Implementation Plan. for transferring EU legislation in the field of climate change. Hungary

Transcription

1 Implementation Plan for transferring EU legislation in the field of climate change Hungary Budapest September 2014

2 Table of contents 1. Introduction Analysis of present situation EU legal acts on climate change and national legislation Overview of acts already transposed into national law Other basic national legislation regulating the implementation of EU legal acts Relevant EU directives already adopted or still pending EU ETS Carbon capture and storage Non-ETS sectors Transport Fuels Industrial emissions Energy efficiency Combined heat and power Buildings Renewable energy sources Biofuels Impacts and requirements linked to EU legal acts under preparation Challenges in transposing and implementing EU legal acts on climate change Transposition Implementation Concluding remarks Implementation plan Aims and objectives Fixing gaps and delays in legislation transfer Energy efficiency CCS Renewable energy Monitoring Steps ahead References

3 1. Introduction The EU s climate change legislation is the result of a long negotiation process, in which all member states have an influence. In spite of this, many governments see climate change regulation as an externally enforced package of acts and decisions that brings only costs and a competitive disadvantage to their economy. This is even more true in the case of new member states, which consider themselves to be even more negatively affected by climate legislation. As a result, the implementation of some climate change legislative acts lags behind or takes place only at the codification level, while full application is subject to delays. In order to reduce the negative impacts on new member states (EU10 and countries that acceded even later), these countries were granted some significant derogations. One good example is the option for the free allocation of EU allowances (EUAs) to power plants in the new member states. Another example applies to all member states for those industrial energy-intensive sectors that are exposed to significant disadvantages in international trade, and are thus exempted from participation in the European Emissions Trading Scheme (ETS). What is important in this respect is that member states must devise their own strategies and make their own judgements about the various implementing instruments, where they see their disadvantages and advantages in the whole legislative and implementation process. A good positive example is carbon capture and storage (CCS) technology: countries with coal-based energy systems devote a significant share (in electricity generation or industrial heat) of their research and policy efforts to those technologies that would enable the longer-term survival of the fossil-based technologies equipped with CCS, even under more stringent climate policy. The EU also provides financial aid to those countries that aim to research and develop commercial CCS applications. Another example relates to renewable electricity technologies: in this case, countries focus on those technologies that could lead to a competitive advantage. Hungary, for example, is focusing its research and development efforts on geothermal energy, as it has high resource potential in this area and also in the technology (e.g. the national oil refinery company has experience in drilling technology). The feed-in-tariff (FIT) that is given for geothermal energy is also very attractive in Hungary. In summary, countries should multiply their efforts in those areas where they see positive synergies between the community climate policy and their other (energy or economic) strategies, so that their industrial and service sectors will be more willing to participate in the implementation process as a whole. The aim of this document is to provide an overview of the implementation status of EU climate legislation in Hungary. 3

4 2. Analysis of present situation In general, Hungary has been transposing EU climate legislation in good time. However, the transposition and implementation of one major recent directive, the Energy Efficiency Directive (EED) is lagging behind. The EED has a wide scope and requires numerous actions from member states. However, this cannot justify the lack of government action, as other states are much further along in the transposition process. On the other hand, Hungary is performing better in relation to the Renewable Energy Sources (RES) Regulation and its relevant targets. Targets for RES were reached in 2010 and Hungary is on the way towards reaching its 2020 National Renewable Energy Action Plan (NREAP) targets as well. However, the revision of the national support scheme in RES electricity is somewhat delayed. The present system has been in force since 2007 (the main rules are set in the Electricity Act (Act No. LXXXVI of 2007). The government planned to design a new system in 2011, but the revision has been continually postponed. This delay is causing investment uncertainty, which mainly affects the RES electricity market. The main RES electricity source in Hungary is biomass. The country is heavily using the biomass co-firing option, while wind and PV technology have a rather minor role. Wind-based generation is governed by unique regulation: wind farms can only be installed through a tendering procedure, but the procedure has not been initiated by the government since 2009, when the last call was cancelled. Hungary is an active member of both the international climate regime and its EU implementation. It is a party to the UNFCCC and has ratified the Kyoto Protocol. It is on track for meeting its 2020 Effort Sharing Decision (ESD) target, as defined in EU legislation. 4

5 Source: REKK estimations In order to provide an overview of climate-related EU legislation and its implementation in Hungary, we have identified seven main categories and some connected sub-categories that are reflected in the structure of the tables. 1) General framework (UNFCCC and Kyoto Protocol) 2) EU ETS (registry, auctioning, free allocation, MRV, aviation, NER300, carbon leakage) 3) Carbon capture and storage 4) GHG emissions and monitoring for non-ets sectors (road transport, fuels, ozone, LULUCF, F-gases) 5) Industrial emissions 6) Energy efficiency (CHP, buildings) 7) Renewable energy sources (biofuels) 2.1 EU legal acts on climate change and national legislation Overview of acts already transposed into national law Hungary is generally on track with the transposition of EU climate legislation into national law. The two directives that should have been transposed already are the EED (1012/27/EU) and the CCS Directive (2009/31/EC). In the latter case, Hungary has been facing an infringement procedure. A detailed explanation is offered in the following table. 5

