nach oben

Energy Efficiency

Erschienen in:

01.02.2009

Incentives for energy efficiency in the EU Emissions Trading Scheme

verfasst von: Joachim Schleich, Karoline Rogge, Regina Betz

Erschienen in: Energy Efficiency | Ausgabe 1/2009

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper explores the incentives for energy efficiency induced by the European Union Emissions Trading Scheme (EU ETS) for installations in the energy and industry sectors. Our analysis of the National Allocation Plans for 27 EU Member States for phase 2 of the EU ETS (2008–2012) suggests that the price and cost effects for improvements in carbon and energy efficiency in the energy and industry sectors will be stronger than in phase 1 (2005–2007), but only because the European Commission has substantially reduced the number of allowances to be allocated by the Member States. To the extent that companies from these sectors (notably power producers) pass through the extra costs for carbon, higher prices for allowances translate into stronger incentives for the demand-side energy efficiency. With the cuts in allocation to energy and industry sectors, these will be forced to greater reductions; thus, the non-ET sectors like household, tertiary, and transport will have to reduce less, which is more in line with the cost-efficient share of emission reductions. The findings also imply that domestic efficiency improvements in the energy and industry sectors may remain limited since companies can make substantial use of credits from the Kyoto Mechanisms. The analysis of the rules for existing installations, new projects, and closures suggests that incentives for energy efficiency are higher in phase 2 than in phase 1 because of the increased application of benchmarking to new and existing installations and because a lower share of allowances will be allocated for free. Nevertheless, there is still ample scope to further improve the EU ETS so that the full potential for energy efficiency can be realized.

Vorheriger Artikel Economic comparison of greenhouse gas mitigation options in Germany

Nächster Artikel Integrated cost-estimation methodology to support high-performance building design

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Technik"

Online-Abonnement

Mit Springer Professional "Technik" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 390 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Maschinenbau + Werkstoffe

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Nur mit Berechtigung zugänglich

Higher carbon efficiency is typically the result of improvements in energy efficiency. However, this is not necessarily the case for fuel switching, and it does not apply to carbon capture and storage either (IPCC 2005). We do not always make this distinction in the paper and the terms “carbon efficiency” and “energy efficiency” are used interchangeably.

See Fischer (2005) for a recent overview of this topic.

In addition, EUAs from phase 1 generally could not be transferred into phase 2 (see also Schleich et al. 2006). However, such banking of EUAs will be allowed starting from phase 2 onwards.

France’s NAP was only accepted without a reduction of its allocation because France withdrew the NAP it submitted first and reduced its ET budget according to the EC’s formula (−14.7% or −22.9 million EUA/a).

The NAPs submitted by the Member States together with the European Commission’s decisions are available at http://ec.europa.eu/environment/climat/2nd_phase_ep.htm. For all Member States, we use figures from approved NAPs, even for those which are challenging the EC’s decisions in court (Latvia, Estonia, Poland, the Czech Republic, and Hungary).

The set of EU-12 Member States includes the new Member States which have entered the European Union in 2004 and 2007: Bulgaria, Cyprus, Czech Republic, Latvia, Lithuania, Estonia, Hungary, Malta, Poland, Rumania, Slovakia, and Slovenia. The remaining Member States will be referred to as EU-15 Member States.

For a detailed description on the methodology, see Rogge et al. (2006).

When interpreting the quantitative results, it should be kept in mind that these figures do not fully account for closures and new entrants.

This condition then emerges from the first-order condition of the cost minimization problem for achieving a given emission target.

In practice, such negative effects are likely to be small and limited to a few products including primary steel produced from blast oxygen furnaces, aluminum, or nitric acid (e.g., Peterson and Schleich 2007; Hourcade et al. 2008).

These results were obtained for lower fuel prices than currently observed. Arguably, substantially higher fuel prices may lead to a different outcome since they tend to raise the costs for abatement measures available particularly in the ET sector (e.g., fuel switch).

In general, Ramsey pricing refers to a linear pricing scheme designed for a multiproduct natural monopolist, which maximizes social welfare while allowing the monopolist sufficient profits to cover total costs. Ramsey pricing then implies prices above marginal costs in inverse proportion to the elasticity of demand (see Ramsey 1927).

For an isoelastic demand function, the pass through rate will be more than one since, for example, an increase in costs by 10% would also result in a 10% increase in the power price.

The observation that the price for EUAs in the (rather thin) spot market did not drop to zero but instead remained around or above 10 to 15€ per EUA once the number of surplus allowances became common knowledge in May 2006 is consistent with this interpretation.

