of the world (so called carbon leakage)
- Around E10 billion from the auction revenue (total ~50 bn p.a. by 2020) used to finance 12 commercial scale CCS plants by 2015
- support for increasing the EU target for emission reductions from 20% to 30% of 1990 levels by 2020 if there is a wider international agreement for this level of action.
- longer term emission reduction targets of 50% by 2035 and 60-80% by 2050
- limiting the use of the (highly flawed, according to many recent reports) Kyoto protocol international offset mechanisms to account for emission reductions in the EU. This will now be limited to the equivalent of 8% of 2005 emissions over the whole 2013-2020 period, instead of the previously suggested 3% per annum between 2013 and 2020.
Meanwhile in the UK, the Climate Change Committee (the independent advisory/regulatory board set up under the Climate Change Bill) officially recommended that the UK target be raised to at least 80% by 2050, including for the first time aviation and international shipping in some form.
See, e.g. http://www.guardian.co.uk/environment/2008/oct/07/carboncapturestorage.carb...
http://news.bbc.co.uk/1/hi/world/europe/7656478.stm
http://www.planetark.com/dailynewsstory.cfm/newsid/50518/story.htm
http://www.planetark.com/dailynewsstory.cfm/newsid/50521/story.htm
In reply to johnSD:
There a re a few faults with some of the comments...
Would that affect Kingsnorth? I assumed that would be due before 2015.
Either way I doubt it makes much difference as I would be amazed if the Council of Ministers agreed to the Parliament's limit.
That is only true if the companies were allocated the full amount that they needed - if they had to buy them then why shouldn't they pass that on? 100% auctioning will mean substantial price rises (unless you live in France or poss Denmark....certainly anywhere that relies on gas or coal will see prices going up).
That won't prevent carbon leakage! In fact the opposite - as the amount they need to purchase increases then you will get more carbon leakage (it already happens in the cement sector (and probably in steel as well)).
Anyway what they actually agreed was that energy intensive sectors at risk of carbon leakage should be identified and potentially given 100% free allowances.
> news from the European Parliament yesterday.
There a re a few faults with some of the comments...
> Highlights include:
>
> - A carbon dioxide limit of 500 g/kWh for electricity generation from 2015, effectively outlawing new coal fired plants from that date unless they are fitted with Carbon Capture and Storage (relevant to several proposed plants in the EU including here in the UK)
>
> - A carbon dioxide limit of 500 g/kWh for electricity generation from 2015, effectively outlawing new coal fired plants from that date unless they are fitted with Carbon Capture and Storage (relevant to several proposed plants in the EU including here in the UK)
Would that affect Kingsnorth? I assumed that would be due before 2015.
Either way I doubt it makes much difference as I would be amazed if the Council of Ministers agreed to the Parliament's limit.
> - Full auctioning of EU ETS emission allowances for the power sector from the start of Phase 3 in 2013 has been confirmed, preventing further windfall profits for electricity companies who have been adding their cost to bills despite receiving most of their permits for free
That is only true if the companies were allocated the full amount that they needed - if they had to buy them then why shouldn't they pass that on? 100% auctioning will mean substantial price rises (unless you live in France or poss Denmark....certainly anywhere that relies on gas or coal will see prices going up).
> - energy intensive industry purchasing 15% of allowances in 2013, ramping up to 100% by 2020, to prevent these industries losing out or relocating to less heavily regulated parts of the world (so called carbon leakage)
That won't prevent carbon leakage! In fact the opposite - as the amount they need to purchase increases then you will get more carbon leakage (it already happens in the cement sector (and probably in steel as well)).
Anyway what they actually agreed was that energy intensive sectors at risk of carbon leakage should be identified and potentially given 100% free allowances.
In reply to johnSD and MJH: So have have these measures actually become law now? My reading of it was that this was an energy committee ruling, or was it the parliament. Ah, the misteries of European politics.
In reply to alanw: Nowhere near law yet! It was the opinion of the Environment Cttee of the European Parliament. Next step will be for the full plenary of the Parliament to vote on it, then the Council of Ministers...
In reply to MJH: Cheers. As I think I mentioned on here before - the only thing with greater inertia than the climate is the global political system.
In reply to MJH:
Not sure - have only seen what's in the news, and it seems to suggest that it depends on whether it is rushed or not. A pretty controversial decision for the new minister to make early in their role?
Can I ask why?