6 Table 1: EU acts national legislation EU LEGISLATIVE ACT(S) NATIONAL LEGISLATION COMMENTS GENERAL FRAMEWORK UNFCCC & KYOTO PROTOCOL Decision 2002/358/EC Decision 2006/944/EC DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW EU ETS Directive 2003/87/EC Law 2005/XV on trade in GHG emissions repealed by Decision 2005/381/EC Decision 2006/780/EC Regulation (EU) No 550/2011 REGISTRY Regulation (EU) No. 389/2013 Law 2012/CCXVII on participation in the EU ETS system and the implementation of the Effort Sharing Decision DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW 6

7 AUCTIONING Regulation (EU) No. 1031/2010 FREE ALLOCATION Decision 2011/278/EU Hungary uses the common auctioning platform (EEX) DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW MONITORING, REPORTING, VERIFICATION & ACCREDITATION Regulation (EU) No. 600/2012 Regulation (EU) No. 601/2012 DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW AVIATION Decision 2009/450/EC Decision 2011/638/EU Regulation (EU) No. 100/2014 DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW NER 300 Decision 2010/670/EU DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW CARBON LEAKAGE Decision 2010/2/EU DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW 7

8 CARBON CAPTURE & STORAGE (CCS) Directive 2009/31/EC Law XLVIII of 1993 on mining Government Decree 145/2012 (VII. 3) on the geological storage of CO 2 The law provides basic legal definitions (such as for CO 2 storage site and pipelines) and sets out the tasks of the government, minister and mining authority. GHG EMISSIONS & MONITORING FOR NON-ETS SECTORS Decision 406/2009/EC Regulation (EU) No 525/2013 ROAD TRANSPORT Directive 1999/94/EC Regulation (EC) No. 443/2009 Regulation (EU) No. 1014/2010 Regulation (EU) No. 510/2011 Regulation (EU) No. 293/2012 Act 528/2013 on the national report on GHG emissions Joint Ministerial Decree 12/2002 of the Ministry of Economy, Ministry of Transport and Water and Ministry of Environment on making available information on the fuel economy and CO 2 emissions of new passenger vehicles Government Decree 263/2006 (XII. 20) on the National Transport Authority Government Decree 263/2006 (XII. 20) on the National Transport Authority and Ministerial Decree 5/1990 (IV. 12) of the Ministry of DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW. DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW. The decree sets out the rules relating to various information tools. The regulation itself does not require transposition into national law. The related legal act has set up the institutional structure to implement the regulation. The regulations themselves do not require transposition into national law. The related legal acts have set up the institutional structure to implement the regulations. 8

9 Transport and Communications on the technical testing of motor vehicles FUELS Directive 98/70/EC as amended by Directive 2009/30/EC Directive 1999/32/EC Directive 2003/30/EC repealed by Directive 2009/28/EC Ministerial Decree 30/2011 (VI. 28) of the ministry responsible for the national development of the quality requirements for motor fuels Ministerial Decree 17/2003 (IV. 4) of the Ministry of Economy and Transport, the Ministry of Environment and the Ministry of Finance on reducing the sulphur content of certain liquid fuels Law CXVII of 2010 on promoting the use of renewable energy for transport and reducing GHG emissions from energy use in transport Government Decree 343/2010 on the requirements for sustainable biofuel production and certification The decree sets out fuel quality requirements, rules for inspection and certification of fuel quality, reporting requirements and rules concerning consumer information. The ministerial decree sets out the fuel quality requirements, the rules and procedures for certification, sampling and analysis, and emergency situation arrangements. The law contains relevant legal definitions, target values for renewable energy in transport, a framework for sustainability criteria for biofuels, measures to promote the use of biofuels, and data collection and reporting requirements to support the introduction of monitoring systems for GHG emissions. The decree sets out requirements for sustainable biofuel production, the minimum proportion of biofuel blend in motor fuels, and rules and procedures. 9

10 Ministerial Decree 36/2010 (XII. 31) of the Ministry for National Development on the rules for calculating GHG emissions reductions in relation to the sustainability requirements of biofuels The decree contains the calculation procedures for GHG emissions reductions from biofuels and the necessary default values. OZONE LAYER PROTECTION Regulation (EC) No. 1005/2009 Decision 2010/372/EU Regulation (EU) No. 537/2011 LULUCF Decision 529/2013/EU Government Decree 310/2008 (XII. 20) on activities that deplete the ozone layer and fluorinated greenhouse gases The regulation itself does not require transposition into national law. The related legal act has set up the institutional structure to implement the regulation. The decision does not require transposition into national law. The regulation does not require transposition into national law. THE DECISION DOES NOT REQUIRE TRANSPOSITION INTO NATIONAL LAW. INDUSTRIAL EMISSIONS Directive 2010/75/EU Government Decree 314/2005 (XII. 25) regarding the procedures for environmental impact assessment and the single procedure for authorisation of the utilisation of the environment 10

