Proposals by the European Commission to reform the EU emissions
trading scheme would likely result in higher power prices, the European
electricity trade association Eurelectric warned late January 23.
"Revenues accruing from the auctions should therefore--at least partly--
be channeled into developing low-carbon technologies" - Eurelectric
The EC had earlier January 23 set out plans to create a new Europe-wide
cap for emissions allowances, instead of national caps, and to move away from
free allocation of allowances toward more auctioning as part of its wider
package on energy and climate change.
Under the proposals, which still have to be agreed by the European
Parliament and the Council of Ministers representing member states'
governments, power utilities would lose their free allocation of emissions
allowances from 2013 and would have to buy them at auction.
In its initial reaction to the EC's proposals, Eurelectric said
"policymakers at all levels should be aware that the scarcity of allowances
created by stricter caps will impact on electricity prices, irrespective of
the switch to auctioning."
And it warned that the higher costs faced by the power sector of having
to buy emissions allowances instead of getting them free would "syphon off"
revenues that the industry needs to invest in new carbon technologies in order
to reach the stricter emissions goals.
"Revenues accruing from the auctions should therefore--at least partly--
be channeled into developing low-carbon technologies," Eurelectric said.
It said that Eurelectric members welcomed "the clear visibility to the
2020 horizon and recognised auctioning as the main allocation method."
"However, it will be crucial to ensure an orderly transition, so the
rules must be made clear as soon as possible," Eurelectric added.
Continued renewables subsidies distort the market
On renewable energy, Eurelectric said it "fully supports" the trend
towards greater use of renewable sources, but was "disappointed" that the EC
did not put greater emphasis on green certificates trading to meet renewable
energy goals.
The EC's package Jnauary 23 included an analysis of support schemes for
renewable energy, which showed that feed-in tariffs and similar systems which
give guaranteed prices for renewables in countries like Germany and Spain had
so far been cheaper and more effective in delivering renewables than
market-based certificates trading systems like that used in the UK.
Eurelectric said that non-market support schemes were not compatible with
the broader EU aim of creating a single European electricity market.
"It is vital that current efforts to drive forward the internal energy
market are not negated by ring-fencing up to 35% of the EU electricity market
via non-market renewable energy support schemes," Eurelectric said.
It was "disappointed" that the EC's proposals presented a system to trade
renewables across border virtually using guarantees of origin--a form of green
certificates--as "a limited secondary possibility."
"We urge policymakers to foster GOO trade for renewables production so as
to link renewables more closely into the electricity market," said
Eurelectric, "[and] to foster the development of the internal market as a
mechanism for ensuring cost-effective delivery of both secure energy supply
and climate-related policy goals."
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