Comparison between energy and emission data reported under the ETS and energy balance and greenhouse gas inventory of Flanders

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1 Comparison between energy and emission data reported under the ETS and energy balance and greenhouse gas inventory of Flanders Abstract Dieter Cuypers 1, Tom Dauwe 1, Kristien Aernouts 1, Ils Moorkens 1, Johan Brouwers 2 1 VITO Transition, Energy and Environment Boeretang 200, Mol, B2400, Belgium dieter.cuypers@vito.be 2 Flemish Environmental Agency Van Benedenlaan 34, Mechelen, 2800, Belgium Belgium is a federal state where environmental issues fall under the responsibility of the regions. In the Flemish Community, data from the ETS are not used in the GHG inventories. In this paper, we compared the energy and emissions included in the ETS with the total energy consumption and CO 2 emissions for the different industrial sectors. During the first period of the ETS ( ), the average share of CO 2 emissions was 45 % of total CO 2 emissions in Flanders. In 2008 the share even rose to 50%, due to an expanded scope of the ETS in the second trading period. We also examined the differences between the data reported under the ETS and the data used in energy balances and GHG inventories. This analysis shows differences in the calculated emissions in some industry sectors due to different approaches and definitions. Also, in sectors where derived fuels are used, ETS data and energy balances are not easily comparable. We conclude that the involvement of different authorities for GHG inventories and ETS necessitates consultation and coordination among all actors. Further harmonization between the two data sets is needed in light of the division between ETS and ETS policies in the EU Climate and Energy Package. Keywords: Industry, energy, CO 2 emissions, ETS, energy balance, ETS 1. Introduction The European Union have played an important and active role in the international climate change debate. To reduce greenhouse gas emissions, numerous policies and measures have been installed at EU, member state, regional and communal level. The flagship of the EU climate policy is the EU emission trading scheme (ETS, Directive 2003/87/EC). The ETS is the largest cap-and-trade system with approximately installations in 2008 in 27 member states and 3 EU countries (i.e. Norway, Iceland and Liechtenstein). It covers almost all large point-source pollution sources of CO 2. In the first ( ) and second ( ) trading period of the ETS, installations were allocated emission allowances by the member states to offset their greenhouse gas emissions. The possibility to trade emission allowances will guarantee that emission reductions are achieved at the lowest cost. The type of activities that fall under the ETS are listed in Directive 2003/87/EC. Member states however have an option to either include (opt-in) or exclude (opt-out) certain activities. After the first trading period it became evident that member states interpreted the activity combustion installations with a thermal input exceeding 20 MW differently. For the second trading period, the European Commission clarified which activities (in the so-called aggregation rule) fall under the ETS.

2 The clear division between ETS and ETS emissions in current and especially future climate policies (i.e. in the climate and energy package) is also apparent in the EU energy policy. The Energy Services Directive (2006/32/EC) sets a mandatory objective to member states to improve energy efficiency with 1% annually between This directive only applies to the ETS sector. The division between ETS and ETS does not necessarily correspond to the classic division in sectors and subsectors (e.g. households, industry and services). Therefore there is a need for reliable statistics on ETS and ETS energy consumption and related CO 2 emissions for monitoring and reporting purposes. In this study we have compared the energy consumption and energetic CO 2 emissions of the energy and industrial sector with the energy consumption and CO 2 emissions of the ETS installation in Flanders, Belgium in For reasons of confidentiality information at installation level are aggregated to subsector level. Belgium is a federal country, where competences are divided between the federal and the regional level. For most climate and energy related competences, regional governments (Flanders, Walloon region and Brussels Capital) are for a large extent responsible for implementing policies and monitoring and reporting obligations. In Flanders, ETS installations have to monitoring, report and verify their emissions to the Department of Environment, Nature and Energy, whereas the energy consumption and greenhouse gas emissions are monitored by the Flemish Environmental Agency. 2. Methodology We were interested in a few comparisons related to the differences between the ETS sector and the installations and sectors not covered by the ETS Directive. More specifically, we wanted to investigate : The differences between ETS and ETS in sectors and subsectors that are subject to the ETS Directive (for installations that meet the criteria for inclusion under the ETS); and The differences between ETS and ETS in the complete sector (which includes all sectors and subsectors, irrespective of whether installations are included under the ETS). Both comparisons were made for: Energy consumption; Energetic emissions of CO 2 ; Process related CO 2 emissions; and The sum of all CO 2 emissions Energy consumption in the Flemish Community For energy statistics the Flemish Community uses the energy statistics manual developed by the IEA[1] with some specific adaptations because of the limited availability of regional energy statistics. As energy import data are only available at the Federal Belgian level for fossil fuels Flemish energy import is deducted from the Gross Inland Consumption, production and distribution losses and international bunker fuels. For biomass, derived fuels (i.e. byproducts from industrial processes which can be reused as fuel) and heat net import is considered to be equal to 0. With the increasing importance of imported biomass and for consistency reasons this assumption will be adjusted in the future.