11 ENERGY EFFICIENCY Directive 2012/27/EU PENDING Notification on Articles 5 and 7 has been submitted to the EC. The new National Energy Efficiency Action Plan (NEEAP) has not yet been submitted. Directive 2006/32/EC First and second NEEAP Adopted in February 2008 and October 2011 COMBINED HEAT AND POWER (CHP) Directive 2004/8/EC Law 2007/ LXXXVI on electricity BUILDINGS Directive 2010/31/EU Regulation 2006/7 of the minister without portfolio on the definition of the energy performance of buildings Regulation 2014/20 of the Ministry of the Interior on the definition of the energy performance of buildings, amending Regulation 2006/7 A nearly zero buildings (NZB) national plan has not yet been submitted by Hungary, but a definition of NZB is included in Regulation 2014/20. RENEWABLE ENERGY SOURCES Directive 2009/28/EC Law LXXXVI 2007 on electricity Government Decree 309/2013 (VIII. 16) on proving the origin of electricity produced from renewable sources and high efficiency cogeneration Government Decree 389/2007 (XII. 23) on feed-in rules and feed-in 11

12 tariffs for electricity produced from waste and renewable sources Ministerial Decree 1/2012 (I. 20) of the Ministry for National Development on the calculation method for determining the share of energy produced from renewable sources Other basic national legislation regulating the implementation of EU legal acts The Hungarian Green Investment Scheme was created in 2007 (Government Regulation 323/2007) and comes under the competence of the Ministry for National Development. 1 The aim of the scheme is to use the revenues collected from the sale of Kyoto (or assigned amount) units (AAUs) for climate policy implementation. Rather than being an obligation, current regulations only recommend spending this revenue for such purposes, but Hungary has agreed to use all of them on climate protection mainly GHG emission mitigation. The scheme establishes the principle of additionality: the supported measures would not be implemented without funding from the Green Investment Scheme. It is important to verify the realised emissions reductions from the supported projects, as this influences the country s future possibilities for selling quotas (even though the prospects of further selling are very low due to the lack of demand). There are several measures that can be funded by the scheme, such as projects that facilitate renewable energy use, improvements to the efficiency of district heating systems, the modernisation of public lighting systems, and the reduction of energy consumption in buildings. Until now, the main focus was on the energy efficiency of buildings, as they represent 30 percent of total CO 2 emissions in Hungary. The sub-programmes from 2009 to 2011 are listed below Climate Friendly Panel Home sub-programme for apartment buildings, housing associations and local authorities Friendly Home Energy Efficiency sub-programme for apartment buildings, housing associations and private individuals 1 This section is based on information from the Green Investment Scheme website, 12

13 2010 Energy Efficient Household Appliance Replacement sub-programme for foundations dedicated to protecting the interests of large families, elderly people, people with disabilities and registered unemployed people Energy-Efficient Bulb Replacement sub-programme for foundations dedicated to protecting the interests of large families, elderly people, registered unemployed people and people with disabilities 2011 Our Home Renovation and Building New Homes sub-programmes for housing associations, apartment buildings, builders organisations and private individuals Promotion of renewable energy use, installation of multifunctional solar collector systems for the generation of domestic hot water and heating purposes for private individuals and apartment buildings According to the second Hungarian Energy Efficiency Action Plan, the Green Investment Scheme, among other instruments, contributed to energy savings of 4.09 PJ in residential buildings, as a cost of HUF 535 billion up to 2010, which was a significant contribution towards achieving the 21 PJ savings target in residential buildings by Relevant EU directives already adopted or still pending Although Hungary is in line with the EU 2020 target and has incorporated the majority of directives related to the EU Climate and Energy Package, there are some gaps in relation to some implementing legal acts, as synthetised in the table below. 2 For the Energy Efficiency Action Plan reports see: use_en.htm, pages

14 Table 2: Directives (and relevant amendments) National legislation DIRECTIVES NATIONAL LEGISLATION COMMENTS EU ETS Directive 2003/87/EC Directive 2004/101/EC Directive 2008/101/EC Directive 2009/29/EC Law 2005/XV on trade in GHG emissions repealed by Law 2012/CCXVII on participation in the EU ETS and the implementation of the Effort Sharing Decision CARBON CAPTURE & STORAGE (CCS) Directive 2009/31/EC Directive 2011/92/EU Law XLVIII of 1993 on mining Government Decree 145/2012 (VII. 3) on the geological storage of CO 2 The EC started infringement proceedings against Hungary, but closed the case in July 2014 as Hungary notified the EC that they have taken measures to incorporate the CCS Directive into national law. NON-ETS SECTORS ROAD TRANSPORT Directive 1999/94/EC Joint Ministerial Decree 12/2002 of the Ministry of Economy, Directive 2003/73/EC Ministry of Transport and Water and Ministry of Environment on making available information on the fuel economy and CO 2 emissions of new passenger vehicles 14

15 Government Decree 263/2006 (XII. 20) on the National Transport Authority Government Decree 263/2006 (XII. 20) on the National Transport Authority and Ministerial Decree 5/1990 (IV. 12) of the Ministry of Transport and Communications on the technical testing of motor vehicles FUELS Directive 98/70/EC Directive 2000/71/EC Directive 2003/17/EC Directive 2009/30/EC Directive 2011/63/EC Directive 1999/32/EC Directive 2005/33/EC Ministerial Decree 30/2011 (VI. 28) of the Ministry for National Development on the quality requirements of motor fuels Ministerial Decree 17/2003 (IV. 4) of the Ministry of Economy and Transport, the Ministry of Environment and the Ministry of Finance on reducing the sulphur content of certain liquid fuels Directive 2009/30/EC Directive 2012/33/EU INDUSTRIAL EMISSIONS Directive 2010/75/EC Government Decree 314/2005 (XII. 25) regarding the procedures for environmental impact assessment and the single procedure for authorisation of the utilisation of the environment 15