In fact, a clear ranking of environmental policies (emissions trading, environmental taxes, standards, emission rates) in terms of innovation is not possible once technology spillovers, market structure, or the regulator’s response to diffusion are taken into account (see Fischer et al. 2003; or Requate 2005).

See also Bovenberg and Goulder (2002) and Bovenberg et al. (2005), who empirically and theoretically analyze the adverse distributional effects of auctioning emission allowances for emission-related industries. By the same token, profit losses of these industries may be avoided through the free allocation of emission allowances. However, the higher the abatement requirements, the higher is the efficiency costs of such compensating policies because they force the government to forego auctioning revenue and—in the absence of lump-sum taxation—to rely more heavily on regular distorting taxes.

This reasoning implicitly assumes that the budget for installations receiving a benchmarking allocation is not fixed. If the budget were fixed, allocation would be independent of the benchmark level because a compliance factor would be applied to exactly balance the budget. In this case, allocation to an installation would correspond to that installation’s activity rate share.

The Netherlands, Flanders, and Wallonia, where allocation is based on covenants or voluntary agreements, use BAT benchmarks for existing installations. However, as in phase 1, they use benchmarks to calculate the efficiency factor (i.e., difference between BAT and actual efficiency) which is used in the allocation formula (see “Appendix”).

However, under the current closure rules, which essentially provide an output subsidy to incumbent installations (see below), free allocation to new entrants may be considered second best because it counters the bias against closure (Åhman and Holmgren 2006).

Total emissions may increase if production is displaced to regions where companies are not subject to climate policy regulations and where production is more carbon-intensive than in the EU.

AEA Technology Environment & Ecofys, (2006). LETS update scoping phase report. http://www.environment-agency.gov.uk/commondata/acrobat/scopingphase_1383666.pdf. Accessed 19 October 19, 2007.

Åhman, M., & Holmgren, K. (2006). New entrant allocation in the Nordic energy sectors—current principles and options for the EU ETS. Climate Policy, 6, 423–440.

Åhman, M., Burtraw, D., Kruger, J., & Zetterberg, L. (2007). A ten-year rule to guide the allocation of EU emission allowances. Energy Policy, 35, 1718–1730. doi:10.1016/j.enpol.2006.04.007.CrossRef

Bertoldi, P., Rezessy, S., & Bürer, M. J. (2005). Will emission trading promote end-use energy efficiency and renewable energy projects?. Paper presented at the ACEEE Summer study on efficiency in industry of the American Council for Energy Efficient Economy, New York.

Betz, R., Eichhammer, W., & Schleich, J. (2004). Designing national allocation plans for EU emissions trading—a first analysis of the outcomes. Energy & Environment, 15, 375–425.CrossRef

Betz, R., Rogge, K., & Schleich, J. (2006a). EU emissions trading: An early analysis of national allocation plans for 2008–2012. Climate Policy, 6, 361–394.

Betz, R., Rogge, K., & Schön, M. (2006b). Domestic climate projects: Limited opportunities in Germany but example for others? Energy & Environment, 17, 569–582. doi:10.1260/095830506778644260.CrossRef

Böhringer, C., Hoffmann, T., & Manrique de Lara-Penante, C. (2006). The efficiency costs of separating carbon markets under the EU emissions trading scheme: A quantitative assessment for Germany. Energy Economics, 28, 44–61. doi:10.1016/j.eneco.2005.09.001.CrossRef

Bovenberg, A. L., & Goulder, L. H. (2002). Environmental taxation and regulation. In A. J. Auerbach, & M. Feldstein (Eds.), Handbook of public economics (vol. 3, (pp. 1474–1545)). Amsterdam: Elsevier.

Bovenberg, A. L., Goulder, L. H., & Gurney, D. R. (2005). Efficiency costs of meeting industry-distributional constraints under environmental permits and taxes. The Rand Journal of Economics, 36, 951–971.

Brown, M. A. (2001). Market failures and barriers as a basis for clean energy policies. Energy Policy, 29, 1197–1207. doi:10.1016/S0301-4215(01)00067-2.CrossRef

Burtraw, D., Palmer, K., & Kahn, D. (2006). Allocation of CO₂ emission allowances in the regional greenhouse gas cap-and-trade program. The Electricity Journal, 19, 79–90. doi:10.1016/j.tej.2006.01.001.CrossRef

CEC, (2000). Communication from the Commission to the Council and the European Parliament on EU Policies and Measures to Reduce Greenhouse Gas Emissions: Towards a European Climate Change Programme (ECCP). COM (2000) 88 Final. Brussels, 8 March 2000.