3 The representation of the energy statistics derived is called the energy balance. An energy balance represents in a consistent way all streams and stocks per fuel product (energy carrier) in energy units. All stocks, production, imports, exports and consumption are compiled from existing statistics and inquiries and reporting by companies and sector organisations. The energy balance data allow for a division and comparison of energy consumption between the different sectors of an economy. The format of the energy balance for the Flemish Community follows the revised IPCC Guidelines from 1996 [1,2]. According to these guidelines the energy consumption of autoproducers of electricity is reported in the sector these autoproducers belong to whereas in the past they were treated as a specific category in the transformation sector. To compare ETS installation energy consumption with the energy consumption of the sectors they belong to, we first extracted the concerned sectors from the energy balance: the Energy sector and its subsectors Natural Gas, Electricity & Heat Production, and Petroleum Refineries; the Industry sector and its subsectors Metal, Chemical, Food, Paper, Textile, and Other Industries; and Commerce & Services. All of the extracted sectors and subsectors could be affected by the ETS Directive, other sector were not extracted. The sector terminology used is the MIRA sector division for the Flemish Community. To be able to compare energy consumption data, autoproducer energy consumption had to be subtracted from the (sub)sectors and counted towards the considered subsector in the Energy sector as this is the way emissions from energy consumption are treated in the ETS. Per (sub)sector the energy consumption per energy carrier was compared to the energy consumption of the ETS installations belonging to that sector. Some specific energy carriers had to be transferred from one sector to another when sectors use each other s derived fuels. Companies with ETS installations are required to report their energy consumption annually as imposed by the Directives 2003/87/EC and 2007/589/EC, based on a verified monitoring plan. These are the ETS data which are freely available on the LNE website[3]. Energy balance and ETS reporting is done annually which allows for a comparison for the years as ETS reporting started in For the comparisons only fossil and derived fuels are considered relevant for this study as they are the ones regulated by a cap-and-trade mechanism. Comparisons made with total energy consumption are comparisons made with total energy consumption of fossil and derived fuels; no renewable or nuclear energy is considered Greenhouse Gas Emissions in the Flemish community The energy balance statistics are used by the Flemish Environmental Agency to construct an Emission inventory by multiplying energy consumption by emission factors per fuel to calculate energetic emissions. Additional data from inquiries and reporting from companies and sector federations are used for verification. Process emissions are also included in this inventory and are calculated from the mandatory emission reporting by companies and inquiries. The comparison is done in the same way as for energy consumption comparisons. The extracted (sub)sector energetic emissions were calculated from the multiplication