16 ENERGY EFFICIENCY Directive 2012/27/EU TRANSPOSITION IS PENDING Directive 2006/32/EC First and second NEEAP Adopted in February 2008 and October 2011 COMBINED HEAT AND POWER (CHP) Directive 2004/8/EC Law 2007/LXXXVI on electricity BUILDINGS Directive 2010/31/EU Regulation 2006/7 of the minister without portfolio on the definition of the energy performance of buildings Regulation 2014/20 of the Ministry of the Interior on the definition of the energy performance of buildings, amending Regulation 2006/7 A national plan for NZB has not yet been submitted by Hungary, but the definition of NZB is included in Regulation 2014/20. RENEWABLE ENERGY SOURCES Directive 2009/28/EC Law LXXXVI 2007 on electricity Government Decree 309/2013 (VIII. 16) on proving the origin of electricity produced from renewable sources and highefficiency cogeneration Government Decree 389/2007 (XII. 23) on feed-in rules and feed-in tariffs for electricity produced from waste and renewable sources Ministerial Decree 1/2012 (I. 20) of the Ministry of National Development on the calculation method for determining the share of energy produced with renewable sources The EC sent a reasoned opinion to Hungary for not informing the EC about the full transposition of the RES Directive. A new renewable energy support scheme has been under preparation since 2011 and a draft has been published, but it has not been finalised and seems to have been postponed indefinitely. A National Renewable Energy Action Plan has been adopted, which is in line with the National Energy Strategy. 16

17 BIOFUEL Directive 2003/30/EC repealed by Directive 2009/28/EC Law CXVII of 2010 on promoting the use of renewable energy for transport and reducing GHG emissions from energy use in transport Ministerial Decree 36/2010 (XII. 31) of the Ministry for National Development on rules for calculating GHG emissions reductions in relation to the sustainability requirements of biofuels EU ETS Law 2012/CCXVII on the participation of Hungary in the EU ETS and the implementation of the Effort Sharing Decision adopted the following directives: Directive 2003/87/EC, Directive 2004/101/EC, Directive 2008/101/EC and Directive 2009/29/EC. The law lays down the rules for the ETS in Hungary, covering emission permits, monitoring, reporting and verification (MRV), the allocation of allowances, trading and registry Carbon capture and storage Law XLVIII of 1993 on mining provides basic legal definitions (such as for CO 2 storage sites and pipelines) and sets out the tasks of the government, the relevant ministry (Ministry for National Development) and the mining authority. The mining authority has to oversee activities related to the establishment and operation of CO 2 pipelines and exploration, and the establishment and operation of storage sites for CO 2. The tasks of the government are multiple and include overseeing the mining authority and establishing rules and procedures concerning the exploration of potential sites, permitting, financial assurance, access to the CO 2 transport network, fines and reporting to the EC. The tasks of the ministry include determining safety requirements for CO 2 transport pipelines. Government Decree 145/2012 (VII. 3) on the geological storage of CO 2 sets out rules and procedures related to identifying potential storage sites, permitting procedures for exploring potential storage sites and related to CO 2 storage, the required financial assurances from the operators of storage sites, the monitoring, reporting and supervision of activities related to the storage of CO 2, and fines for illegal and non-compliant activities. 17

18 Government Decree 314/2005 (XII. 25) regarding the procedures for environmental impact assessment and the single procedure for authorisation of the utilisation of the environment and Government Decree 219/2004 (VII. 21) on the protection of underground waters establish rules relating to environmental impact assessment and environmental permitting for CO 2 transport and storage activities and prohibiting CO 2 storage activities in areas with sensitive water reserves Non-ETS sectors Transport Joint Ministerial Decree 12/2002 of the Ministry of Economy, Ministry of Transport and Water and Ministry of Environment on making available information on the fuel economy and CO 2 emissions of new passenger vehicles establishes rules relating to various information tools. These are fuel economy labelling, the annual publication by the transport authority of information on the fuel economy and CO 2 emissions of new passenger vehicles, and other information tools including billboards and advertisements. Government Decree 263/2006 (XII. 20) on the National Transport Authority (NTA) sets out the tasks of the NTA, which is a central authority under the Ministry of Transport. The tasks of the NTA are carried out by its central body and three specialist bodies, including the Central Road Motor Vehicle Transport Office (CRMTO). Government Decree 263/2006 (XII. 20) on the National Transport Authority and Ministerial Decree 5/1990 (IV. 12) of the Ministry of Transport and Communications on the technical testing of motor vehicles also contribute to setting up the institutional structure. The CRMTO is responsible for a number of tasks, including tasks set out in Regulations 510/2011/EU and 293/2012/EU, such as publishing emission and fuel consumption data for new motor vehicles, collecting and forwarding to the EC the data from the monitoring of CO 2 emissions, collecting data from filling stations, and related reporting requirements on member states Fuels Ministerial Decree 30/2011 (VI. 28) of the Ministry for National Development on the quality requirements of motor fuels sets out fuel quality requirements, rules for the inspection and certification of fuel quality, reporting requirements and rules concerning consumer information. Ministerial Decree 17/2003 (IV. 4) of the Ministry of Economy and Transport, the Ministry of Environment and the Ministry of Finance on reducing the sulphur content of certain liquid fuels establishes fuel quality requirements; the rules and procedures for certification, sampling and analysis; and emergency situation arrangements. 18

