EUROCHAMBRES amendment proposals

Transcription

1 27 June 2016 EUROCHAMBRES amendment proposals on the proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments proposal 1 Recital 1 (1) Directive 2003/87/EC of the European Parliament and of the Council 15 established a system for greenhouse gas emission allowance trading within the Union in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner. (1) Directive 2003/87/EC of the European Parliament and of the Council 15 established a system for greenhouse gas emission allowance trading within the Union in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner and in order to safeguard the international competitiveness of EU industry in its gradual transition to a low-carbon economy by means of effective measures against investment and carbon leakage. It should be clarified that the objective of the Directive is to achieve a certain level of emissions reductions in a way that does not lead to carbon and investment leakage. This is essential both, from an environmental (avoid relocation of emissions and enable the EU s transition to a low-carbon society) and an economic perpective (relocation of industrial growth and jobs). proposal 2 Recital 2a (2a) In addition, the European Council concluded in 2014 that [i]n order to maintain international competitiveness, the most efficient installations [ ] EUROCHAMBRES The Association of European Chambers of Commerce and Industry represents over 20 million enterprises in Europe 98% of which are SMEs through members in 43 countries and a European network of 1700 regional and local Chambers.

2 should not face undue carbon costs leading to carbon leakage. The future of European industry must, therefore, be secured by a guaranteed 100% free allocation for the most efficient installations. In October 2014 the European Council concluded that the best performing installations in each sector should not be burdened with undue carbon costs as this significantly undermines their competitiveness. A tiered approach to carbon leakage protection as it is currently discussed contradicts this demand as best performers from sectors grouped under a lower tier would, per se, only receive a fraction of their required allowances for free. proposal 3 Article 1 paragraph 1a (new) Article 1 paragraph 1 is amended as follows : This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community (hereinafter referred to as the Community scheme ) in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner and to safeguard the international competitiveness of EU industry in its gradual transition to a low-carbon economy by means of effective measures against investment and carbon leakage. It should be clarified that the objective of the Directive is to achieve a certain level of emissions reductions in a way that does not lead to carbon and investment leakage. This is essential both, from an environmental (avoid relocation of emissions and enable the EU s transition to a low-carbon society) and an economic perpective (relocation of industrial growth and jobs). EUROCHAMBRES Proposals 27/06/2016 Page 2 of 11

3 proposal 4 Article 1 paragraph 1 point 4 point b a (new) Present text "3. Member States shall determine the use of revenues generated from the auctioning of allowances. At least 50 % of the revenues generated from the auctioning of allowances referred to in paragraph 2, including all revenues from the auctioning referred to in paragraph 2, points (b) and (c), or the equivalent in financial value of these revenues, should be used for one or more of the following: (ba) in paragraph 3 the first subparagraph is replaced by the following: "3. Member States shall determine the use of revenues generated from the auctioning of allowances. Revenues generated from the auctioning of allowances referred to in paragraph 2, including all revenues from the auctioning referred to in paragraph 2, points (b) and (c), or the equivalent in financial value of these revenues, shall be fully used for one or more of the following: In recent years, only a relatively small share of auctioning revenues has been spent on developing lowcarbon technologies. For the most part, revenues are still absorbed by public budgets. Thus, EUROCHAMBRES demands that 100% of auction revenues should be reinvested to the benefit of businesses in all Member States. Priority shall be given to finance research and development in energy efficiency and clean technologies in the sectors covered by this Directive, as referred to in point (g). proposal 5 Article 1 paragraph 4 point a Article 10 is amended as follows: (a) three new subparagraphs are added to paragraph 1: From 2021 onwards, the share of allowances to be auctioned by Member States shall be 57%. 2% of the total quantity of allowances between 2021 and 2030 shall be auctioned to establish a fund to improve energy efficiency and modernise the energy Article 10 is amended as follows: (a) a new subparagraph is added to paragraph 1: From 2021 onwards, the share of allowances to be auctioned by Member States shall be in the range up to a maximum of 52.5%. The total remaining quantity of allowances to be auctioned by Member States shall be distributed in accordance with paragraph EUROCHAMBRES Proposals 27/06/2016 Page 3 of 11