4 of the energy consumption per energy carrier and the emission factor for each energy carrier. 3. Results 3.1. Energy consumption As the energy consumption of fossil fuels and derived fuels constitute the major part of CO 2 emissions from the evaluated sectors a first analysis on these energy consumption data can be seen as a first step for a consistent analysis of the CO 2 emissions later on. In Table 1 the results are given for each sector and subsector with the relative part of the ETS installations per (sub)sector expressed in %. The share of ETS installations in the Energy sector in the Flemish Community stays quite stable around 95% over both phases of the ETS. In the subsectors there is, however, an increased coverage of the Natural Gas sector from 0% in the first trading period to 63% in the second trading period. The minor share of this subsector towards the Energy sector explains the effect on the Energy sector ETS share as a whole. The installations in the Natural Gas subsector are compressor stations. The increased share of ETS is due to a former opt-out of these installations in the first trading period. Table 1. Energy Consumption (PJ) per sector for the period split-up between ETS and ETS installations, % expressed as ETS part of total energy consumption of sector Energy use (GJ) SECTOR or subsector ETS Phase I Phase ETS % ETS ETS % ETS ETS % ETS ETS % ENERGY 291,5 12,9 96% 280,1 17,9 94% 293,9 11,9 96% 285,7 14,6 95% Natural Gas 0,0 2,0 0% 0,0 2,4 0% 0,0 1,9 0% 1,2 0,7 63% Electricity & Heat 225,9 10,9 95% 211,3 15,6 93% 221,4 9,9 96% 206,4 13,9 94% Petroleum Refineries 65,6-100% 68,8-100% 72,5-100% 78,0-100% INDUSTRY 102,4 187,7 35% 120,1 168,2 42% 111,4 158,2 41% 180,4 87,4 67% Metal 31,0 71,3 30% 32,7 68,5 32% 31,0 58,1 35% 33,8 50,3 40% Chemical 37,5 85,8 30% 44,7 78,4 36% 44,7 74,6 37% 111,1 10,6 91% Food 12,5 11,2 53% 12,6 9,3 57% 12,9 8,2 61% 12,9 9,6 58% Textile 1,9 4,7 28% 2,2 4,4 33% 2,0 4,0 33% 1,2 3,3 27% Paper 3,2 1,6 67% 3,4 0,9 79% 3,1 1,2 72% 2,9 1,3 69% Other 16,3 13,0 56% 24,5 6,6 79% 17,8 12,1 60% 18,5 12,4 60% COMMERCE & SERVICES 0,0 33,2 0% 0,0 31,6 0% 0,0 30,9 0% 0,4 37,8 1% The other two subsectors, Electricity & Heat and Petroleum Refineries stayed stable around 95% and 100% (complete coverage) respectively. The Petroleum Refineries sector proved to be a difficult exercise because of different methodologies used between the ETS reporting and data from the Energy Balance. The sector was

5 Energy Consumption (PJ) known to be covered completely by the ETS, though, ETS report data didn t add up to 100% of energy balance data. In the Industry sector in the Flemish Community the effect of the clarification on the interpretation of the 20 MW rule for the second phase clearly has its effect on the coverage of the sector by the ETS. In the first phase the ETS share lies around 39% increasing to 69% in the second phase (Table 1). This increase is mostly due to the increased coverage of the Chemical Industry subsector (infra) by the ETS. In the Metal Industry subsector there is a slight increase of the ETS share from 2005 to 2008 (Table 1). The increase during the first phase is due to the lowered energy consumption of the ETS installations while the ETS installations energy consumption stays quite constant around 31,5 PJ. The decreased energy consumption of the ETS installations continues in This, combined with an increased energy consumption for the ETS sector results in a 40% coverage. Although only one more installation got covered by the ETS in 2008 while 6 were transferred to the ETS sector because of the 3 MW de-minimis rule this can be explained by the fact that one major installation influences the Flemish Metal ETS sector because it is responsible for 2/3 of the energy consumption in the subsector. The Chemical Industry subsector is clearly affected by the clarification on the interpretation of the 20 MW rule for the second phase (Figure 1). While the total energy consumption of fossil and derived fuels remains quite constant throughout the period, the share of the ETS rises slightly towards the end of the first phase to 37% to increase to 91% in The Food, Textile, Paper and Other Industries represent only a minor share of all ETS installations in the Flemish Community, the Energy sector and Metal and Chemical Industry sector make up about 90% of all energy consumption of the Flemish ETS sector (Figure 2) % 36% 37% 91% TOTAL (PJ) 123,3 123,1 119,3 121,6 ETS (PJ) 85,8 78,4 74,6 10,6 ETS (PJ) 37,5 44,7 44,7 111,1 share ETS 30% 36% 37% 91% Figure 1. Evolution of the energy consumption (PJ) and share (%) of the ETS installations energy consumption in the Chemical Industry in the Flemish Community