19 2.2.4 Industrial emissions Government Decree 314/2005 (XII. 25) regarding procedures for environmental impact assessment (EIA) and the single procedure for authorisation of the utilisation of the environment determines the scope of EIA and sets out the procedures related to EIA and permitting Energy efficiency Hungary s first NEEAP was adopted in February 2008, and the second in October 2011 in line with the provisions of the Directive 2006/32/EC. Directive 2012/27/EU sets several deadlines for implementation. As of August 2014, Hungary was lagging behind with many requirements related to this directive. Hungary has submitted its notification on the implementation of Article 7, although it is virtually void of content and only expresses Hungary s plan to decide on measures for implementation (energy efficiency obligation scheme and/or alternative measures) at a later date. Hungary has not submitted: a NEEAP (due in April 2014); a legal transposition document (due in June 2014); exemptions from the cost-benefit analysis obligation it intended to grant to electricity generation and industrial installations above 20 MW th, based on the feasibility of high-efficiency cogeneration (Article 14.6) (due in December 2013); or a building renovation strategy (Article 4) Combined heat and power Directive 2004/8 was adopted through the Law on Electricity (created in 2007 and amended several times). Among other things, the law defines the CHP certificate, the economically justifiable demand for heating or cooling, and useful heat production Buildings Directive 2010/31/EU and its parent directive were adopted through Regulation 2006/7 of the minister without portfolio on the definition of the energy performance of buildings, and Regulation 2014/20 of the Ministry of the Interior on the definition of the energy performance of buildings, amending Regulation 2006/7. The first regulation defines 19

20 concepts related to energy efficiency (major renovation, energy performance certificates etc.), the methodology for calculating the energy performance of buildings, and minimum energy performance requirements (U and kwh/m2/a values). The 2014 amendment defined new U values that will enter into force from January 2015 and introduced the concept of NZB. However, Hungary failed to submit its national plan for NZBs, as required by the Energy Performance of Buildings Directive (EPBD) Renewable energy sources The National Renewable Energy Action Plan contains measures to reach the renewable energy target of percent of gross final energy consumption by The targeted share is 10.9 percent for the electricity sector, 18.9 percent for heating and cooling, and 10 percent for renewable transport fuels. The respective shares in 2010 were 6.7 percent, 9 percent and 3.7 percent. The 2013 progress report of the EC shows that Hungary is on track towards meeting its renewable energy target for The overall share of renewable energy in 2012 was 9.6 percent of gross final energy consumption. 4 A number of legislative instruments transpose the requirements of Directive 2009/28/EC. One law and a set of government and ministerial decrees set out the rules regarding renewable energy support in the electricity sector: Law LXXXVI 2007 on electricity; Government Decree 309/2013 (VIII. 16) on proving the origin of electricity produced from renewable sources and high-efficiency cogeneration; Government Decree 389/2007 (XII. 23) on feed-in rules and feed-in tariffs for electricity produced from waste and renewable sources; and Ministerial Decree 1/2012 (I. 20) of the Ministry for National Development on the calculation method for determining the share of energy produced from renewable sources. The support scheme for renewable electricity production is a feed-in tariff, and the Hungarian Energy Office determines the timeframe during which the tariff is applied in order to ensure positive returns on investment. Law XVIII of 2005 on district heating contains principles for determining the price of district heating, for which detailed rules are determined by the Hungarian Energy and Utility Regulation Office. The principles of price setting take into consideration the positive environmental impact of renewable energy use, but there is a strong political incentive to keep prices low, therefore there is no adequate centralised support for renewable heat production. In addition, there is EU funding for renewable energy, including electricity production, heat production in district heating plants, and solutions integrated into buildings, but it is difficult to foresee the level of support and eligibility of investments, as it depends on the requirements set out in the calls. 3 lex.europa.eu/legal- content/en/all/?uri=celex:52013dc

21 Biofuels Law CXVII of 2010 on promoting the use of renewable energy for transport and reducing GHG emissions from energy use in transport contains relevant legal definitions, target values for renewable energy in transport, a framework for sustainability criteria for biofuels, measures to promote the use of biofuels, and data collection and reporting requirements to support the introduction of monitoring systems for GHG emissions. Government Decree 343/2010 on the requirements for sustainable biofuel production and certification sets out requirements for sustainable biofuel production, the rules and procedures for issuing sustainability certificates, the minimum proportion of the biofuel blend in motor fuels, the monitoring and reporting of marketed biofuels, rules relating to the registry for biofuel GHG emissions, sustainability certificates and sustainability criteria, the legal consequences of non-compliance and the designation of responsible authorities. Ministerial Decree 36/2010 (XII. 31) of the Ministry for National Development on the rules for calculating GHG emissions reductions in relation to the sustainability requirements of biofuels contains the calculation procedures for GHG emissions reductions of biofuels and the necessary default values. 2.3 Impacts and requirements linked to EU legal acts under preparation The LOCSEE Guidelines for the Coordinated Transfer of EU Legislation in the Field of Climate Change lists the proposed new legislation in the field of the EU ETS, on the auctioning and free allocation of allowances, as well as in the transport sector and on F- gases. The most important proposal from a Hungarian point of view is the one that allows member states to modify the preliminary total annual amount of emission allowances allocated free of charge to installations covered by the ad hoc list of sectors and subsectors that are deemed to be exposed to a significant risk of carbon leakage (Commission Decision 2014/9/EU). 5 This proposed amendment would cover the following sectors: finishing of textiles (NACE code 1330); manufacture of bricks, tiles and construction products in baked clay (NACE code 2332); manufacture of plaster products for construction purposes (NACE code 2362); casting of iron (NACE code 2451); and casting of light metals (2453). These are among the sectors listed as being exposed to a significant risk of carbon leakage also for the period 2015 to lex.europa.eu/legal- content/en/txt/html/?uri=celex:32014d0009&from=en 6 EC COMMISSION DECISION of XXX (proposal) determining, pursuant to Directive 2003/87/EC of the European Parliament and of the Council, a list of sectors and subsectors that are deemed to be exposed to a significant risk of carbon leakage, for the period 2015 to 2019: 21

