ENERGYQUOTE JHA
12th MAY 2015
GREEN TUESDAY • Data Management • Legislation • Compliance
A Unique Perspective
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A Unique Perspective | Green Tuesday | 12.05.2015
EU: New Agreement to Boost EU Emissions Trading System The EU Emissions Trading System (EU ETS) The ETS is a cap-and-trade system aimed to drive down the amount of carbon dioxide emitted into the atmosphere by capping the total amount of emission on an annual basis, and allowing companies to trade permits to cover all of their emission or pay a heavy penalty. The cap is reduced year over year to drive companies to become more energy efficient overall. All 28 EU states are involved in the system and over 50% of total greenhouse gas emissions from all industries are covered: more than 11,000 heavy energy-using installations in power generation and manufacturing as well as aircraft operators are included. The need to reform originated from the problem that the number of allowances has outstripped the demand, making allowances cheaper and lowering the financial impetus for polluters to look for more energy efficient alternatives. Previous attempt to correct the system led to a delay of release of 900 million allowances (one allowance for one ton of carbon emission) set to be auctioned between 2014 and 2016, to 2019 and 2020. But structural changes remained necessary.
ETS is a cap-and-trade system aimed to drive down the amount of carbon dioxide emitted into the atmosphere
The need to reform originated from the problem that the number of allowances has outstripped the demand
Updates: Market Stability Reserve to be introduced in 2019 The solution proposed and adopted during the May 5th conference in Brussels is to set up a “market stability reserve”, which means from the beginning of 2019, the 900 million reserved allowances – instead of being auctioned off into the marketplace – will be placed into a reserve. In addition, the agreement will also direct 8% of current allowances in circulation into the reserve between January and September 2019; afterwards, 12% of annual surplus would be placed into the reserve at the rate of 1% each month. As soon as the surplus drops below 400 million, EU will release 100 million back into the market.
The price of carbon is now expected to increase to €30 by 2020 and to around €40 by 2030
The market welcomed the new agreement, and believes it will make positive impact to help the scheme function more effectively and exert more pressure on heavy energy users. The price of carbon is now expected to increase to €30 by 2020 and to around €40 by 2030 from only around €7 today.
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A Unique Perspective | Green Tuesday | 12.05.2015
Next Steps: More reforms could be required between 2021 and 2030 The creation of the reserve is expected to become a great potential to steer EU into a more energy efficient market along with the 20% energy reduction target for 2020. More reforms could be required between 2021 and 2030 depending on how the market functions, but in the meantime, the marketplace data will be closely watched for analysis.
UK: Renewable Energy Subsidies Expected to Triple by 2020, Green Levies Face Sharp Rise According to the Office for Budget Responsibility, official figures suggest that the costs of environmental levies to support renewables such as wind farms and solar panels will rise from £3.1billion last year to £9.4billion by the end of the decade. Meanwhile, although such policies account for 5% of current energy bills (£68 a year), that percentage will rise to 15% annually by 2020, estimated at £226. The main driver behind this steep increase is the renewable energy targets that require 30% of Britain’s electricity to come from renewable sources by 2020, despite the widespread concern that measures implemented to reach those targets will have major impact on consumer energy bills. The biggest contributor to this increase is the “renewable obligation” that subsidises green projects. For example, onshore wind farms receive £40/mWh in addition to the market price. Such subsidies are responsible for over £2.5billion of the £3.1billion worth of environmental levies in 2013-14. A complete reversal compared to the 2010 Conservatives election manifest, David Cameron has vowed to cut down on renewable subsidies and lower energy bills.
More reforms could be required between 2021 and 2030 depending on how the market functions
The costs of environmental levies to support renewables will rise from £3.1billion last year to £9.4billion by the end of the decade
The biggest contributor to this increase is the “renewable obligation” that subsidises green projects
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