The European Emissions Trading System

The EU Emissions Trading System (EU ETS), which has been in place since 2005, is a key part of European climate protection policy and aims to effectively limit CO2 emissions in the European energy sector and industry. The basic principle is that a limited number of emission allowances are allocated or auctioned to the operators of relevant plants. If a plant emits more greenhouse gases than it was assigned or purchased, the company must purchase additional rights. In turn, those in possession of more rights than they need can sell these to other companies. This creates an incentive to take an economical approach to greenhouse gases. In order to achieve the emission reduction target of 21 per cent by 2020 (basis: 2005) for the sectors covered by the EU ETS, the number of allowances will be reduced by 1.74 per cent each year. In doing this, European industry is making an above-average contribution to reducing greenhouse gases in the EU, as compared with non-EU ETS sectors.

The start of the third trading period (2013 to 2020) saw a drastic reduction in availability of emission rights due to the amended Emissions Trading Directive. In addition, full auction of CO2 allowances (EUAs) was introduced for the energy sector. Since then, industry has also had to purchase or buy part of its allowances at auction. Sectors that are demonstrably at risk of carbon leakage, i.e. transfer of production or emissions to non-European countries, get a free allocation of EUAs based on sophisticated product benchmarks. A benchmark has been determined for grey clinker (766 kg CO2/t) and white clinker (987 kg CO2/t) for the European cement industry, which faces the risk of carbon leakage. The average emissions of the best ten per cent of all plants were used as the basis for calculation.

Thanks to altered general economic conditions in the EU, the CO2 price is currently relatively low. It is for this reason that the EU Commission is striving to implement a structural reform of the EU ETS. Before the end of the third trading period, a rule-based mechanism, in the form of what is known as the "market stability reserve", is to be introduced to break down market imbalances and raise the CO2 price level.

In order to create planning security for a possible fourth trading period, the EU's heads of state and government agreed on a framework for the 2030 climate and energy policy in October 2014. This includes a reduction target of 40 per cent by 2030 for greenhouse gases. Associated with this is an increase in the linear reduction factor, which continually reduces the maximum amount of CO2 allowances. The European Council has resolved that there will still be a free allocation of CO2 allowances for sectors at risk of carbon leakage after 2020. This is very important for the European cement industry, as without effective carbon leakage protection there would be a real threat of transfer of production and investment to third states. This must therefore be the focus of all considerations regarding climate policy, in order to prevent endangering the sector's international competitiveness.

Contact

Manuel Mohr

Manuel Mohr

Phone:
+49-30-2 80 02-100

Fax:
+49-30-2 80 02-250

 

 

Emission Trading

McKinsey study – Amendment to the European Directive on Emission Trading:
Impact on the German Cement Industry

Environmental Data

VDZ Environmental data 2016

Environmental Data of the German cement industry 2016