6 The Food Industry ETS share fluctuates slightly due to fluctuations in the ETS installations energy consumption. Although four companies enter the ETS sector in 2008 this does not alter the energy consumption of the ETS sector. In the Textile Industry the ETS share falls from 33% in 2007 to 21% in 2008 due to the 3 MW deminimis rule transferring four companies back to the ETS sector in the second phase. In the Paper Industry there is a small decrease in the ETS share due to the 3 MW de-minimis rule applying to one installation. The Other Industries, regrouping all industries which do not resort under any other major subsector, show fluctuations in the first phase which are bigger than the increase of the share from 63% in 2007 to 75% in 2008, which is due to the transfer of 6 installations to the ETS sector in the second phase. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Commerce & Services Other Paper Textile Food Chemical Metal Petroleum Refineries Electricity & Heat Natural Gas Figure 2. ETS energy consumption repartitioning among sectors and subsectors subject to the ETS Directive for the period The Commerce & Services sector constitutes a very small share of the total ETS in the Flemish Community (Figure 2). Because of the transfer of three former opt-outs and one other installation the share of ETS energy consumption of the sector increases to 1% CO 2 emissions Energetic emissions For energetic emissions the same comparison was made as for energy consumption. For emission factors (EF) the IPCC Guidance 1996 and default EF were used, other EF or data were used for: 1) Electricity: reported emissions from power generating facilities; 2) Petroleum Refineries: reported emissions from the companies reports; 3) Metal Industry: EF from ETS reports for specific fuels from big emitters; and 4) for derived fuels (most common in the Chemical Industry subsector) specific EF

7 were used when available from company reporting. The results of this exercise are shown in Table 2. It is clear that the same explanations as given for energy consumption per (sub)sector apply here. In general evolutions and fluctuations have the same reasons because the first and second phase the ETS Directive coverage is based on energetic thresholds and CO 2 emissions only. By comparing Table 1 and Table 2, even while using company specific EF and reported emissions, inconsistencies appear. Comparing energy consumption shares and energetic emission shares From a comparison it is clear that the biggest differences lie in the Metal Industry sector; the ETS share of energy consumption lie between 45% and 49% lower than the share calculated for energetic emissions. The same applies to the Petroleum Refineries sector, although it is not visible because this subsector is known to be covered completely by the ETS and was treated as a 100% sector. Energetic data from ETS reporting were considerably lower than the total calculated from the energy balance while energetic emissions were somewhat higher than those reported for ETS. This can be explained by the fact that in these sectors a lot of emissions are treated as energetic emissions when reported for the ETS while for the energy balance they were treated as non energetic processes. In fact, although it renders this comparison difficult, the final result should be the same; no difference is made between energetic or process emissions to calculate ETS emissions. Other inconsistencies are due to the use of: different calorific values; unknown calorific values for heterogeneous and uncommon (e.g. one-time use) fuel types; the use of different EF. Two major eventual differences remain to be solved for the Food (in 2006) and the Other Industries (in 2007) sectors. Table 2. Energetic emissions (kton CO 2 ) per sector for the period split-up between ETS and ETS installations, % expressed as ETS part of total energetic emissions of sector Energetic emissions (kton CO 2 ) SECTOR or subsector ETS Phase I Phase ETS % ETS ETS % ETS ETS % ETS ETS % ENERGY % % % % Natural Gas % % % % Electricity & Heat % % % % Petroleum Refineries % % % % INDUSTRY % % % % Metal % % % % Chemical % % % % Food % % % % Textile % % % % Paper % % % % Other % % % % COMMERCE & SERVICES % % % %

