European Environmental Policy

Transcription

1 European Environmental Policy November 2003 European Commission (Directorate-General for Energy and Transport) Contract no. NNE5/2002/52: OPET CHP/DH Cluster

2 TITLE: European Environmental Policy Authors: Kostantinos D. Patlitzianas, Argyris G. Kagiannas, John Psarras Organisation: Decision Support Systems Lab (EPU-NTUA) National Technical University of Athens School of Electrical and Computer Engineering Address: 9, Iroon Polytechniou str., Zografou, Athens, Greece Tel.: / 2083 Fax: kpatli@epu.ntua.gr Web: - The project "OPET CHP/DH Cluster" has obtained financial support from the European Commission (Directorate-General for Energy and Transport) under the contract no. NNE5/2002/52 for Community Activities in the Field of the specific programme for RTD and demonstration on "Energy, Environment and Sustainable Development - Part B: Energy programme" The responsibility for the content on this publication lies solely with the authors. The content does not necessarily represent the opinion of the European Community and the Community is not responsible for any use that might be made of data appearing herein.

3 1. INTRODUCTION The Environmental effects of the energy sector are significant. More analytically, the Global Warming (or Greenhouse Effect ) is caused when the earth s surface is heated by the sun and while radiating back heat in longer wavelengths (infrared radiation), the infrared is prevented from escaping by certain gases in the atmosphere, termed also greenhouse gases (GHG). The result is that energy is trapped in the form of heat and the temperature of Earth is increased. The main contributor to Global Warming is the portion of CO 2 emissions (a global contribution of 64%). In addition, acid rain is caused when SO 2 and NOx emissions together with moisture in the air, form weak solutions of sulphuric and nitric acids and then this moisture is deposited as rain, snow or fog or mist. The creation of ground-level Ozone, namely the smog effect is caused by chemical reactions of NOx emissions and Volatile Organic Compounds in the presence of sunlight. Water pollution is caused not only due to from the emissions of air pollutants but also from vast amounts of cooling water and the thermal contamination of the aquatic environment. Nowadays, there are manners for the mitigation of emissions. Concerning greenhouse gas emissions the action on a policy level is the implementation of targets set by a Protocol decided by the United Nations Framework Convention on climate Change (UNFCCC). Moreover, EU member states have some important tools for implementing the EU environmental policy (e.g. regulatory instruments, fiscal instruments etc.). In addition, the increase of the use of Renewable Energy Sources (RES) is estimated to have an important reduction potential of CO 2 as well as the other emissions in the European Union (EU). Finally, an Environmental Management System can be developed according to a national, or international standard. More analytically, the above issues are described in the following. 2. KYOTO PROTOCOL The Kyoto Protocol has been agreed by the 3 rd Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in December 1997 in Kyoto, Japan. Its scope is to confront global warming through international action for reducing the emissions of six green house gases. Those are carbon dioxide, methane and nitrous oxide, HFCs, PFCs and sulphur hexafluoride. The emissions shall be reduced during the period compared to 1990 levels by an overall of 5,2%. For Fluorocarbons however as a base year either 1990 or 1995 can be chosen. 2.1 The EU and the Kyoto Protocol The commitment of the EU in the frame of the Protocol is a 8% reduction in total, whereas the assigned amount for each Member State varies from +27% for Portugal to -21% for Denmark and Germany and -28% for Luxembourg (The Burden-Sharing Agreement). Without any policy measures, EU s total GHG emissions are expected to rise by 6% until 2010, therefore an aggregate effort for the reduction of about 14% of GHG emissions in the EU is needed (approximately 332 million tonnes CO 2 equivalents). Current projections show that a 'business as usual' scenario would at best reduce overall EU GHG emissions in 2010 by 57 Mt CO 2 equivalent, which corresponds to a 1,4% reduction below the 1990 level. The efforts of the EU have resulted into a reduction of EU s GHG emissions by 2,5% between 1990 and Therefore, additional policies and measures at EU level will become important for supplementing and reinforcing national climate strategies. European Environmental Policy Page 3

