EAST EUROPEAN COUNTRIES RESPONSES. Hungarian experiences with the EU ETS

Transcription

1 EAST EUROPEAN COUNTRIES RESPONSES Understanding the Pilot Phase of EU ETS in EU 12 Member States Hungarian experiences with the EU ETS September , Paris Dóra Fazekas PhD Candidate at Corvinus University of Budapest Environmental Management and Technology Department

2 Hungary is a small country in every aspect, influenced by its neighbors June 13, UNFCCC, ratified by the law LXXXII in 1995 August 21, Kyoto Protocol ratification May 1, 2004 European Union accession February 16, Kyoto Protocol December 30, Kyoto eligibility Annex I country with Eastern legacies copy and paste policy

3 By ratifying the Kyoto Protocol, Hungary committed to cut GHG emissions by 6% under levels Low per capita CO 2 emissions level Liberalized electricity and natural gas markets Electricity generation and distribution almost fully privatized

4 Legal and Regulatory Environment Three Ministries, each with a different goal and a different conception Ministry for Environment and Water Ministry of Economy and Transport Ministry of Finance National Inspectorate for Environment, Nature and Water Registry ( Institutional learning Serious delays, confusions, postponing decisions

5 The lack of harmonized rules and the absence of restrictive Kyoto Protocol targets describe the allocation process in most new Member States Hungarian NAP I - November 25, 2006 Total cap: M t for NER: 1.89 M t (2% of the cap) Auction reserve: 2.37 M t (2.5% of the cap) Top-down macroeconomic analysis Proposed amount - 3.8% more than emissions in 2002 Accepted in December 2004 without any reductions NAP withdrawn, a new version resubmitted

6 Interesting features of the Hungarian NAP are worth mentioning Free-riding technique drafters built on the structure and contents of other NAPs Early action reserve distributed in proportion to the reductions achieved New entrants reserve divided into progressively decreasing tranches Data collection soft data

7 Hungary was one of only a handful of states to allow auctioning Hungary, Ireland and Lithuania used sealed-bid uniform-price auctions 2.5% set aside, 4.18% auctioned

8 Auctions were implemented on the euets.com CO 2 trading platform On the day of the first action (Dec 11, 2006) the auction clearing price was higher than the daily market price

9 EU ETS has not led to significant emissions abatement in the pilot phase 254 installations emissions increased at 40%, decreased at 60% Significant net long positions (14%) 12 M t/3 years Firms build capability to respond to carbon price signal

10 Hungary effectively exercised the opportunity to access the European carbon market Considerable movement among market players imports, exports, domestic transfers Net export M EUA (10.75% of allocation and 80% of surplus) International transfers - 10 M EUA - 52M (0.05% of Hungarian GDP) Domestic transfers - 5 M EUA M (0.07% of Hungarian GDP) Timing of transfers and surrenders

11 Impact of the EU ETS on operations was minimal Power generation Neutral due to over-allocation After the price collapse one power plant switched back to coal Cement production Long position Sales through Holcim central trading desk Iron and steel Only abatement possibility is to reduce production Leakage production to Ukraine Oil refinery Internal system to take carbon constraint into consideration 25 /t carbon price on every project (40 /t from 2012)

12 Conclusions Opposed to expectations there is no significant difference between Eastern and Western European Member States in the implementation and operation of the EU ETS The Hungarian experience serves as evidence that a new market economy has the institutional capacity and technical expertise to carry out auctioning No abatement was achieved due to the EU ETS Volume and frequency of domestic and foreign transfers prove that Hungary was actively involved in the allowance market The timing of transfers and surrenders suggests that Hungarian companies realized the revenue generating opportunity The impact of the EU ETS on operations was minimal, the effect has been positive for the sectors in some cases The pilot phase was a good idea, three years proved to be sufficient to prepare for the Kyoto phase

13 Thank you for your attention! Dóra Fazekas Background paper:

14 Supplementary slides Hungarian NAP I Foreign and domestic EUA transactions Installations interviewed Joint Implementation projects

15 Emissions allowances to be allocated to existing installations free of charge Quantity of emissions allowances (CO 2 tonnes/year) I/a-I/b. Electricity generation* 16,927,857 I/b. District heating 2,267,091 I/c. Combustion for internal purposes (except for sugar industry) 2,100,160 I/d. Sugar industry 431,479 II. Mineral oil processing 1,383,170 III. Coking 264,233 IV-V. Roasting and concentration of metal ores; iron and steel production* 2,643,354 VI/a. Cement production 2,390,321 VI/b. Lime production 464,575 VII. Glass production 295,420 VIII. The production of roof tiles, bricks, fire-resistant bricks, wall tiles, stone products and china 865,447 IX-X. The production of cellulose, paper and cardboard 203, Total for existing installations 30,236, New entrants reserve 633,218 TOTAL FREE OF CHARGE (1+2) 30,869, Quantity to be allocated for compensation 791,523 TOTAL FOR SECTORS (1+2+3) 31,660,907 * Including the quantity to be transferred by the sector later under point 15 of the Allocation Plan.

16 Hungarian transactions based on CITL data Member State Export (t) Import (t) Net export (t) United Kingdom 2,812, % 14, % 2,797, % Germany 2,528, % 28, % 2,499, % Belgium 1,485, % 7, % 1,478, % Spain 1,131, % 24, % 1,107, % Italy 1,080, % % 1,080, % Poland 78, % 236, % (158,369) (1.62%) Czech Republic 478, % 145, % 332, % France 21, % 135, % (114,160) (1.17%) Estonia % 38, % (38,692) (0.40%) Slovakia 10, % 21, % (11,494) (0.12%) Others 793, % 20, % 773, % Total 10,420, % 673, % 9,747, % Net Exports 11.70% Imports 0.85% exports 10.95%

17 Hungarian transactions based on Registry data

18 Installations interviewed receive more than half of Hungarian allocation Sector Allowances Percentage of allowances Cumulative percentage Mátrai Erőmű Rt. Visontai Erőmű 1-Combustion % 22.54% Dunamenti Erőmű Rt. 1-Combustion % 31.31% Dunaferr Nagyolvasztó és Konverteres Acélgyártómű 5-Iron and steel % 37.69% Vértesi Erőmű Rt. Oroszlányi Erőmű 1-Combustion % 43.42% AES Tisza Erőmű Kft. 1-Combustion % 48.19% MOL Rt. Dunai Finomító 2-Refineries % 52.77% Csepel II. KCGT Erőmű 1-Combustion % 55.46%

19 Approved Joint Implementation projects focus on wind energy and biomass utilization MtCO 2 e JI projects in Hungary Other N2O red. in acid plant Wind Submitted Endorsed Approved Appr., impl. Landfill gas Biogas plant Fuel switch to biomass