Emissions allocation plan back on track

Hopes have risen that the UK's allocation plan for the EU emissions trading scheme will be among the first to be approved by the European Commission in July. Environment Secretary Margaret Beckett has also stepped up the pressure on the Commission to take a tough line with other Member States' plans.

DEFRA submitted the UK's national allocation plan (NAP) to the Commission at the end of April - a month after the original deadline.

However, by the end of May the Commission had told it that the NAP was incomplete - mainly because it did not contain a list of allocations for individual installations (ENDS Report 352, pp 41-44 ). The move threatened to delay approval of the UK's plan, undermining DEFRA's hopes of influencing the trading scheme by setting the standard for other Member States to follow.

In mid June, DEFRA submitted a "provisional" list of installations to the Commission, together with further information dealing with issues such as the treatment of new entrants.

DEFRA is confident that the information should "allow the UK NAP to be considered by the Commission in the first group of NAPs to be assessed." ENDS understands that the Commission hopes to approve the first few plans in July.

DEFRA stresses that the list of installation-specific allocations is based on information available by the end of April, and "may be subject to technical revision following the outcome of our final consultation exercise". For example, DEFRA is seeking views on extending the baseline period to include 2003 and on the treatment of new entrants - while the energy forecasts which underpin the allocation may also change significantly (see below).

Ironically, it appears that DEFRA excluded the list from the original NAP because of worries that it would lead to a repeat of the detailed haggling which followed a draft version issued in January (ENDS Report 348, pp 18-22 ).

The Government is keen to claim the high ground in the debate over allocation for the trading scheme. It is helped by the fact that the UK's "burden-sharing" target under the Kyoto Protocol is much less demanding than that for many Member States - allowing it to propose allocations for manufacturing industry which go no further than business as usual.

In June, Mrs Beckett issued a joint statement with CBI director Digby Jones calling on the Commission to "use its legal powers to ensure that Member States take a consistent approach to get the best results for the environment and balance environmental and competitiveness concerns."

The move is unusual - only a few months ago Mr Jones claimed that the Government's allocation approach was "risking the sacrifice of UK jobs on the altar of green credentials."

However, Mrs Beckett and Mr Jones now say "it is essential for key departments in the European Commission... to ensure that the combination of all national plans across the EU adds up to a coherent whole. At stake is the credibility of emissions trading as a mechanism for engaging other key countries, including the United States."

In May, the Commission's Environment Department signalled its concern that many Member States appear to be over-allocating to their industries. It also started infringement action against six Member States which were particularly late in submitting their NAPs (ENDS Report 352, p 54 ).

By late June, the Commission had received NAPs from only 10 of the original 15 Member States. The laggards are France and Italy, which have now produced draft plans, and Spain, Greece and Belgium, which have not. Only five of the 10 new EU Member States had submitted plans, with important players such as Poland and Hungary still to reveal their hands.

  • Revised energy projections: In late May, the Department for Trade and Industry belatedly issued a "working paper" detailing its latest work on the energy projections.1 The work is running many months behind schedule - it was originally supposed to be completed by February.

    The paper confirms that on current policies, CO2 emissions in 2010 are expected to be 14.3% below 1990 levels, or 15.2% once the reduced allocation to the power generators is taken into account. The picture has worsened since last summer, when the DTI foresaw a reduction of 16.3% by 2010.

    The forecasts - which already make allowance for additional measures announced under the recent energy efficiency implementation plan (ENDS Report 352, pp 45-46 ) - suggest that the Government is way off course for its target of a 20% reduction by 2010.

    Moreover, there is still scope for the projections to be revised upward before they are finalised in July or August. The DTI is doing further work on sectoral growth assumptions - and says the iron and steel industry "presents the biggest challenge". The sector's output is expected to increase by 7.8% between 2002 and 2007, a dramatic turn-around in its fortunes.

    The Association of Electricity Producers is challenging the forecasts, arguing that the DTI has assumed an unrealistic reduction in total electricity demand and has over-estimated the contribution from renewables and combined heat and power. It is lobbying for an extra 20 million tonnes of allowances for the first phase of the trading scheme from 2005-8.

    The DTI's forecasts assume that two new gas-fired power stations will be commissioned this decade, and show only a small reduction in coal burn by 2010 from the current high levels.

    It assumes that 12GW of coal-fired stations will be fitted with flue gas desulphurisation equipment. However, there are significant uncertainties over the UK's implementation of the EU large combustion plant Directive (see p 50 ).