4 2.2 Flexible Mechanisms The UNFCCC recognized the principle of global cost-effectiveness of emission reduction in its Art In order to facilitate cost-effective abatement strategies, the Kyoto Protocol introduced three mechanisms, or flexible instruments, which were to enable Annex I countries to meet (part of) their Kyoto commitment by means of emission reduction activities abroad as well as to encourage the sustainable development of non- Annex I countries by means of technology transfers and institutional capacity building (and, hence, to facilitate participation of all countries involved). More analytically: Emissions Trading (ET): Emissions Trading (ET) refers to the ability of Annex I countries to exchange part of their emissions commitment and, hence, to redistribute in effect the division of allowed emissions between them. This market-based instrument allows Annex I countries (basically, the industrialised nations) to purchase the rights to emit greenhouse bases (GHG) from other Annex I countries, which have reduced their GHG emissions below their amounts. In contrast to JI and CDM, ET is a facilitating mechanism to enhance market efficiency with regard to reducing GHG emissions. In fact, an optimal system of ET minimizes overall abatement costs by ensuring that emission reductions take place where marginal costs are lowest. In the Kyoto Protocol, ET is treated briefly in Art. 17. It mainly urges the Conference of the Parties to define the relevant principles, modalities, rules and guidelines, in particular for verification, reporting and accountability for Emissions Trading. In addition, it states that ET shall be supplemental to domestic actions. Hence, the issue of defining supplementarity is also relevant in ET Joint Implementation (JI): Joint Implementation (JI) is defined in article 6 of the Kyoto Protocol and refers to a mechanism that assists an Annex I country to meet (part of) its Kyoto commitment through investments in GHG abatement projects in another Annex I country. Such investments result in the generation of Emission Reduction Units (ERUs). Depending on the agreements made on credit-sharing between the parties involved, these ERUs are fully or partially added to the amount of assigned GHG emissions of the investing country, while they are subtracted from the assigned amount of the host country. The amount of credits generated is usually an estimate of the emission reductions achieved by a JI project relative to a baseline situation. The latter refers to the estimated level of GHG emissions that would occur without the JI project. In the pilot phase of JI, which was launched in 1995, several countries have participated in projects which where referred to as Activities Implemented Jointly (AIJ). These activities have been pursued mainly with the objective of gaining experience and do not generate emission reduction credits. JI projects will start generating credits in 2008, although the projects themselves may begin from the year Definite crediting of ERUs will only occur after annual reporting requirements and other obligations have been met Clean Development Mechanism (CDM): The Clean Development Mechanism (CDM) is defined in Article 12 of the Kyoto Protocol. Its main objectives are: To encourage the sustainable development of non-annex I countries by means of institutional capacity building and technology transfer;. To enable Annex I countries to meet part of their Kyoto commitments cost-effectively by means of abatement projects in non-annex I countries. European Environmental Policy Page 4

