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соприкосновения. Материалы II Всероссийской научно-практической конференции (26 ноября 2013 года). - Комсомольск-на-Амуре: Издательство АмГПГУ 2013. - 282 с.
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3. Кукушкин И.А., Зимина Е.В. Привлекательные ресурсы развития туристской деятельности в горных территориях Нижнего Приамурья // Фундаментальные и прикладные исследования: проблемы и результаты. - 2014. -№ 10. - С. 17.
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THE EU ETS EFFECTS ON THE GERMAN INDUSTRY SECTOR
© Kholiavko T.*
Saint-Petersburg State University, Saint-Petersburg
Germany as one of the main GHG emitters of the EU is participating in the European Emission Trading System (EU-ETS). Since the implementation in 2005 companies and installations are facing the challenge of reducing emissions due to a limited amount of allowances. There were many allowan-
Student.
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ces given away for free, and therefore, a gap between the cap and the actual emissions occurred.
Key words: emission trading system, climate policy, greenhouse gases.
Climate policy became more important in the last decades in the global context as well as on the national scale. The increasing effects of climate change have negative impacts worldwide, including impacts on biodiversity, environmental diversity and human health. The EU made an important step to fighting against climate change by implementation of the Emissions Trading System (EU ETS). It was launched in 2005 and became the first and largest market-based regulation mechanism to reduce man-made greenhouse gases (GHG) emissions, which are considered to be responsible for causing climate change [1].
The main principle of the EU ETS is ‘cap and trade’ and it can be briefly described as following. The regulator sets the overall volume of GHG that can be emitted each year by the most carbon intensive sectors and allocate a given amount of emission allowances to them. Companies under the cap that emit less than their allocations can trade their surplus to those companies that exceed the set level [1]. Since the introducing of the EU ETS, the programme knows three phases:
- A pilot phase (2005-2007) was seen as a test phase. Almost all allowances have been distributed for free and could not be carried over to subsequent phases [2].
- The second phase (2008-2012). Allowances from this phase could be banked and carried over into Phase III.
- The third phase (2013-2020). The main trend is to auction allowances instead of allocating them for free. It is worth mentioning here that in this phase not only CO2 emissions were included, but also N2O and PFC.
Germany is one of the main GHG emitters in the EU and has the largest volume of emissions covered by the EU ETS [3], therefore it is the best example to study and evaluate the results of environmental policy. For Germany the EU ETS has become the most significant climate policy instrument, covering about 60 % of total CO2 emissions and over 2000 industrial installations and large power plants [4]. Despite the fact that the energy industry sector emits more GHG emissions than non-energy and has a lot more allocation of emissions allowances [5], it was decided to focus in this research on German non-energy industry sector. This sector includes CO2-intensive industrial processes, such as the production of iron and steel, cement, sintering, coke, lime, glass, bricks, ceramics, pulp, paper and cardboard as well as refineries [6].
The German non-energy sector is interesting to focus on since the majority of its sectors have a surplus of emissions permits, with the iron and steel, cement and chemical sectors having the largest absolute surplus while the power sector is short of permits and acts as a main buyer in the scheme [3].
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Also, this research is focused on two first phases since they are finished and the results of EU ETS implementation are collected and can be analysed.
Allocation of allowances in phase I and II. During the first period and the second periods the distribution of carbon dioxide emission allowances took place on the national scale whereas in the third phase it changed to an auctioning system on European level [7]. Besides this shift from national allocation to international auctioning there were also changes in the distribution of allowances in the German industry sector in the second period. In the following, an elucidation of the allocation of allowances in the German industry sector will be chronological presented regarding the adjustment of allowances and their impact on the greenhouse gas emissions in the two periods.
The first period. By 31 March 2004 every Member State of the European Union was obliged to set up a National Allocation Plan (NAP) according to Article 9(1) of Directive 2003/87/EC for the first period 2005-2007. The NAP is divided into a macro and a micro plan and includes the total amount of emission allowances for the installations in total (macro plan) and their distribution to the plants in the sectors (micro plan). Although Art. 10 of the Directive set in advance that 95 % of the allowances had to be allocated free of charge, the German government extended all emission allowances for free [8]. To improve the market based auctioning of allowances the Member States had the opportunity to decrease the budget of emissions certificates without charge in the second period to 90 % [9].