4 systems of certain Member States as set out in Article 10d of this Directive ( the Modernisation Fund ). The total remaining quantity of allowances to be auctioned by Member States shall be distributed in accordance with paragraph According to the Conclusions of the European Council from 24 October 2014, best performers in sectors at risk of carbon leakage should not face undue carbon costs leading to carbon leakage. In order to avoid a shortage of free allowances for the most efficient installations, to secure sufficient allowances for future growth and to prevent the application of the cross sectoral correction factor, the auctioning share should be adjusted accordingly in a range up to 52.5%. The Commission s Impact Assessment and the Belgian Nonpaper indicate options for more flexibility regarding the auctioning share. proposal 6 Article 1 paragraph 5 point b (b) a new third subparagraph is added to paragraph 2 as follows: "The benchmark values for free allocation shall be adjusted in order to avoid windfall profits and reflect technological progress in the period between and each later period for which free allocations are determined in accordance with Article 11(1). This adjustment shall reduce the benchmark values set by the act adopted pursuant to Article 10a by 1% of the value that was set based on data in respect of each year between 2008 and the middle of the relevant period of free allocation, unless: (i) On the basis of information submitted pursuant to Article 11, the Commission shall identify whether the values for each benchmark calculated using the principles in Article 10a differ from the annual reduction referred to above by (b) paragraph 2 is replaced by the following: 2. Benchmarks shall be set on the basis of objective, fair and non-discriminatory criteria. They must reflect actual technological cycles in specific sectors and remain technically feasible and economically achievable. The benchmark values for free allocation should be updated once at the beginning of the trading period, based on bottom-up real installation data and taking into account sector-specific characteristics. This update shall be based on the average emission intensity of the 15% most efficient installations in a sector or sub sector in the Community using average emissions data reported by operators in the 2nd and 3rd last year preceding the relevant trading period. EUROCHAMBRES Proposals 27/06/2016 Page 4 of 11

5 more than 0.5% of the value higher or lower annually. If so, that benchmark value shall be adjusted either 0.5% or 1.5% in respect of each year between 2008 and the middle of the period for which free allocation is to be made; The data used to determine the benchmarks shall be exclusively representative, robust, transparent and easily available. The Commission shall consult the relevant stakeholders, including the sectors and sub sectors concerned. Benchmarks are a key element for determining the level of carbon leakage protection and shall be based on recent and real data of installations to reflect chemical, physical and technical limits for emissions reductions. As is currently the practice, benchmarks should be set and updated on the basis of verified emissions data of the best performers and must not be tightened automatically, e.g. by using a flat rate reduction. The proposed automatism would lead to an undersupply of certificates in those sectors unable to achieve a predetermined reduction rate, as is the case for sectors with a significant share of unavoidable process emissions. This flat rate approach would contradict the principle that best performers should not face additional carbon costs. proposal 7 Article 1 paragraph 5 point c c) paragraph 5 is replaced by the following: "In order to respect the auctioning share set out in Article 10, the sum of free allocations in every year where the sum of free allocations does not reach the maximum level that respects the Member State auctioning share, the remaining allowances up to that level shall be used to prevent or limit reduction of free allocations to respect the Member State auctioning share in later years. Where, nonetheless, the maximum level is reached, free allocations shall be adjusted accordingly. Any such adjustment shall be done in a uniform manner. c) paragraph 5 is replaced by the following: "In order to respect the auctioning share set out in Article 10, the sum of free allocations in every year where the sum of free allocations does not reach the maximum level that respects the Member State auctioning share, the remaining allowances up to that level shall be used to prevent or limit reduction of free allocations to respect the Member State auctioning share in later years. Where, nonetheless, the maximum level is reached, free allocations shall be complemented by allowances from the market stability reserve and, as a last resort, the auctioning share as set out in Article 10. EUROCHAMBRES Proposals 27/06/2016 Page 5 of 11

6 As long as the international imbalance of CO2 costs remains, it is crucial that the best performing installations at risk of carbon leakage receive 100% of their required certificates for free, without subsequent reductions. In order to make this possible, the harmful effects of the cross-sectoral correction factor (CSCF) that burdens even state-of-the-art businesses, reducing their free allowances faster than their actual emission reduction potential, must be tackled. For this purpose, an additional flexibility for the share of free allocation should be aimed for. This could be implemented for example by using part of the allowances which will be transferred to the market stability reserve. proposal 8 Article 1 paragraph 5 point d d) the first subparagraph of paragraph 6 is replaced by the following: "Member States should adopt financial measures in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices, taking into account any effects on the internal market. Such financial measures to compensate part of these costs shall be in accordance with state aid rules. d) the first subparagraph of paragraph 6 is replaced by the following: "Member States shall adopt financial measures in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices, taking into account any effects on the internal market. Such financial measures to compensate part of these costs shall be in accordance with state aid rules. Indirect carbon costs passed through in electricity prices by the power sector have a similar effect as direct costs on the competitiveness of energy-intensive sectors that are exposed to global competition. proposal 9 Article 1 paragraph 5 point e paragraph 7 is amended as follows: (i) The first and second sentences of the first subparagraph are replaced by the paragraph 7 is amended as follows: (i) The first and second sentences of the first subparagraph are replaced by the EUROCHAMBRES Proposals 27/06/2016 Page 6 of 11

