Monday, September 10, 2012

Coal power to be subsidized by ETS revenues

The Slovak government is debating how it will use hundred millions of euro it may get from auctioning of emission allowances since 2013. According to EU rules (Art. 10, par. 3 Directive 2009/29/EC) at least 50 % of the revenues generated from the auctioning should be used for climate related activities in the EU or in the least developed countries.

During current trading period (2008 - 2012) the Slovak power plants have received allowances for free and they were not obliged to auction them.

New draft law about trading with emissions allowances which is still in legislative process stipulates that 50 % of the revenues will be used for financing projects of truly achievable and measurable savings of greenhouse gas (GHG) emissions, increase of energy efficiency, reduction of consumption of primary energy sources, substitution of fossil fuels for renewables and introduction of best available techniques aimed at reduction of GHG emissions and polluting substances. 

Another 10 % will be used as state aid for industries with anticipated risk of carbon leakage due to increased electricity costs, as allowed by the ETS Directive and specified by the European Commission in May 2012. 20 % will be used to support the achievement of state environmental policy goals.

Support for coal

Last week (September 5) the government agreed on resolution on future state support for coal mining sector. It says that since the domestic mining and electricity production from this coal in Novaky power plant is not commercially viable it is only possible through mechanism of general economic interest. These subsidies for electricity production are part of consumers´ bill. 

The document foresees the operation of Novaky power plant until 2020, with outlook until 2035. However, the facilities will have to undergo substantial modernization due to new rules on industrial emissions (Directive 2010/75/EU).

According to the analysis of Ministry of Economy Novaky power plant should produce 15,973 kt CO2 in the period of 2013 – 2020. Later (2021-2035) it should produce further 13,860 kt CO2. The ministry also calculated costs related with the compulsory purchase of allowances. During 2013 – 2022 the costs should be € 321.87 million. In this calculation the ministry used floating carbon price per ton from € 8 in 2013 to € 24 in 2022.

As for the amount of revenues from auctions the document refers to volatility of EUA price. Here the document does not count with the floating price mentioned above, but only uses current EUA price of € 7 per ton CO2. With this methodology it only expects revenues of € 100 million. 

Greenpeace: It is absurd!

Greenpeace Slovakia has reacted strongly against the government decision. Support for mining industry from the European system ETS created to reduce carbon emissions is “absurd”, they argue. 

“This step goes against the whole logic of international emission trading and has nothing to do with sustainability and development of green jobs,” said Pavol Siroky, the climate campaigner at Greenpeace Slovakia. ”Instead of strategic direction towards so-called green economic growth the government has decided to increase the GHG emissions.”

The organization will ask the government to abolish the resolution and rather support program for energy savings in households and public buildings. 

Other EU members are also finalizing their plans how to use the revenues generated from the auctioning of allowances. Germany wants to use all this income for national and international climate financing channeled via special Energy and Climate Fund (for more see Germanwatch analysis). The others are mostly following the rule of 50 % for climate projects.

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