8 Process emissions Process emissions in Flanders only in some of the (sub)sectors studied. Table 3 gives an overview of these process emissions for these (sub)sectors. It is clear from a first look at Table 3 that a lot of emissions are not reported in the emission inventory from the Flemish Environmental Agency. The process emissions in the Electricity & Heat sector are limestone emissions and are only reported via the ETS reporting. For the Petroleum Refineries the emission inventory does not report the energetic and process emissions separately as they are not calculated from the energy balance and process emission reporting, but directly from the company reports, which do not distinguish between both. For the Metal Industry the same figure is reported in the ETS as for the emission inventory. This is because the ETS reporting for this sector is already integrated in the emission inventory (a positive consequence of this study). The emissions reported for the Paper sector are from bio sludge which were reported by one company as process emissions while they were treated as energetic emissions for the emission inventory. Table 3. Process emissions (kton CO 2 ) per sector for the period reported for ETS installations and for the emission inventory kton CO sector ETS Total ETS Total ETS Total ETS Total Electricity & Heat 11 n a 13 n a 13 n a 18 n a Petroleum refineries n a n a n a n a Metal Chemical Paper 12 n a 16 n a 10 n a 26 n a Other n a: data not available Total CO 2 emissions The evaluation of the coverage of the ETS of all CO2-emissions in the Flemish Community, including all process and energetic emissions from other (sub)sectors reported in the emission inventory is visualised in Figure 3. The clarification on the scope of the ETS increases the ETS share of all CO 2 emissions in the Flemish Community from 45% in the first phase to 50% in the second phase.

9 CO2-emissions (kton CO2) % 45% 45% Figure 3. Evolution of the CO 2 emissions (kton CO 2 ) and share (%) of the ETS installations CO 2 emissions of total CO 2 emissions of the Flemish Community 50% TOTAL (kton CO2) non ETS (kton CO2) ETS (kton CO2) share ETS 45% 45% 45% 50% 4. Discussion and conclusion It can be clear from the above that a simple split-up between ETS and non ETS is not that straightforward, especially when factoring in control mechanisms through the use of energy balances and the consecutive split-up between process and energetic emissions. Though these control mechanisms are necessary to provide for a consistent analysis. Problems encountered during this analysis are due to different typologies and methodologies used among the different reports. First, although all CO 2 emissions in the ETS are treated equal, the differentiation in distinguishing between process or energetic emissions is a difficulty for good comparisons. Second, the use of generalised and specific emission factors and calorific values for derived fuels among companies but also between reports and inventories can create considerable differences when big fuel quantities are consumed. Third, but of lesser importance, is the terminology of fuels: which bio-like fuels are biofuels or which compartments of these fuels are considered bio and which not? Fourth, different methodologies between ETS reporting and the energy balance and emission inventory for treating autoconsumers render comparisons difficult and can cause misunderstandings when evaluating sector wide data. The same applies to some fuels which are interchanged between sectors and are attributed to either one of the sectors involved depending on the framework. To provide for a clear split-up between the ETS and ETS sector these inconsistencies have to be cleared out. On the other hand the comparisons provided us with data from ETS reports that, up to now, were not included in the energy balance or emission inventory. Unreported data in one inventory can be added to complement the other if the different scope is taken into account. At the same time double counting is to be avoided and this is only possible through the use of the same terminology.

10 We conclude that the involvement of different authorities for GHG inventories and ETS necessitates consultation and coordination among all actors. Further harmonization between the two data sets is needed in light of the division between ETS and ETS policies in the EU Climate and Energy Package. References [1] IEA. (2004): Energy Statistics Manual. Paris, France. Available at : [2] IPCC. (1997): Greenhouse gas inventory reporting instructions. In: IPCC 1996 Revised Guidelines for National Greenhouse Gas Inventories, Vol.1. Bonn, Germany. Available at: [3]