7 following: "Allowances from the maximum amount referred to Article 10a(5) of this Directive which were not allocated for free up to 2020 shall be set aside for new entrants and significant production increases, together with 250 million allowances placed in the market stability reserve pursuant to Article 1(3) of Decision (EU) 2015/ of the European Parliament and of the Council(*). From 2021, allowances not allocated to installations because of the application of paragraphs 19 and 20 shall be added to the reserve." following: "Allowances from the maximum amount referred to Article 10a(5) of this Directive which were not allocated for free up to 2020 shall be set aside for new entrants, for significant production increases and for the purpose of free allocation together with the allowances placed in the market stability reserve pursuant to Article 1(3) of Decision (EU) 2015/ of the European Parliament and of the Council(*). From 2021, allowances not allocated to installations because of the application of paragraphs 19 and 20 shall be added to the reserve." It is essential that the MSR is made available to tackle potential shortfalls of freely allocated emission allowances in order to avoid the application of the uniform correction factor in paragraph 5 Art 1 (5) c (the CSCF). proposal 10 Article 1 paragraph 5 point e point i a (new) (ia) The following subparagraph is inserted: An installation shall be deemed to have a significant production increase where one of its sub-installations increases its activity level in a given calendar year by at least 10% compared to the activity level used for calculating the subinstallation's allocation of emission allowances. Currently, the allocation is only altered when there is a 50% change in an installation's activity which can lead to over or under allocation. Changing this to 10% will allow for a more dynamic allocation which will reduce perverse incentives and counter the risk of over or under allocation. EUROCHAMBRES Proposals 27/06/2016 Page 7 of 11

8 proposal 11 Article 1 paragraph 5 point f f) in paragraph 8, the first, second and third subparagraphs of paragraph 8 are replaced by the following: "400 million allowances shall be available to support innovation in low-carbon technologies and processes in industrial sectors listed in Annex I, and to help stimulate the construction and operation of commercial demonstration projects that aim at the environmentally safe capture and geological storage (CCS) of CO2 as well as demonstration projects of innovative renewable energy technologies, in the territory of the Union. The allowances shall be made available for innovation in low-carbon industrial technologies and processes and support for demonstration projects for the development of a wide range of CCS and innovative renewable energy technologies that are not yet commercially viable in geographically balanced locations. In order to promote innovative projects, up to 60% of the relevant costs of projects may be supported, out of which up to 40% may not be dependent on verified avoidance of greenhouse gas emissions provided that pre-determined milestones are attained taking into account the technology deployed. In addition, 50 million unallocated allowances from the market stability reserve established by Decision (EU) 2015/ shall supplement any existing resources remaining under this paragraph for projects referred to above, with projects in all Member States including small-scale projects, before Projects shall be selected on the basis of objective and (f) in paragraph 8, the first, second and third subparagraphs of paragraph 8 are replaced by the following: "400 million allowances to be auctioned shall be available to support innovation in the whole range of low-carbon technologies and processes in industrial sectors listed in Annex I, and to help stimulate the construction and operation of commercial demonstration projects that for example aim at the environmentally safe capture and geological storage (CCS) and usage (CCU) of CO2 as well as demonstration projects of innovative renewable energy technologies, in the territory of the Union. The allowances shall be made available for innovation in the whole range of lowcarbon industrial technologies and processes in existing and new installations and support for demonstration projects for the development of a wide range of CCS, CCU and innovative renewable energy technologies/concepts that are not yet commercially viable. In order to promote innovative projects, up to 75% of the relevant costs of projects may be supported. Eligibility criteria should be improved by reducing bureaucratic burden and should be designed in a way that a broad participation of SMEs is attracted. In addition, 50 million unallocated allowances from the market stability reserve established by Decision (EU) 2015/ shall supplement any existing resources remaining under this paragraph for projects referred to above, with projects in all Member States including small-scale EUROCHAMBRES Proposals 27/06/2016 Page 8 of 11