My understanding based on the ofgem report into the issue and associated reports was that companies were treating the allocated allowances as an opportunity cost and adding them onto the bills anyway. Obviously if they need to buy more they should add that on to the bills - but that's not the way it has worked... If the cost is already factored in to consumers, then there is no reason that prices should rise further with full auctioning, unless of course companies do not want to reduce the windfall profit margin they have the potential to make just now. But I realise that some of this could have been used to buffer the effect of rising gas prices etc., so I'm not saying it's all bad...
e.g. http://www.publications.parliament.uk/pa/cm200708/cmselect/cmberr/293/293i....
Since the establishment of the European Union Emissions Trading Scheme (EU ETS) in 2005, the cost of carbon has been factored into the wholesale price of electricity by generators. [...] electricity generators receive a
large proportion of their carbon permits at no cost. However, Ofgem and the European Commission told us because permits have a market value generators have benefited from windfall profits by increasing their wholesale prices to reflect the opportunity cost of using their permits. This is because power companies could choose not to generate electricity
and, instead, sell their free permits on the open market. They need wholesale prices to rise by at least the value of their permits in order for them to have an incentive to generate.
fair enough, but it represents an attempt to reduce the risk of carbon leakage. They somehow have to find the balance - do you think they are anywhere near it?
Can you point me towards a better source - would be good to see things first hand rather than through the news?
Cheers
>
> Would that affect Kingsnorth? I assumed that would be due before 2015.
> Would that affect Kingsnorth? I assumed that would be due before 2015.
Not sure - have only seen what's in the news, and it seems to suggest that it depends on whether it is rushed or not. A pretty controversial decision for the new minister to make early in their role?
> Either way I doubt it makes much difference as I would be amazed if the Council of Ministers agreed to the Parliament's limit.
Can I ask why?
> That is only true if the companies were allocated the full amount that they needed - if they had to buy them then why shouldn't they pass that on? 100% auctioning will mean substantial price rises (unless you live in France or poss Denmark....certainly anywhere that relies on gas or coal will see prices going up).
My understanding based on the ofgem report into the issue and associated reports was that companies were treating the allocated allowances as an opportunity cost and adding them onto the bills anyway. Obviously if they need to buy more they should add that on to the bills - but that's not the way it has worked... If the cost is already factored in to consumers, then there is no reason that prices should rise further with full auctioning, unless of course companies do not want to reduce the windfall profit margin they have the potential to make just now. But I realise that some of this could have been used to buffer the effect of rising gas prices etc., so I'm not saying it's all bad...
e.g. http://www.publications.parliament.uk/pa/cm200708/cmselect/cmberr/293/293i....
Since the establishment of the European Union Emissions Trading Scheme (EU ETS) in 2005, the cost of carbon has been factored into the wholesale price of electricity by generators. [...] electricity generators receive a
large proportion of their carbon permits at no cost. However, Ofgem and the European Commission told us because permits have a market value generators have benefited from windfall profits by increasing their wholesale prices to reflect the opportunity cost of using their permits. This is because power companies could choose not to generate electricity
and, instead, sell their free permits on the open market. They need wholesale prices to rise by at least the value of their permits in order for them to have an incentive to generate.
> That won't prevent carbon leakage! In fact the opposite - as the amount they need to purchase increases then you will get more carbon leakage (it already happens in the cement sector (and probably in steel as well)).
fair enough, but it represents an attempt to reduce the risk of carbon leakage. They somehow have to find the balance - do you think they are anywhere near it?
> Anyway what they actually agreed ...
Can you point me towards a better source - would be good to see things first hand rather than through the news?
Cheers
In reply to alanw:
aye. Some important hurdles passed, but not sure how much will make the whole distance...
> (In reply to MJH) Cheers. As I think I mentioned on here before - the only thing with greater inertia than the climate is the global political system.
aye. Some important hurdles passed, but not sure how much will make the whole distance...
In reply to johnSD:
Typically the EP is much greener and more radical than the Member States. From the MS point of view given that so many of them still rely on coal I doubt there will be a strong enough support for the CO2 emission limit.
Ah right - that makes sense - very naughty, though I am amazed that Ofgem didn't refer the companies to the Competition Commission! Having said which if the cost of carbon goes up (as it should) then we will pay more but at least we should be paying for something rather than accounting trick.
No idea - I suspect that it will be a very difficult balance to strike. What I do know is that the cement industry has been squealing about it since ETS started. The problem for them is that for a modern plant there isn't too much they can do to reduce CO2 emissions. ETS forces them to accept a lower CO2 allocation year on year so they have the choices of reducing production (only achieves lower total CO2 if demand reduces, otherwise demand satisfied outside of ETS) or buy allowances (competitive disadvantage compared to imports). Many cement producers are companies that operate globally and they have worked out that for a vast amount of the EU (ie within a certain distance of a port, including inland ports on canals) it is cheaper to ship in cement from asia or northern africa than to operate under ETS.
