By Costis Stambolis
As the European Union is getting ready to launch its pioneering
emission trading scheme early in 2005, in compliance with Kyoto protocol requirements, Greece is still struggling to prepare, its long overdue proposal for a national allocation plan
for industrial emissions as is required by European Union regulations. According to EU directive 2003/87/EK concerning the introduction of an emission trading scheme for greenhouse gases within the Community all member countries were required to have prepared and submitted detailed national allocation plans by March 31,2004. In the event only eight countries out of the 25 submitted on time their plans but gradually the rest followed with Greece not being the only country not to have complied so far.
According to a government announcement last week the study for the national allocation emission plan will be submitted to the ministry of Development by the working group in charge by December 11th. Provided that the ministry will fully accept the findings and recommendations of the study it will launch a public consultation,as required by EU regulations, which must be completed within a minimum three week period. Making allowances for the enforced annual Christmas festivities, this means that the earliest that the government will be able to assess the responses from the open consultation and prepare and send its final proposals to Brussels will be at the end of January. Failure by Greece to participate in the EU trading scheme will draw heavy fines and threaten with immediate closure some of the more heavily polluting industries. In addition to drawing Brussels’s wrath abstention from the scheme will act as a disincentive for lucrative investments in renewable energy installations, since the EU emissions trading scheme is apart of an overall process to reduce overall gas emissions. One way of doing this is by encouraging energy production,especially electricity, from renewable energy sources such as solar and wind energy, hydroelectricity,biomass and geothermal.
The Kyoto Protocol
Back in 1992 the United Nations concerned with global warming,the greenhouse effect and its possible interaction with climate change set up the UN Framework Convention on Climate Change. Five years later and as evidence was mounting on the effects of industrial and transport emissions to climate change, the Kyoto Protocol for Climate Change was signed in Kyoto, Japan by 159 countries in December 1997.The aim of the protocol is to force countries to reduce the six basic greenhouse gases (CO2,CH4,N2O,HFC,PFC,and SF6) by 5% ,on the basis of total global emissions observed in 1990 ,during a first application period between 2008-2012.However, as gas emissions will continue to rise real emission reductions for some countries will far exceed the 5% target ,if Kyoto targets are to be met.
“What is now plain is that the emission of greenhouse gases, associated with industrialization and strong economic growth from a world population that has increased sixfold in 200 years, is causing global warming at a rate that began as significant, has become alarming and is simply unsustainable in the long-term. And by long-term I do not mean centuries ahead. I mean within the lifetime of my children certainly; and possibly within my own. And my unsustainable, I do not mean a phenomenon causing problems of adjustment. I mean a challenge so far-reaching in its impact and irreversible in its destructive power, that is alters radically human existence”, says Tony Blair, UK Prime Minister.
According to the majority of scientists climate change is happening right now. There are four main considerations:
· There is virtual worldwide scientific consensus on the scale of the problem
· 10 warmest years on record all since 1990
· Average global temperatures have risen by 0,6 degrees Celsius over last century
· Extreme events are becoming more frequent; glaciers are melting; the sea ice and snow cover are declining
Following the ratification of the Kyoto Protocol by the Russian government on November 17 this year, the protocol is now fully in force. It required to be signed by countries responsible between them for at least 55% of total global emissions. It has now been signed by 129 countries, including China and India, which between them are responsible for 61.6 % of global emissions. USA is one of the few countries which oppose the principle of greenhouse warming and are therefore refusing to sign the Kyoto Protocol.
The EU Emission Trading Scheme
The EU Emission Trading Scheme(EU ETS) introduces
legally binding greenhouse gas (GHG) emissions limits for industrial activities from the beginning of 2005 and harsh penalties for non-compliance (€ 40-100 per tonne of carbon dioxide equivalent – CO2e). The scheme assigns a direct cost or value to GHG emissions associated with commercial activities (currently predicted to be € 10-15 per ton of CO2e) and will have a significant financial impact on companies in the energy and energy-intensive sectors. Business ramifications will be felt not only by the 5 industry sectors initially covered by the scheme (energy, mineral oils, minerals, metals, pulp & paper), but also by large consumers of energy and energy-intensive commodities (e.g. chemicals, metals, minerals, etc.). The range of expected risks and opportunities associated with the EU ETS is considerable.
Affected industries may incur costs associated with meeting the compliance requirements of the scheme (investing in emissions reduction projects or purchasing emissions allowances or credits). In many cases, these compliance costs will be passed on to customers, resulting in additional cost implications associated with rising commodity prices. For example, wholesale electricity and natural gas prices are predicted to increase by as much as 70% and 30%, respectively.
In some cases, companies will be able to derive new sources of revenue from the EU ETS, for example, from the sale of emissions credits. Many firms are also expected to benefit from the sale of commodities and technologies that will deliver emissions and energy savings (e.g. energy-efficient industrial equipment or relatively low-carbon fuels such as biofuels and natural gas). Other companies may derive reputation or brand benefits by effectively demonstrating reductions in their GHG emissions.
There will be significant differences in the cost increases incurred by individual production facilities in the EU. Further, industrial operations in many regions of the world will not be subject to any GHG controls or GHG-related production cost changes. Cost increases arising from the EU ETS will therefore differ considerably between companies, resulting in radical changes to the competitive landscape of many industries.
The EU ETS assigns a cost to the GHG emissions released by commercial activities. Conversely, businesses are able to derive a financial value from any GHG reductions that they are able to achieve. Companies must therefore factor the cost of value of emissions and emissions reductions into their marketing, investment and disposal strategies and manage their GHG assets and liabilities proactively if they are to survive and prosper in the long term.
Greece’s Position
Despite the serious delay in preparing the Greek submission for the EU ETS, work is now in progress and the leader of the team, Professor Dimitris Lalas, chairman of the Athens Observatory and Greece’s permanent delegate in the UN Convention on Climate Change,is confident that the December 11 deadline will be met. The work team comprises the Athens Observatory, engineering consultants LDK, the accounting firm KPMG and EPEM a specialist environmental consultant.
“Due to administrative problems, partly attributed to the change in government last March, there was considerable delay in the start of the project and the preparation of the national allocation plan.” Says Prof Lalas. “ However, I remain hopeful that the draft which has now been prepared by the team under my supervision will be submitted to the government on time next week, which means that provided the European Commission accepts the plan with only minor adjustments, then Greece may be in a position to complete the necessary infrastructure so that Greek installations can join the emission trading scheme albid at the last moment, which is February 28,2005” notes Prof.Lalas. That presupposes a super human effort by all involved and a firm commitment by the government,which initially failed to realize the importance of the exercise, to seek expedited means to address administrative and technical needs. E.g setting up of the registry, daily monitoring of the trading activity etc.In question is the management of of 70 million of emission per year, corresponding to 52-53% of total national emissions, and 140 power generation and industrial installations in Greece which will join the scheme. This compares with 2,200 million tons of emission and 9,000 installations in the whole of the EU.