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Following today's announcement (18th April 2016) that Vattenfall intend to sell their German lignite assets to EPH, Sandbag releases this paper investigating the past acquistions of EPH, and their likely result for the climate.
Dave Jones, Sandbag's Carbon & Power analyst comments:
"This is a lose-lose-lose situation.
It's a lose for the climate, because EPH are unlikely to implement a just phase-out that Vattenfall could have implemented, meaning the lignite plants are likely to stay open longer than they would have otherwise.
It's a lose for the Swedish government, because it is very likely that the sale price to EPH is so low, that it might even be negative when you take into account liabilities left in Vattenfall. Keeping the assets, and phasing-out generation would arguably be more profitable.
It's a lose for German workers. EPH has a track record in rapidly and aggressively cutting jobs at the plants it acquires, rather than the measured phase-out Vattenfall could implement, aided by German government transition funding for green jobs in Lusatia.It's a big gamble to hand these assets at a cut-price, or even a negative price, to a faceless organization. EPH have no public shareholders to be responsible to, no electricity customers to be responsible to, and no ownership from regional or national government to be responsible to. With electricity prices so low and lignite so unprofitable, EPH ownership leaves Lusatia's lignite industry in a precarious position, with the possibility it could collapse at any time, with devastating consequences to the local community."
This briefing presents an amendment to the 2015-16 UK Energy Bill drafted in partnership with Client Earth, and supported by WWF, RSPB and Greenpeace.
It seeks to make the UK government directly accountable for emissions in the sectors covered by the EU Emissions Trading Scheme (ETS) when determining whether the UK is staying within its national carbon budgets. The EU ETS covers emissions from the electricity sector and heavy industry. Currently, the carbon accounting regulations allow the government to ignore emissions from these sectors when determining whether the carbon budgets have been met. In effect, this makes the government responsible for only half the carbon budgets – those residual parts of the carbon budget that do not fall under the scope of the EU Emissions Trading Scheme (e.g. transport, heat, agriculture).
This amendment was presented to the 2015-16 Energy Bill at report stage as New Clause 10, where it was supported by the Labour, the SNP, the Lib Dems and the Greens. We write up the vote in more detail at this blog.
It has now been retabled by Labour as the Bill has returned to the House of Lords, where we eagerly await a decision.
Total emissions are 11mt down, or 0.6%, from 1813mt to 1802mt
Power and heat emissions fell 0.6%, from 1073mt to 1065mt
- This fall follows a massive 8% in 2014 power sector emissions, due to a record mild year. It is incredible that emissions in 2015 still fell as weather moved to be more “normal”.
- This underlines the large long-term trend of falling emissions in the European power sector as renewable electricity displaces fossil.
- UK coal power emissions saw a huge fall of 23%, whilst UK gas power also fell. See blog
- German lignite power emissions fell slightly slower than overall EUETS emissions, and are still responsible for 9.0% of all EUETS emissions. See blog
- Netherlands power emissions increased by 11% as new coal plants came online. However, emissions should fall again as older coal plants are decommissioned in 2016 and 2017.
- A dry region in Spain and Portugal significantly increased coal power emissions there; whilst a wet Nordic region led to lower coal generation in Denmark and Finland.
Industrial emissions fell 0.3% from 740mt to 738mt
- Emissions have fallen only very marginally.
- UK steel emissions fell 18%. Excluding this fall, total European industrial emissions were the same in 2015 as in 2014.
How greater climate ambition is in the interest of Central and Eastern Europe
- CEE countries are to receive ~1 billion allowances to fund energy sector modernisation during 2021-2030.
- With every €1/t increase in the ETS carbon price, the value of these funds to CEE states increases by about €1 billion.
- An increase in the ETS carbon price will not endanger CEE national manufacturing industries which are protected by free allocation.
On 17 March, the European Heads of State met in Brussels, but the outcome of COP21 dropped off their agenda due to a strong opposition to increased 2030 climate ambition coming from lower-income member states. In today’s new briefing Sandbag explains that the post-Paris rise in climate ambition is actually in the interest of the lower-income Central and Eastern European economies after 2020.