22 As indicated by Eurostat statistics, sectors with NACE code 23 and 24 have shown significant contraction in Hungary since 2008 due to the economic crisis, as shown by their added value. The non-metallic minerals sector (NACE 23) underwent a 32 percent contraction between 2008 and 2012, while the manufacture of basic metals sector (NACE 24) showed a reduction in added value of 62 percent in the same period, thus any help that would increase their competitiveness (via reduced carbon cost) is a great help to them. If the proposal is adopted, it could help these two sectors to regain or maintain some production opportunities in the near future. 2.4 Challenges in transposing and implementing EU legal acts on climate change Transposition Hungary has faced some challenges in transposing certain pieces of legislation and has therefore been the target of some reasoned opinions and fully fledged infringement procedures. The challenges faced by the public administration result mainly from a reduced personnel capacity compared with previous years and a lower political priority given to the environment. This can be seen in the reduction of the number of staff working in the field of environment and the integration of the previously separate Ministry of Environment into the Ministry of Agriculture and Rural Development, the Ministry of Economic Affairs, and the Ministry for National Development. Due to high staff turnover, lack of technical knowledge is also becoming an issue Implementation The following table provides an overview of the implementation of the discussed EU legislation. The implementation status is indicated by the following symbols: implemented " inadequate implementation The issues faced in relation to implementation are similar to those faced in relation to transposition and include reduced staff capacity in the public administration compared to previous years and a lower political priority given to the environment as well as high staff turnover resulting in lack of technical knowledge. The institutions responsible for implementing environmental policy and the environmental authorities have also seen a reduction in the number of staff and a high staff turnover. 22

23 Table 3: Main provisions of EU acts and their implementation at national level EU LEGISLATIVE ACT(S) MAIN PROVISIONS IMPLEMENTATION STATUS GENERAL FRAMEWORK UNFCCC & KYOTO PROTOCOL Decision 2002/358/EC - Periodic national Decision 2006/944/EC communications to the UNFCCC - National annual GHG emissions inventory - National inventory system - Target: GHG emissions in EU ETS Directive 2003/87/EC - Design of the EU ETS system - Cap and trade principle: limited Community-wide quantity of GHG emission allowances fixed for each year - Inclusion of aviation since the beginning of Determine how to use revenues from auctions - Special reserves of free allowances for new entrants - Ensure that a national accreditation body compiles and maintains a list of accredited verifiers for the purposes of EU ETS - Allocate and issue 23

24 allowances to be allocated free of charge - Continuous monitoring and reporting of emissions and activities - Establishment of a national registry - Organise a mechanism for carrying out regular auctions of GHG emission allowances - Compile and update a list of stationary installations and aircraft operators falling under the scope of the EU ETS - Provide permits to installations and aircraft operators falling under the scope of the EU ETS - Ensure that each aircraft operator submits to the competent authority an appropriate monitoring plan; approve plans - Ensure that by March 31 of each year x each installation/aviation operator has verified its emissions for the year x-1 - Ensure that by April 30 of each year x each installation/aviation operator surrenders a number of allowances equal to the total emissions from that installation/aviation operator during the year x- 1 24

25 REGISTRY Regulation (EU) No. 389/ National registries are replaced by a single centralised online database managed by the EC - Establish a national administrator - Establish a national helpdesk for account holders and representatives x - Communicate changes to the national (aviation) allocation table(s) - Approve, update and review information submitted to open an account - Ensure that a national accreditation body compiles and maintains a list of accredited verifiers for the purposes of the EU ETS AUCTIONING Regulation (EU) No. 1031/ Member states shall auction allowances in the form of either futures or forwards - Perform adjustments to the volumes of allowances to be auctioned FREE ALLOCATION Decision 2011/278/EU - Allocate and issue (by February 28 of each year x) allowances to be allocated free of charge 25

26 MONITORING, REPORTING, VERIFICATION & ACCREDITATION Regulation (EU) No. 600/ The national accreditation body is responsible for the accreditation process and monitoring of accredited verifiers Regulation (EU) No. 601/ Monitoring and reporting of GHG emissions and activity data from stationary installations and aviation activities in the third trading period - Design electronic templates for the submission of monitoring plans - Identify the competent authority(ies) AVIATION Regulation (EU) No. 100/ List aircraft operators and define administering state for each operator NER 300 Decision 2010/670/EU - Collect proposals for innovative projects to be implemented in Hungary - Pre-select proposals by verifying that they respect the eligibility criteria and by assessing the 26

