29th SEPTEMBER 2015
GREEN TUESDAY • Data Management • Legislation • Compliance
A Unique Perspective
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A Unique Perspective | Green Tuesday | 29.09.2015
EU: Greenhouse gas emissions: creation of a market stability reserve approved On 5 May 2015 the Council of the European Union and the European Parliament reached an agreement in principle on the market stability reserve proposal. The Parliament endorsed the reform in July 2015. The Council formally adopted the decision on the creation of a market stability reserve (MSR) for the EU greenhouse gas emission trading scheme (EU ETS) on 18 September 2015.
On 5 May 2015 the Council of the European Union and the European Parliament reached an agreement in principle on the market stability reserve proposal
What is the EU Emissions Trading System? The EU Emissions Trading System, launched in 2005, aims at delivering the EU’s greenhouse gas emission reduction goals in an economically efficient manner. It is based on the so-called “cap-and-trade” approach: each year the EU establishes a limit (cap) for overall emissions from power plants, energy-intensive industry and commercial airlines covered by the system. Within this limit, companies can buy and sell emission allowances and each allowance gives the right to emit one tonne of CO2, the main greenhouse gas, or the equivalent of another greenhouse gas. From 2013 to 2020, the cap is reduced annually by 1.74%. From 2021, the annual reduction will increase to 2.2%, reflecting the EU’s new 2030 target for emission reductions.
The EU Emissions Trading System, launched in 2005, aims at delivering the EU’s greenhouse gas emission reduction goals in an economically efficient manner
EU ETS Market Stability Reserve When in a given year the total of emission allowances surpass a certain threshold, a percentage of allowances will be automatically withdrawn from the market and placed into the reserve. In the opposite case, allowances will be returned from the reserve to the market. In 2013, there was a significant excess of allowances in the EU ETS, which was expected to increase over the following years. This resulted from a disequilibrium between the supply and demand of allowances, since demand is flexible and affected, for instance, by economic cycles.
In 2013, there was a significant excess of allowances in the EU ETS, which was expected to increase over the following years
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A Unique Perspective | Green Tuesday | 29.09.2015
The presence of a large surplus reduces the prices of allowances and decreases the incentives for low-carbon investment. Therefore, if not addressed, the current market imbalance would influence the ability of the EU ETS to meet its targets in a cost effective manner in the future. The European Commission presented its proposal for a market stability reserve in January 2014, starting the legislative ordinary procedure. On 30 March 2015, the Council started trilogue negotiations with the European Parliament on the market stability reserve proposal. At a meeting on 5 May 2015, representatives from the two institutions reached an agreement in principle on the issue.
The presence of a large surplus reduces the prices of allowances and decreases the incentives for lowcarbon investment
The main issues in the agreement are: • the start date of 1 January 2019; • to place ‘backloaded allowances’ on the market reserve - this represents the 900 million allowances whose auction was postponed from 2014-2016 until 20192020; • to transfer unallocated allowances directly to the market reserve in 2020 and their future use considered under a wider review of the EU ETS • to carry out a review of the EU ETS and market stability reserve to take into account carbon leakage and competitiveness aspects, including employment and GDP-related issues.
The European Commission presented its proposal for a market stability reserve in January 2014, starting the legislative ordinary procedure
The Council on 18 September formally adopted the creation of the EU ETS market stability reserve, the decision was adopted in first reading.
UK: The UK Energy Bill 2015 The Department of Energy & Climate Change (DECC) releases its Impact Assessment on the closure of the Renewables Obligation (RO) for onshore wind. The Government is committed to delivering on its manifesto pledge of ending new subsidies for onshore wind projects by closing the window on RO to new onshore wind from 1 April 2016 (a year earlier than planned).
The DECC releases its Impact Assessment on the closure of the Renewables Obligation for onshore wind
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A Unique Perspective | Green Tuesday | 29.09.2015
The proposed amendments to the Electricity Act and the RO Closure Order necessary to bring this pledge into effect (contained in the Energy Bill) was debated before the House of Lords on 14 September 2015, although industry remains concerned that an amendment to clarify grace period qualifying criteria has not yet made it to the debating room floor. Shadowing the passage of the Bill, DECC published its Impact Assessment (IA) on the RO closure on 8 September 2015. The Government argues that, in the absence of intervention, onshore wind could add to the over-allocation of renewable energy subsidies under the Levy Control Framework (LCF), which sets limits on the overall costs of DECC’s levy funded policies (including ROs, FiTs, and CfDs).
The proposed amendments to the Electricity Act and the RO Closure Order necessary to bring this pledge into effect was debated before the House of Lords on 14 September 2015
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