The German emission-intensive industry sector counts 615 installations whereas the energy sector includes 1,234 installations. In the first commitment period all of these plants received together 1,485 million carbon dioxide equivalent emission allowances (1,170 million for the energy sector, 315 million for the industry) [5].
Around four fifths of the greenhouse gas emission budget were hold by the energy installations, whereas the fifth part is distributed among the industrial plants. Regarding the size of the installations, just 15 installations hold allowances to emit more than 15 million tonnes of carbon dioxide per year, while two thirds of the plants obtain allowances for emissions < 150.000 tonnes of carbon dioxide per year [5].
The Option Rule in NAP I lead to an over allocation as existing plants had the opportunity to receive allowances according to estimated prognoses than to actual emissions, whereas the actual emissions were lower. The optimistic estimation curtailed the predictability that in NAP II the Option Rule no longer existed [10].
The second period. After the first pilot period the second phase took place from 2008-2012 as well as the NAP II including some more changes for the German electricity and industry sector. The structure of allocation was reformed through reduction of special rules like the Optional Rule to facilitate administration and bureaucracy and to improve transparency [11].
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The budget of allowances decreased to 482 million tonnes carbon dioxide equivalent emissions per year [12]. The number of installations taking part in the EU ETS decreased to 10 % compared to the first period and to 1.665 installations due to amalgamation or closure. Also some small ceramic plants withdraw as a consequence of changing conditions in the participation criterion. In total 1.072 energy installations and 553 industrial plants received allowances for free (13 installations did not apply for allotment, whereas 27 installations did not receive allowances as a result of lower emissions) [13]. The 553 industrial installations hold allowances for greenhouse gas emissions to the amount of 96,253 Million tonnes per year [14].
Compared to the energy sector the German industries managed to reduce their annual emissions in average about 1.8 %. This might be either as a result of the more efficient technology or a decline in production due to the economic crisis [14].
Outlook on the third period. In consequence of the over allocation of allowances in Germany and in Europe in the third period 2013 to 2020 no national allocation takes place. Since in the second period 90 % (in average 400 Million allowances per year) of the allowances were allocated for free, the amount of free distributed allowances decreased to 172 Million and will decline within 2020 to 139 Million. Especially the power sector is affected by this reduction measure. The industry sector still receives in the first years of the third period 80 % of the allowances given away without charge in the second trading period. Until 2020 the free allocation will be reduced to 70 % [13].
The EU ETS effectiveness in driving reduction emissions. The total number of verified emissions of non-energy industry sector at the end of the second period in 2012 amounted to 99, 9 million tCO2. Compared to the beginning of this period in 2008, the verified emissions decreased by 9 %, compared to 2005 - by 1 %. During the first phase emissions of CO2 increased by 3 %, this trend was observed not only for non-energy industry sector, but also for overall German emissions [6].
It is interesting to find the relationship between production indices of the manufacturing industry (without construction) and the corresponding verified emissions, which Figure 1 depicts. The decrease of emissions in 2009 is due to the economic crisis and the drop in production [6].
As one of the main EU ETS policy objectives is to deliver a capped level of emissions from the power and industrial sectors within the EU [15], it is important to understand whether the first two trading phases have encouraged participating installations to reduce emissions.
An emission trading scheme can be considered effective at driving abatement reduction if it leads to lower emissions than it would have occurred in the absence of the system.
It is considered, that the EU ETS was responsible for emission reductions of 2-5 % across all regulated sectors below business-as-usual level in Phase I and
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during the first two years of Phase II. This confirmed the result of Ellerman and Feilhauer [16], who found that abatement per year due to the EU ETS in Germany was close to 5 % for all EU ETS sectors over Phase I. The authors were also able to estimate specifically that German industrial abatement over the same period amounted to 6.3 % (11, 7 Mt per year) vs. 4.1 % for the power sector. It is important to note that German emissions were growing prior to the introduction of the EU ETS in 2005. After its introduction, German emissions decreased in spite of economic growth throughout Phase I [16].
Figure 1: Industrial production, production in the energy supply sector and verified emissions in Germany, (2005 = 100) [6]
It is worth mentioning that in Phase II there is a lack of available data to either assess the industrial abatement due to the complexity and time persistent nature of the economic crisis, as well as the time lag involved in releasing emission data [15].