27 convenience of supporting each project - Submit pre-selected proposals together with information on state aid - By December 31 each year, report on the implementation of demonstration projects CARBON CAPTURE & STORAGE Directive 2009/31/EC - If member states intend to allow the geological storage of CO 2 in their territory, they shall first undertake an assessment of the storage capacity available in parts or in the whole of their territory - They then need to establish or designate the competent authority or authorities for implementing the provisions of the directive. - They also need to establish and maintain a register of the storage permits granted, and a permanent register of all closed storage sites. - A number of other provisions are foreseen if a member state finally uses CCS (on issuing permits, inspection, arrangements for financial contributions by operators of CCS sites, rules for penalties etc.). No storage permits have been granted yet - Every three years, 27

28 member states must report to the EC on the implementation of the directive. (First report submitted) GHG EMISSION & MONITORING FOR NON-ETS SECTORS Decision 406/2009/EC - Each member state should annually reduce its GHG emissions in a linear manner to pursue the 2020 limit and report on its emissions - GHG emissions in non- ETS sectors: +10% in 2020 compared to Include data on progress in annual national inventory reports (Decision 280/2004) Regulation (EU) No. 525/ Monitoring and reporting GHG emissions and reporting other information at national and EU level Hungary on track towards meeting the target NIR 2014 submitted Deadline for the first report, March 15, 2015 ROAD TRANSPORT Regulation (EC) No. 443/2009 Regulation (EU) No. 1014/ From January 1, 2010, and each subsequent calendar year, each member state shall record information for each new passenger car registered in its territory and make it available to manufacturers and their designated importers or representatives in each member state. - By February 28 each year x, starting in 2011, each member state shall determine and transmit to the EC information for the 28

29 year x-1 on the number of new passenger cars registered, average specific CO 2 emissions from new passenger cars, etc. - Member states shall designate (by December 8, 2009 at the latest) a competent authority for the collection and communication of monitoring data - Monitoring data (including information on filling stations supplying bioethanol) shall be transmitted by member states via electronic data transfer to the Central Data Repository managed by the EEA. Regulation (EU) No. 510/ From January 1, 2012, and each subsequent calendar year, each member state shall record information for each new light commercial vehicle registered in its territory. This information shall be made available to the manufacturers and their designated importers or representatives in each member state. - By February 28of each year x, starting in 2013, each member state shall determine and transmit to the EC monitoring information for new light commercial vehicles in respect of the year x-1. 29

30 FUELS Directive 2009/30/EC of the European Parliament and of the Council of 23 April 2009 amending Directive 98/70/EC as regards the specification of petrol, diesel and gas- oil and introducing a mechanism to monitor and reduce greenhouse gas emissions and amending Council Directive 1999/32/EC as regards the specification of fuel used by inland waterway vessels and repealing Directive 93/12/EEC - Member states shall designate the supplier(s) or suppliers responsible for monitoring and reporting lifecycle GHG emissions per unit of energy from fuel and energy supplied. - From January 1, 2011, suppliers shall report annually, to the authority designated by the member state, on the GHG intensity of fuel and energy supplied within each member state - Member states shall require suppliers to reduce as gradually as possible lifecycle GHG emissions per unit of energy from fuel and energy supplied by up to 10 % by December 31, 2020, compared with the fuel baseline standard. - From January 1, 2017, the GHG emission saving from the use of biofuels shall be at least 50%, and from January 1, 2018, at least 60% for biofuels produced in installations in which production started on or after January 1, By March 31, 2010, member states shall submit to the EC a report with a list of areas where typical GHG emissions from the cultivation of agricultural crops are expected to be lower or equal to typical values Deadline has not yet passed 30

31 listed by the directive. ENERGY EFFICIENCY Directive 2006/32/EC - Set energy savings target for Submit first and second NEAAP. Directive 2012/27/EU - Each member state should fix an indicative energy efficiency target (Article 3). - Long-term renovation strategy for buildings (Article 4). - National energy efficiency obligation scheme for energy distributors and/or retail energy sales companies (Article 7). - Individual meters for final consumers of electricity, natural gas, district heating and cooling, and domestic hot water (Article 9). - Member states must develop a comprehensive assessment of the potential for applying highefficiency cogeneration and efficient district heating and cooling. " " Only formally implemented " Requires further effort, especially in relation to district heating " Not yet published COMBINED HEAT AND POWER (CHP) Directive 2004/8/EC - Member states shall ensure that the origin of electricity produced from high- efficiency cogeneration can be guaranteed according to objective, transparent and non- discriminatory criteria. Included in the Law on Electric Energy - Member states may 31

32 designate one or more competent bodies, independent of generation and distribution activities, to supervise the issue of the guarantee of origin. - Member states shall establish an analysis of the national potential for the application of high- efficiency cogeneration, including high- efficiency micro- cogeneration. - Member states shall for the first time not later than February 21, 2007, and every four years thereafter, evaluate progress towards increasing the share of high-efficiency cogeneration. - Member states shall ensure that support for cogeneration existing and future units is based on useful heat demand and primary energy savings. - Member states shall, no later than February 21, 2006, publish a report that includes: a) the measures taken to ensure the reliability of the guarantee system; b) an analysis of the national potential for the application of high- efficiency cogeneration; c) 7 Second report has been submitted 8 These data are included in the first national report 7 HU Report Art6 Potential (Hungarian Version) 8 see: 32