CEC, (2003a). Directive 2003/87/EC of the European Parliament and the Council of 13 October 2003 Establishing a scheme for greenhouse gas emission allowance trading within the community and amending council directive 96/61/EC, OJ L275, 25.10.2003. Brussels, 32–46.

CEC, (2003b). Non-paper on the installation coverage of the EU emissions trading scheme and the interpretation of Annex I. Brussels: CEC.

CEC, (2004a). Directive 2004/101/EC of the European Parliament and the Council of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol’s project mechanisms.

CEC, (2004b). Communication from the Commission on guidance to assist Member States in the implementation of the criteria listed in Annex III to Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC, and on the circumstances under which force majeure is demonstrated, Brussels: CEC.

CEC, (2005). Communication from the Commission on further guidance on allocation plans for the 2008 to 2012 Trading Period of the EU Emission Trading Scheme, Brussels: CEC.

CEC, (2006a). Communication from the Commission to the Council and to the European Parliament on the assessment of national allocation plans for the allocation of greenhouse gas emission allowances in the second period of the EU Emissions Trading Scheme accompanying Commission Decisions of 29 November 2006 on the national allocation plans of Germany, Greece, Ireland, Latvia, Lithuania, Luxembourg, Malta, Slovakia, Sweden and the United Kingdom in accordance with Directive 2003/87/EC, Brussels.

CEC, (2006b). Community independent transaction log: National reports on verified emission and surrendered allowances. Brussels: CEC.

CEC, (2006c). EU emissions trading scheme delivers first verified emissions data for installations, IP/06/XXX. Brussels: CEC.

CEC, (2006d). Action plan for energy efficiency: Realising the potential. COM(2006)545 final. Brussels: CEC.

CEC, (2008a). Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading system of the Community. COM (2008) xxx, Brussels: CEC.

CEC, (2008b). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - 20 20 by 2020 Europe’s climate change opportunity. COM (2008) 30 final, Brussels: CEC.

CEC, (2008c). Proposal for a decision of the European Parliament and of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020. COM(2008) 17 final, Brussels: CEC.

Cramton, P., & Kerr, S. (2002). Tradable carbon permit auctions: How and why to auction not grandfather. Energy Policy, 30, 333–345. doi:10.1016/S0301-4215(01)00100-8.CrossRef

Cremer, C., & Schleich, J. (2006). Using benchmarking for the primary allocation of EU allowances in the German power sector. Paper presented at the 29th IAEE International Conference, Potsdam.

Criqui, P., & Kitous, A. (2003). Kyoto protocol implementation (KPI): Technical report: Impacts of linking JI and CDM credits to the European emissions allowance trading scheme. A report for DG Environment, CNRS-IEPE and ENERDATA S.A. (ed.).

Danish Ministry of the Environment, (2007). Denmark’s National Allocation Plan 2008–2012, English courtesy translation of Denmark’s National Allocation Plan notified to the European Commission 7 March 2007. http://www.mst.dk/NR/rdonlyres/3123145C-A515–4DB7-B877–6C74410F9E5C/38145/20070312danishallocationplanenglishcourtesytransla.pdf. Accessed 19 October 2007.

EEA (2006). Greenhouse gas emission trends and projections in Europe, EEA report. Copenhagen: EEA.

Ehrhart, K.-M., Hoppe, C., Schleich, J., & Seifert, S. (2005). The role of auctions and forward markets in the EU ETS: Counterbalancing the cost-inefficiencies of combining generous allocation with a ban on banking. Climate Policy, 5, 31–46.

Ehrhart, K.-M., Hoppe, C., & Löschel, R. (2008). Abuse of EU emissions trading for tacit collusion. Environmental and Resource Economics, in press.

Ellerman, A. D. (2008). New entrant and closure provisions: How do they distort? The Energy Journal, 29(Special Issue in honor of Campbell Watkins), 63–76.

Ellerman, A. D., & Buchner, B. (2007). The European union emissions trading scheme: Origins, allocation, and early results. Review of Environmental Economics and Policy, 1, 66–87. doi:10.1093/reep/rem003.CrossRef

Ellerman, A. D., & Buchner, B. (2008). Over-allocation or abatement? A preliminary analysis of the EU ETS based on the 2005–06 emissions data. Resource and Environmental Economics, in press.