9 transparent criteria. projects, before Projects shall be selected on the basis of objective and transparent criteria. The Innovation Fund should not exacerbate the shortage of freely allocated allowances. Instead,it shall be supplied by the auctioning share. Moreover, funding should be open to all technologies that may contribute to significant and sustainable abatement potential, including carbon capture and usage (CCU). Given the significant financial risks of these projects, the current funding rate of 50% should be increased to 75% as per the Commission s Impact Assessment. Although projects should aim at GHG emission reductions, there should not be any additional criteria in the form of fixed shares of verified avoidance of greenhouse gas emissions, in order to keep the administrative burden to a minimum. Due to the highly technical nature of these issues, implementing acts are more appropriate than delegated acts. proposal 12 Article 1 paragraph 8 the following second subparagraph is added: "A list of installations covered by this Directive for the five years beginning on 1 January 2021 shall be submitted by 30 September 2018, and lists for the subsequent five years shall be submitted every five years thereafter. Each list shall include information on production activity, transfers of heat and gases, electricity production and emissions at sub-installation level over the five calendar years preceding its submission. the following second subparagraph is added: "A list of installations covered by this Directive for the five years beginning on 1 January 2021 shall be submitted by 30 September 2018, and lists for the subsequent two years shall be submitted every two years thereafter. Each list shall include information (including production data) over the two calendar years preceding its submission. The use of outdated historic production levels as data for the allocation of allowances creates the unfortunate situation that a decrease of production is rewarded, while growth is punished and consequently discouraged. A dynamic allocation, based on the use of more recent output data would incentivise growth, in line with the EU s re-industrialisation target. EUROCHAMBRES Proposals 27/06/2016 Page 9 of 11

10 proposal 13 Article 1 paragraph 22 point a "Following consultation with the operator, Member States may exclude from the Community scheme installations which have reported to the competent authority emissions of less than tonnes of carbon dioxide equivalent and, where they carry out combustion activities, have a rated thermal input below 35 MW, excluding emissions from biomass, in each of the three years preceding the notification under point (a), and which are subject to measures that will achieve an equivalent contribution to emission reductions, if the Member State concerned complies with the following conditions: (a) it notifies the Commission of each such installation, specifying the equivalent measures applying to that installation that will achieve an equivalent contribution to emission reductions that are in place, before the list of installations pursuant to Article 11(1) has to be submitted and at the latest when this list is submitted to the Commission; (b) it confirms that monitoring arrangements are in place to assess whether any installation emits tonnes or more of carbon dioxide equivalent, excluding emissions from biomass, in any one calendar year. Member States may allow simplified monitoring, reporting and verification measures for installations with average annual verified emissions between 2008 and 2010 which are below tonnes a year, in accordance with Article 14; (c) it confirms that if any installation emits tonnes or more of carbon dioxide equivalent, excluding emissions from (22 a) In Article 27, paragraph 1 is replaced by the following: " Following consultation with the operator, Member States may exclude from the EU ETS installations which have reported to the competent authority emissions of less than tonnes of carbon dioxide equivalent, excluding emissions from biomass, in each of the three years preceding the notification under point (a), and which are subject to measures that will achieve an equivalent contribution to emission reductions, if the Member State concerned complies with the following conditions: (a) it notifies the Commission of each such installation, specifying the equivalent measures applying to that installation that will achieve an equivalent contribution to emission reductions that are in place, before the list of installations pursuant to Article 11(1) has to be submitted and at the latest when this list is submitted to the Commission; (b) it confirms that monitoring arrangements are in place to assess whether any installation emits tonnes or more of carbon dioxide equivalent, excluding emissions from biomass, in any one calendar year. Member States may allow simplified monitoring, reporting and verification measures for installations with average annual verified emissions between 2008 and 2010 which are below tonnes a year, in accordance with Article 14; (c) it confirms that if any installation emits tonnes or more of carbon dioxide EUROCHAMBRES Proposals 27/06/2016 Page 10 of 11

11 biomass, in any one calendar year or the measures applying to that installation that will achieve an equivalent contribution to emission reductions are no longer in place, the installation will be reintroduced into the Community scheme; equivalent, excluding emissions from biomass, in any one calendar year or the measures applying to that installation that will achieve an equivalent contribution to emission reductions are no longer in place, the installation will be reintroduced into the EU ETS; The threshold for small emitters to opt out should be raised to 50,000 to reduce administrative burden on installations that contribute comparatively little in terms of greenhouse gas emissions. 72 % of ETS installation, covering around 5% of ETS emissions, emitted less than tonnes of CO2 per year according to a report on the functioning of the European Carbon Market in EUROCHAMBRES Proposals 27/06/2016 Page 11 of 11