According to the survey by Gallier et al., [6], which goal is analysing the situation of German companies both non-energy and energy industry regulated under the EU ETS, this scheme generated only weak incentives for firms to implement carbon abatement measures, such as process optimisations and investments in energy efficiency measures. It was only around 10 % of the respondents that explained the reduction of carbon emissions as the primary objective behind their abatement activities [6].
Conclusions. The EU-ETS as an environmental policy instrument contributes to decrease the negative impacts to climate change by operating on the eco-
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nomic level. In the first two periods the national issuing lead to an overage of allowances and the smaller industries could benefit due to changing law and/or less emissions as a result of efficient technology to sell the surplus allowances on the market. The optimistic estimation of the German government and the consulting agencies, as well as the Grandfathering of allowances may not been intended, but lead to a failure in efficiently allocating allowances. The firms who are participating in the EU ETS are reducing their CO2 emissions by one fifth comparing to non-participating EU ETS firms in the German Industry.
References:
1. Bel, G, & Joseph, S. (2015). Emission abatement: Untangling the impacts of the EU ETS and the economic crisis. Energy Economics, 49, 531-539.
2. European Commission, 2015: http://ec.europa.eu/clima/policies/ets/cap/ auctioning/index_en.htm, last assessed on 21-11-2015.
3. Elsworth, R., Worthington, B., Buick, M. (2011(a)). Der Klimagoldesel: Who are the winners of the EU ETS in Germany? London: Sandbag.
4. OECD (2012), OECD Environmental Performance Reviews: Germany 2012, OECD Publishing.
5. DEHSt (German Emissions Trading Authority) (2005). “Emissions Trading in Germany: Allocation of Allowances for the first Commitment Period 20052007, Facts and Data on the allocation of allowances to installations in Germany.” 20.12.2004; revised edition, 28.02.2005.
6. Gallier, C., Heindl, P., Osberghaus, D., Brockmann, K. L., & Dieckhoner, C. (2015). ”KfW/ZEW CO2 Barometer 2014-Carbon Edition. Ten years of emission trading: strategies of German companies.” KfW/ZEW CO2 Barometer.
7. European Commission (2013): European Commission - The EU Emissions Trading System (EU ETS) - October 2013.
8. BMUB (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) (2004). “National Allocation Plan for the Federal Republic of Germany 2005-2007.” Berlin.
9. Ziesing, Dr. Hans Joachim, et al. (2005). “Entwicklung eines nationalen Allokationsplans im Rahmen des EU-Emissionshandels.”, Umweltbundesamt, Dessau.
10. Kemfert, Claudia; Schneider, Friedrich (2009). “Der Emissionshandel in Deutschland und Osterreich - ein wirksames Instrument des Klimaschutzes?.” in Perspektiven der Wirtschaftspolitik 2009 10(1): 92-122.
11. BMUB (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) (2006). “Nationaler Allokationsplan 2008-2012 fur die Bundes-republik Deutschland.”Berlin.
12. ZuG (2012). Gesetz zur Anderung der Rechtsgrundlagen zum Emissionshandel im Hinblick auf die Zuteilungsperiode 2008 bis 2012 vom 7. August 2007, Bundesgesetzblatt Jahrgang 2007 Teil I Nr. 38, ausgegeben zu Bonn am 10. August 2007.
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13. DEHSt (a) (German Emissions Trading Authority) (2012). “Emission-
shandel 2008-2012: Verteilung der Zertifikate fur die zweite Handelsperiode”, Pressehintergrundpapier zur Zuteilung der Emissionsberechtigungen an 1.625 Anlagen, 2012: http://www.dehst.de/SharedDocs/Downloads/DE/Publikatio-
nen/Pressehintergrund_Zuteilung-2012.pdf?__blob=publicationFile, last accessed on 16-11-2015.
14. DEHSt (b) (German Emissions Trading Authority) (2012). “Press Brief-
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15. Laing, T., Sato, M., Grubb, M., & Comberti, C. (2014). The effects and side-effects of the EU emissions trading scheme. Wiley Interdisciplinary Reviews: Climate Change, 5(4), 509-519.
16. Ellerman, A.D., & Feilhauer, S.M. (2008). A Top-down and Bottom-up Look at Emissions Abatement in Germany in Response to the EU ETS. MIT Center for Energy and Environmental Policy Research.