Ellerman, A. D., Joskow, P. L., & Harrison, D. (2003). Emissions trading in the US: Experience, lessons and considerations for greenhouse gases. Arlington, VA, Pew Center on Global Climate Change.

Fischer, C. (2005). Technical innovation and design choices for emissions trading and other climate policies. In B. Hansjürgens (Ed.), Emissions trading for climate policy: US and European perspectives (pp. 37–52). Cambridge: Cambridge University Press.

Fischer, C., Parry, I., & Pizer, W. A. (2003). Instrument choice for environmental protection when annex: Summary table of national allocation plans for phase 2 technological innovation is endogenous. Journal of Environmental Economics and Management, 45, 523–545. doi:10.1016/S0095-0696(03)00002-0.CrossRef

Gagelmann, F., & Frondel, M. (2005). E. T. and innovation—Science fiction or reality? An assessment of the impact of emissions trading on innovation. European Environment, 15, 203–211. doi:10.1002/eet.387.CrossRef

Grubb, M., & Ferrario, F. (2006). False confidences: Forecasting errors and emission caps in CO₂ trading systems. Climate Policy, 6, 495–501.

Hepburn, C., Grubb, M., Neuhoff, K., Matthes, F., & Tse, M. (2006). Auctioning of the EU ETS phase II allowances: how and why? Climate Policy, 6, 137–160.CrossRef

Honkatukia, J., Mälkönen, V., & Perrels, A. (2006). The impact of the European Emission trade system on Finnish wholesale electricity prices. VATT Discussion Paper 405. VATT Government institute for economic research, Helsinki. http://en.vatt.fi/file/vatt_publication_pdf/k405.pdf. Accessed 1 October 2007.

Hourcade, J. C., Demailly, D., Neuhoff, K., & Sato, M. (2008). Differentiation and dynamics of EU ETS industrial competitiveness impacts climate strategies report. Climate Strategies, London. http://www.climate-strategies.org/uploads/ClimateStrategies_competitiveness_final_report_140108.pdf. Accessed 28 January 2008.

IPCC, (2005). Carbon dioxide capture and storage. Intergovernmental Panel on Climate Change Special Report on Carbon Dioxide Capture and Storage. http://arch.rivm.nl/env/int/ipcc/pages_media/SRCCS-final/IPCCSpecialReportonCarbondioxideCaptureandStorage.htm. Accessed 26 January 2008.

Ismer, R., & Neuhoff, K. (2006). Commitments through financial options: A way to facilitate compliance with climate change obligations, Working Paper EPRG0625. http://www.electricitypolicy.org.uk/pubs/wp/eprg0625.pdf. Accessed 1 October 2007.

Jaffe, A. B., & Stavins, R. N. (1994a). Energy-efficiency investments and public policy. The Energy Journal, 15, 43–65.

Jaffe, A. B., & Stavins, R. N. (1994b). The energy-efficiency gap: What does it mean? Energy Policy, 22, 804–810. doi:10.1016/0301-4215(94)90138-4.CrossRef

Keats Martinez, K., & Neuhoff, K. (2005). Allocation of carbon emission certificates in the power sector: How generators profit from grandfathered rights. Climate Policy, 5, 61–78.

Kettner, C., Köppl, A., Schleicher, S. & Thenius, G. (2007). Stringency and distribution in the EU emissions trading scheme—The 2005 evidence. Nota di Lavora 22.2007 Fondazione Eni Enrico Mattei.

Matthes, F., Graichen, V., & Repenning, J. (2005). The environmental effectiveness and economic efficiency of the European Union emissions trading scheme: Structural aspects of allocation. Berlin: Öko-Institut.

McKinsey & Ecofys (2006). Review of EU emissions trading scheme—Survey results. Brussels: European Commission, DG Environment.

Milliman, S. R., & Prince, R. (1989). Firm incentives to promote technological change in pollution control. Journal of Environmental Economics and Management, 17, 247–265. doi:10.1016/0095-0696(89)90019-3.CrossRef

Montgomery, D. (2005). Creating technologies to reduce greenhouse gas intensity: Public options and opportunities. Washington, DC: George C. Marshall Institute.

National Emissions Trading Taskforce, (2006). Discussion paper: Possible design for a national emissions trading scheme. Discussion paper. http://www.emissionstrading.nsw.gov.au/__data/assets/pdf_file/0010/2017/Discussion_Paper_-_Full_document.pdf.

Neuhoff, K., Keats Martinez, K., & Sato, M. (2006). Allocation, incentives and distortions: the impact of EU ETS emissions allowance allocations to the electricity sector. Climate Policy, 6, 73–91.