5 To enable Annex I countries to the Kyoto Protocol to partially meet cost-effectively their emission reduction commitments by undertaking GHG mitigation projects in developing countries, which do not have any GHG abatement obligations and where the emission reductions are cheaper. By investing in a CDM project, Annex I countries can earn emission credits called Certified Emission Reductions (CERs) that can either be subtracted from their Kyoto emission reduction targets or be sold on emission trading markets. CDM emission credits can be accrued from 2000 and credits generated before 2008 can be banked and used later during the first crediting period from 2008 to This flexible instrument was adopted rather unexpectedly at Kyoto since it had not been part of any formal proposal during the 30-month negotiation period prior to the conference. CDM is still very much under development and will be subject to the authority and guidance of the COP, which has the responsibility to elaborate modalities and procedures to ensure transparency, efficiency and accountability through independent auditing and verification of project activities. CDM has much in common with JI as both mechanisms enable Annex I countries to meet (part of) their Kyoto targets by means of cross-border investments in GHG abatement projects. The most important difference, however, is that the host countries of JI are Annex I countries, whereas those of CDM projects are non-annex I countries (i.e. mainly non-industrialized countries which are not committed to reduce their GHG emissions). 3. AVAILABLE TOOLS TO GOVERNMENTS The implementation of Environmental Policy is undertaken on a national level. Governments of the Member States can use the following tools for implementing the EU environmental policy. 3.1 Regulatory Instruments Regulatory instruments should be according to each country s specific characteristics. On the EU level, the following tools can be considered: Legislation on the sale of electricity produced by RES to the grid; The IPPC Directive, promoting the use of Best Available Techniques in energy industries and specifically combustion installations with a rated thermal input exceeding 50 MW, Mineral oil and gas refineries, Coke ovens and Coal gasification and liquefaction plants; Demand Side Management through technologies or market incentives for managing peak loads and establishing energy efficiency while achieving reduced environmental impacts; Domestic Trading Schemes. In Denmark a trading scheme among the electricity sector is operating with allowances that have been distributed to existing power production companies according to past emissions. 3.2 Fiscal Instruments The fiscal instruments that are available on the governmental level for environmental policy are mainly that of subsidies, energy efficiency demonstration programs (such as JOULE-THERMIE, ALTENER and SAVE in the EU) and taxes. Taxes however may have adverse effects and need appropriate supportive measures so that compatibility is maintained among various countries on several issues (e.g. employment). For the reduction of GHG emissions in the Energy sector the following taxes may apply: Energy/CO 2 Tax. Emission taxes or refunds in case of good performance. European Environmental Policy Page 5

6 Energy Product Tax. A Commission Directive proposal (document COM (97)30) for a consistent framework of taxation for the energy sector widens the scope of the Community minimum rate system, presently limited to mineral oils, to all energy products while allowing EU Member States the flexibility to charge more than the minimum rates of tax. As regards electricity, the proposal for a directive provides for the taxation of output at the final consumption stage. Member States are authorised to refund to the producer the tax paid by the consumer (promoting RES-E). 3.3 Information and Consultation Governmental Plans for implementing environmental policy should include Information and Consultation activities of the concerned actors. The issues on which those actors should be informed are mainly the advantages of environmentally sound options such as: Fuel switching (e.g. Denmark, Greece, Ireland, Portugal, UK). Electricity from RES. Combined Heat and Power Generation (CHP) (e.g. in Austria, Belgium, Denmark, Finland, Greece, Ireland, Netherlands, UK). Voluntary agreements between public authorities and energy companies or association(s) of energy companies. In order to achieve obtaining results from this approach, a dialogue frame and feedback from concerned parties could be organized. 4. MARKET MECHANISMS FOR SUPPORTING RES The use of Renewable Energy Sources (RES) in power generation has a reduction potential of approximately 115 MT CO 2 in the EU that corresponds to one sixth of the total potential for CO 2 reduction with all measures. Therefore, the promotion of the use of RES is a very crucial measure, which needs to be promoted. According to the White Paper on RES, the use of RES needs to be extended within the EU to 12% of the gross inland energy consumption for the Community as a whole by The Indicative target for the contribution of Renewable generating Electricity (RES-E) to gross electricity consumption in the European Union by 2010 is 22,1% (approximately 675 TWh). 4.1 Support of voluntary actions Voluntary actions can be supported through dissemination of knowledge and information to potential investors and users on RES costs, demonstration results and benefits. Information on environmental standards, guaranteed prices for producers, energy taxes or exemptions from taxes in the case of RES production/use also support the development of RES. In addition, governmental subsidies in the form of grants or low-interest loans for renewable installations, could promote the replacement of conventional energy systems with RES ones. An established market mechanism in the US and in Northern EU countries is Green Pricing, which is developed by utilities in some countries. Those utilities aim at consolidating those consumers that have high environmental concerns. Consumers agree to pay higher tariffs while utilities produce a specific quantity of RES. These programs, are established on the so-called Green Tariffs which concern a specific premium per kwh paid by the consumer and specifically: The consumer purchases a fixed quantity of their electric capacity requirements. The consumer purchases a fixed quantity of their electric energy requirements. The consumer contributes to a fund managed by the utilities for RE projects.. European Environmental Policy Page 6