33 an evaluation of the existing legislative and regulatory framework with regard to authorisation procedures that are applicable to high- efficiency cogeneration units; and d) an evaluation of the progress achieved towards increasing the share of high-efficiency cogeneration. - Member states shall submit to the EC for the first time before the end of December 2004, covering data for the year 2003, and thereafter on an annual basis, statistics on national electricity and heat production from cogeneration. - Member states shall also submit annual statistics on cogeneration capacities and fuels used for cogeneration. BUILDINGS Directive 2010/31/EU - Member states shall take the necessary measures to ensure that minimum energy performance requirements for buildings or building units are set with a view to achieving cost- optimal levels - Member states shall report to the EC all input data and assumptions used for calculations of cost- optimal levels of minimum optimal_2013_en.zip 33

34 energy performance requirements and the results of those calculations. - Member states shall draw up national plans for increasing the number of NZB. These national plans may include targets differentiated according to the category of building. - Each member state must set up a system for certifying the energy performance of buildings. " Not submitted RENEWABLE ENERGY SOURCES Directive 2009/28/EC - Mandatory targets for RES penetration by 2020 in each member state. Each member state shall introduce measures effectively designed to ensure that the share of energy from renewable sources equals or exceeds that shown in the indicative trajectory set out in the directive. - Each member state shall adopt a national renewable energy action plan and notify the EC by June 30, Each member state shall submit a report to the EC on progress in the promotion and use of energy from renewable 13% mandatory target set by the EU; Hungary undertook a voluntary 14.65% target 2011 and 2013 reports were submitted Reports are available at: and 34

35 sources by December 31, 2011, and every two years thereafter. OZONE LAYER PROTECTION Regulation (EC) No. 1005/2009 LULUCF Decision 529/2013/EU - Designate a competent authority - Prohibit the production, import, export, placing on the market, use, recovery, recycling, reclaiming and destruction of ODSs, except for specific uses. - Recover ODS from existing equipment and buildings. - Inspect the compliance of undertakings. - Reporting obligations by June 30 each year. - Account for emissions and removals resulting from LULUCF activities. Report not yet prepared for period starting from January 1, 2013 F-GASES Directive 2006/40/EC - National reports on current and future LULUCF activities - Prohibit the use of F-gases with high global warming potential in new types of cars and vans introduced from 2011 and produced from

36 Regulation (EC) No. 842/ Containment of F-gases and recovery of equipment. - Training and certification for personnel and companies. - National certification system. - Labelling of equipment containing F-gases. - Prefer environmentally superior alternatives to F- gases. INDUSTRIAL EMISSIONS Directive 2010/75/EU - Determine the basic obligations on operators. - Ensure respect for emission limit value and the adoption of best available technologies (BAT). - Designate a competent authority. - Grant emission permits or register large installations. - Periodical reconsideration/update of permits. - National system for environmental inspections. - Report on the implementation of this directive. 36

37 2.5 Concluding remarks Hungary was among the good students in the first phase of the implementation of European climate policy for many reasons. Its electricity sector was largely privatised, and the German, French, and Belgian owners of the power plants were more positive towards the ETS Regulation for two reasons. First, the grandfathering of allowances meant a reduced burden (or in fact gains for some of the better-performing plants) on generation companies, thus they did not oppose the introduction of the system. Second, through a more generous allocation in the new member states, these companies were even seen as sources of cheap allowances on the consolidated company level. In the field of RES regulation, Hungary was among those countries that increased their RES target from the 13 percent proposed by the EC to percent by In other areas, such as building efficiency improvements, international sources available from, for example, assigned amount units (AAUs, which are tradable emission permits under the Kyoto Protocol) were used in those building programmes that focused on the very inefficient blockhouse systems in the country. Since these programmes were very visible at political level, they attracted high political support and led to high energy savings, which also benefited building owners. Since 2013 (the third ETS period), the attitude of the government has been less proactive. In the field of building efficiency improvements, programmes usually lack sufficient financial resources (because earlier sources from AAUs have dried up, for example) and the achievement of further energy efficiency improvements in buildings would require programmes focusing on individual family homes with lower political visibility. The present government policy aims to cut the utility end-user prices of electricity, gas and district heating, which reduces incentives for residents to reduce energy consumption and extends the payback times for energy efficiency investments. The reduction in end-user prices makes residential renewable investments less attractive, thus if the price-reduction policy is sustained in the long term, both energy efficiency and RES investments will be negatively affected. In the renewable policy field, the country is on track to reach its NREAP target, although there are two trends to be considered. The target will probably be achieved by RES heating, which is 5 percent higher than that planned in the NREAP, while the RES electricity target lags behind. In the electricity field, the most intensively applied solution is still biomass co-firing in old coal-fired plants with low efficiency. Incentives for building new and more efficient biomass plants are therefore reduced, as quotas are allocated to existing co-firing plants, limiting the opportunity for new biomass-based generation. In addition, frequent changes in ministerial portfolios have meant that the units dealing with climate change related issues have been moved among ministries, resulting in high staff 37