Sorry if that is a bit long and convoluted, but hopefully it makes sense.
The European Parliament's website gives some info at http://www.europarl.europa.eu/news/expert/infopress_page/064-38799-280-10-4...
Not great, but gives a flavour. For my sins I watched some of the vote yesterday.
> (In reply to MJH)
> [...]
> Can I ask why?
> [...]
> Can I ask why?
Typically the EP is much greener and more radical than the Member States. From the MS point of view given that so many of them still rely on coal I doubt there will be a strong enough support for the CO2 emission limit.
> My understanding based on the ofgem report into the issue and associated reports was that companies were treating the allocated allowances as an opportunity cost and adding them onto the bills anyway. Obviously if they need to buy more they should add that on to the bills - but that's not the way it has worked... If the cost is already factored in to consumers, then there is no reason that prices should rise further with full auctioning, unless of course companies do not want to reduce the windfall profit margin they have the potential to make just now. But I realise that some of this could have been used to buffer the effect of rising gas prices etc., so I'm not saying it's all bad...
Ah right - that makes sense - very naughty, though I am amazed that Ofgem didn't refer the companies to the Competition Commission! Having said which if the cost of carbon goes up (as it should) then we will pay more but at least we should be paying for something rather than accounting trick.
> fair enough, but it represents an attempt to reduce the risk of carbon leakage. They somehow have to find the balance - do you think they are anywhere near it?
No idea - I suspect that it will be a very difficult balance to strike. What I do know is that the cement industry has been squealing about it since ETS started. The problem for them is that for a modern plant there isn't too much they can do to reduce CO2 emissions. ETS forces them to accept a lower CO2 allocation year on year so they have the choices of reducing production (only achieves lower total CO2 if demand reduces, otherwise demand satisfied outside of ETS) or buy allowances (competitive disadvantage compared to imports). Many cement producers are companies that operate globally and they have worked out that for a vast amount of the EU (ie within a certain distance of a port, including inland ports on canals) it is cheaper to ship in cement from asia or northern africa than to operate under ETS.
Sorry if that is a bit long and convoluted, but hopefully it makes sense.
> Can you point me towards a better source - would be good to see things first hand rather than through the news?
The European Parliament's website gives some info at http://www.europarl.europa.eu/news/expert/infopress_page/064-38799-280-10-4...
Not great, but gives a flavour. For my sins I watched some of the vote yesterday.
In reply to MJH:
No, it does. It goes to show that really the only way we can ever be really sure of making it work is to have a properly global strategy and a global carbon price (or perhaps very strict local regulation and protectionism...). If we don't then there will always be the risk of "offshore carbon havens" or other forms of carbon leakage.
>
> Sorry if that is a bit long and convoluted, but hopefully it makes sense.
> Sorry if that is a bit long and convoluted, but hopefully it makes sense.
No, it does. It goes to show that really the only way we can ever be really sure of making it work is to have a properly global strategy and a global carbon price (or perhaps very strict local regulation and protectionism...). If we don't then there will always be the risk of "offshore carbon havens" or other forms of carbon leakage.
In reply to johnSD:
Yup, ultimately it needs to be a global system to work. It will get there (eventually).
It would get there even faster under my proposed dictator carbon body
> (In reply to MJH)
> [...]
>
> No, it does. It goes to show that really the only way we can ever be really sure of making it work is to have a properly global strategy and a global carbon price (or perhaps very strict local regulation and protectionism...). If we don't then there will always be the risk of "offshore carbon havens" or other forms of carbon leakage.
> [...]
>
> No, it does. It goes to show that really the only way we can ever be really sure of making it work is to have a properly global strategy and a global carbon price (or perhaps very strict local regulation and protectionism...). If we don't then there will always be the risk of "offshore carbon havens" or other forms of carbon leakage.
Yup, ultimately it needs to be a global system to work. It will get there (eventually).
It would get there even faster under my proposed dictator carbon body
In reply to johnSD: Absolutely - the sooner a gloabl system exists the better. The problem then being how do you resolve the need for developing countries to develop as cheaply as possible (assuming that cheap = polluting in the way that the developed world did in its development over the last 150 years). I suppose one way would be to allow relatively free reign for what they use/do in their countries but make them participate in carbon trading on exports.