Ostertag, K. (2003). No-regret potentials in energy conservation: An analysis of their relevance, size and determinants. Physica: Heidelberg.

Peterson, S. (2006). Efficient abatement in separated carbon markets: A theoretical and quantitative analysis of the EU Emissions Trading Scheme, Working Paper No. 1271, Kiel.

Peterson, E., & Schleich, J. (2007). Economic and environmental effects of border-tax adjustments. Fraunhofer ISI Working Paper Sustainability and Innovation No. S1/2007 (revised version October 2007).

Phaneuf, D. J., & Requate, T. (2002). Incentives for investment in advanced pollution abatement technology in emission permit markets with banking. Environmental and Resource Economics, 22, 369–390. doi:10.1023/A:1016097000190.CrossRef

Prime Ministerial Task Group on Emissions Trading, (2007). Report of the Task Group on emissions trading. Prime Minister, Canberra. http://www.pmc.gov.au/publications/emissions/index.cfm. Accessed 1 October 2007.

Ramsey, F. P. (1927). A contribution to the theory of taxation. The Economic Journal, 37, 47–61. doi:10.2307/2222721.CrossRef

Reinaud, J. (2007). CO₂ Allowance & Electricity Price Interaction—Impact on industry’s electricity purchasing strategies in Europe. IEA Information Paper, OECD/IEA, Paris.

Requate, T. (2005). Dynamic incentives by environmental policy instruments—A survey. Ecological Economics, 54, 175–195. doi:10.1016/j.ecolecon.2004.12.028.CrossRef

Rogge, K., Schleich, J., & Betz, R. (2006). An early assessment of national allocation plans for phase 2 of EU emission trading, 01/06, Fraunhofer ISI Working Papers Sustainability and Innovation, Karlsruhe: Fraunhofer ISI. http://www.isi.fhg.de/n/Projekte/pdf/NAP2_assessment.pdf. Accessed 1 August 2007.

Røine, K., & Hasselknippe, H. (2007). Carbon 2007—A new climate for carbon trading. Oslo: Point Carbon.

Schleich, J., & Betz, R. (2005). Incentives for energy efficiency and innovation in the European emission trading system. Paper presented at the ECEEE Summer Study, Mandelieu, France.

Schleich, J., Ehrhart, K.-M., Hoppe, C., & Seifert, S. (2006). Banning banking in EU-emissions trading? Energy Policy, 34, 112–120. doi:10.1016/j.enpol.2004.06.009.CrossRef

Schmalensee, R., Joskow, P., Ellerman, D., Montero, P., & Baily, E. (1998). An interim evaluation of sulfur dioxide emissions trading. The Journal of Economic Perspectives, 12, 53–68.

Sijm, J., Bakker, S., Chen, Y., Harmsen, H. & Lise, W. (2005). CO₂ price dynamics. The implications of EU emissions trading for the price of electricity, ECN-C-05-081, Petten.

Sijm, J. P., Neuhoff, K., & Chen, Y. (2006). CO2 cost pass-through and windfall profits in the power sector. Climate Policy, 6, 49–72.

Sorrell, S., O’Malley, E., Schleich, J., & Scott, S. (2004). The economics of energy efficiency—Barriers to cost-effective investment. Edward Elgar: Cheltenham.

Spulber, D. F. (1985). Effluent regulation and long-run optimality. Journal of Environmental Economics and Management, 12, 103–116. doi:10.1016/0095-0696(85)90021-X.CrossRef

Sterner, T., & Muller, A. (2006). Output and abatement effects of allocation readjustment in permit trade. Resources for the future discussion paper 06–49, Washington, DC: Resources for the Future.

UNFCCC. (2006). National inventory submissions. Bonn: UNFCCC.

World Bank (2008). State and trends of the carbon market 2008. Washington D.C: World Bank.

Zetterberg, L., Nilsson, K., Åhman, M., Kumlin, A.-S., & Birgersdotter, L. (2004). Analysis of national allocation plans for the EU ETS. IVL-report B 1591, Stockholm, Sweden.

Titel: Incentives for energy efficiency in the EU Emissions Trading Scheme
verfasst von: Joachim Schleich
Karoline Rogge
Regina Betz
Publikationsdatum: 01.02.2009
Verlag: Springer Netherlands
Erschienen in: Energy Efficiency / Ausgabe 1/2009
Print ISSN: 1570-646X
Elektronische ISSN: 1570-6478
DOI: https://doi.org/10.1007/s12053-008-9029-3