7 4.2 A stable regulatory framework The White Paper on RES outlines the promotion of electricity from RES as a high Community Priority due to environmental protection reasons, social and economic cohesion, and due to reasons of security and diversification of supply. In addition an amended legislative proposal on the promotion of electricity from RES in the internal electricity market has been presented by the Commission (COM (2000) 884final). Laws on a national level, which set the conditions under which RES-E is fed into the grid, are applied for example in Germany (Electricity Feed Law - EFL), in Spain and in the Netherlands. Those laws, oblige utilities to purchase RES-E by autonomous producers of RE at a certain price (Premium Price) and can have significant results on the promotion of RES. Another option is the tender-model where the difference of prices between conventionally produced electricity and RES-E is covered by a fund. This has been applied in the UK (the Non-Fossil-Fuel- Obligation -NFFO) and in France. 4.3 Direct Support Schemes Direct Support Schemes concern: The regulation of prices in the case of fixed quantities or market shares: In the case of fixed quantities the Government introduces fixed quotas for utilities according to the quantity of RE they have to sell per year through their network, while provides producers of RE with certificates (otherwise called quotas ) for a certain amount of energy given to the grid. Those certificates need to be bought by the utilities in order to prove that they have purchased a specific quantity according to their obligations. The higher the price of those certificates the more the incentives for producers to develop projects for the installation and production of RE. In this manner a minimum share of RES-E is ensured. Such a system, namely the Green Label System has been operating in the Netherlands since 1998 where a quota of 3% RE production in comparison to total electricity consumption has been arranged between Government and utilities. Each of the Green Labels is issued for 10 MWh of RES-E. In addition, in Denmark a RES-E requirement of 20% minimum in 2003 has been set as a target while a similar system but with a lower start up for RES-E (5%) in 2003 is being prepared in the UK. Regulation of Quantities for fixed prices: In fixed price systems, a specific price is set for RES-E that has to be paid by electricity companies (mostly distributors) to RES-E producers. Such a system is operating in Germany (the Renewable Energy Law) and Spain among other EU countries. Trading Market: The trading of certificates at an Exchange market where transaction costs will be reduced and the market will be reliable regarding the price of RE, can comprise an additional economic instrument. In Europe there are plans for the development of such a trading system within 2001 in the Netherlands by the Dutch Ministry of Economic Affairs, as well as in Denmark. Issues that should be considered while organising such a system are: Perspectives on future development of RES - Risks and implications on RES-producers, utilities and consumers Indication of eligible technologies which could exclude non-commercially available technologies such as PV and offshore wind power, or large hydropower (above MW). Hydropower is usually commercially established even without regulatory support. European Environmental Policy Page 7

8 5. ENVIRONMENTAL MANAGEMENT SYSTEMS An Environmental Management System (EMS) can be defined as the organisational structure, responsibilities, practices, procedures, processes and resources for implementing environmental management (according to the definition of the BS 7750 standard). The scope of an EMS is organising production procedures, achieving the reduction of environmental impacts, while preserving the cost and quality compatibility of products. An Environmental Management System can be developed according to a national standard, an international standard, or within a management scheme imposed either on a Community (as the European Union) or national level or even on a company level: National Standards have been developed on country level in several countries up to now. For example, the standard BS 7750, developed by the British Standard Institution BSI) was published in March 1992 and has been implemented in the UK until it was revised and replaced by the international standards ISO in January The International Standard ISO has been issued in The Eco Management Audit Scheme (EMAS) Regulation of 1993, which is replaced by the new regulation in 2001, allows voluntary participation on a organisation level. In the European Union approximately organisations have been certified with the ISO standard whereas there are about 3100 EMAS registered sites in the EU and Norway. The sectors registered with EMAS are mainly the food products and beverages sector, chemicals and chemical products, machinery, fabricated metals etc. In the Electricity, Gas, Steam and Hot Water Supply Sector almost 85 Sites had been registered with EMAS in February 2001 whereas ISO certifications in the energy sector appear mainly in the Nordic countries and Austria.. European Environmental Policy Page 8