Incidentally I have just seen a quote from the chairman of the EP's Environment Committee saying that the ETS changes are unlikely to be agreed before the end of next year (not that much of a problem because we are talking about post-2012 plans anyway).
Incidentally I have just seen a quote from the chairman of the EP's Environment Committee saying that the ETS changes are unlikely to be agreed before the end of next year (not that much of a problem because we are talking about post-2012 plans anyway).
In reply to MJH:
I suppose burden/effort sharing within the Kyoto protocol and the EU takes that into account to some extent, but I agree that some distinction should be drawn between domestic and export production. As customers and end users of products, we should have to pay for the embedded emissions similarly to if they were produced under our own domestic regulations.
> (In reply to johnSD) Absolutely - the sooner a gloabl system exists the better. The problem then being how do you resolve the need for developing countries to develop as cheaply as possible (assuming that cheap = polluting in the way that the developed world did in its development over the last 150 years). I suppose one way would be to allow relatively free reign for what they use/do in their countries but make them participate in carbon trading on exports.
I suppose burden/effort sharing within the Kyoto protocol and the EU takes that into account to some extent, but I agree that some distinction should be drawn between domestic and export production. As customers and end users of products, we should have to pay for the embedded emissions similarly to if they were produced under our own domestic regulations.
In reply to johnSD:
You could just implement 'Kyoto II' (as it's sometimes known). Where a value for carbon is placed (i.e. taxed) upstream at source for producers of fossil fuels. This should be relatively (compared to individual carbon allowances, or multiple global carbon trading platforms) easy to implement, and should ensure that the cost of carbon filters through proportionally to an end user/product.
(I know it's not as simple as that, but that's the gist of it)
You could just implement 'Kyoto II' (as it's sometimes known). Where a value for carbon is placed (i.e. taxed) upstream at source for producers of fossil fuels. This should be relatively (compared to individual carbon allowances, or multiple global carbon trading platforms) easy to implement, and should ensure that the cost of carbon filters through proportionally to an end user/product.
(I know it's not as simple as that, but that's the gist of it)
In reply to ClimberEd:
Yeah, I think I'm in favour of upstream carbon trading for the reasons you state - it would deal with household gas in the same way as industrial gas in the same way as petrol in the same way as coal powered electricity, etc. - and it would ensure that emissions are governed by a clear and equitable price signal. Things with high emissions will be expensive, end of story, and people choose what they do or buy based on how much money they have. Not sure how easy it would be to regulate on a global basis, or what you'd do with the revenue, but it's a start... You'd still have to cover non combustion emissions as well (like concrete or agriculture), and have systems in place to account for relative wealth across the globe, but it could be the way to go.... or something like that...
Yeah, I think I'm in favour of upstream carbon trading for the reasons you state - it would deal with household gas in the same way as industrial gas in the same way as petrol in the same way as coal powered electricity, etc. - and it would ensure that emissions are governed by a clear and equitable price signal. Things with high emissions will be expensive, end of story, and people choose what they do or buy based on how much money they have. Not sure how easy it would be to regulate on a global basis, or what you'd do with the revenue, but it's a start... You'd still have to cover non combustion emissions as well (like concrete or agriculture), and have systems in place to account for relative wealth across the globe, but it could be the way to go.... or something like that...
In reply to MJH:
Coal-fired power stations must not be built unless they can capture and store CO2, the Environment Agency has warned.
Plants like that proposed at Kingsnorth in Kent could "lock" the UK into high carbon technology, says the agency, whose remit covers England and Wales.
Even if stations can be fitted with clean coal technology at a later stage, that is "insufficient" for them to be approved now, the Agency argues.
The government will make its final decision on Kingsnorth within months.
http://news.bbc.co.uk/1/hi/sci/tech/7633938.stm
24th September 2008
> Would that affect Kingsnorth? I assumed that would be due before 2015.
>
> Either way I doubt it makes much difference as I would be amazed if the Council of Ministers agreed to the Parliament's limit.
>
> Either way I doubt it makes much difference as I would be amazed if the Council of Ministers agreed to the Parliament's limit.
Coal-fired power stations must not be built unless they can capture and store CO2, the Environment Agency has warned.
Plants like that proposed at Kingsnorth in Kent could "lock" the UK into high carbon technology, says the agency, whose remit covers England and Wales.
Even if stations can be fitted with clean coal technology at a later stage, that is "insufficient" for them to be approved now, the Agency argues.
The government will make its final decision on Kingsnorth within months.
http://news.bbc.co.uk/1/hi/sci/tech/7633938.stm
24th September 2008
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