The transition to a low-carbon economy in CEE countries can impose as much as €84 billion of additional investment burden on the CCE economies during 2021-2030. To ensure an even spread of the decarbonisation effort the EU Council agreed in Oct 2014 that CEE countries will be supported by special provisions from the EU Emissions Trading Scheme Directive allowing them to use additional carbon credits for investment in the decarbonisation of their energy sectors. The funds total nearly 1 billion carbon allowances.
Funds flowing from the Modernisation Fund and the Article 10c derogation should be focused on financing long-term carbon reductions – which will, in turn, protect the CEE power sectors from the future impact of the declining carbon cap – an objective that has not been made clear in the current ETS Phase. Significant support is needed to a broad range of zero- and low-carbon technologies, alongside renewables, and comparable incentives should be put in place.
How Europe’s cement sector benefits and the climate suffers from emissions trading flaws
Sandbag’s new report reveals the European cement sector is reaping huge financial benefits from climate laws, adding to company profits and encouraging the import of emissions from other countries.
Perverse incentives in the design of the EU’s ‘flagship’ climate change policy, the Emissions Trading Scheme (ETS), have increased cement sector emissions. We estimate these rules have resulted in an extra 15 million tonnes of CO2. If the cement sector had been outside the ETS, its emissions would be lower. While the surplus in emissions allowances that have accrued to most industrial sectors are now declining, in the cement sector the surpluses continue to grow.
Five “Carbon Fat Cat Companies” from the cement sector have collectively received nearly €1 billion worth of spare EU allowances (EUAs) for free between 2008 -2014. As the number of free allowances available to all industry is fixed, over-allocation to cement companies is reducing the volume that can be allocated to other sectors that may need more protection.
These facts highlight the urgent need to overhaul the rules governing the ETS in the ongoing reform of the Directive. A low emissions cement sector is possible, but to incentivise it requires the ETS:
· Has a substantially higher carbon price (currently just €5/tonne.
· Ends the over-allocation of allowances.
· Provides new support for innovative processes and Carbon Capture Utilisation & Storage.
In a new communication responding to the Paris Climate agreement, the European Commission has signalled that it does not intend to increase the level of its climate ambition until after 2030. This applies the weakest possible reading of the ambition ratchet agreed in Paris and ignores the clear mandate it provided to increase EU ambition from current levels at the 2018 facilitative dialogue and/or the 2023 stocktake.
Research from Sandbag highlights that Europe is set to massively over-deliver against its 2020 climate target. We project that domestic emissions will fall 30% below 1990 levels by 2020, creating a clear opportunity to step up the 2020 climate target (which is currently 20% below 1990, with offsets) after Paris.
Moreover, we also find that the ambition of the current 2020 climate target and the proposed 2030 targets remain inadequate to deliver the 2050 goals agreed under a 2 degree temperature goal, let alone the more ambitious temperature goals agreed in Paris (well below 2 degrees with an aspirational goal of 1.5 degrees).
Europe could increase its 2020 target with minimal impact on the European economy by a) allowing spare allowances in the EU Effort Sharing Decision to expire in 2020, and b) by cancelling a significant portion of the carbon allowances that are already off the market in the newly constructed Market Stability Reserve. The persistently low carbon prices in the EU ETS also provide an opportunity to increase the ambition of the 2030 target by adopting a stronger ETS cap.
The EU’s relatively unambitious targets contribute to the “emissions gap” that currently exists between the aggregate effect of all the INDCs submitted to the Paris talks and what is needed to stand a good chance of staying below 2 degrees global average temperature increase. The EU should therefore look to increase its targets as soon as possible. Europe has been a world leader on climate action, now is not the time to relinquish that mantle when the rest of the world is finally joining the climate charge
This briefing represents Sandbag's official written evidence to the Energy and Climate Change parliamentary select committee inquiry on the 5th carbon budget.* It details our five key recommendations to improve the 5th carbon budget and maintain its environmental integrity. We focus especially on the carbon accounting rules, and how the treatment of EU Emissions Trading Scheme (ETS) allowances need to be changed to ensure that:
- the government is held accountable for reducing emisssions in ETS sectors, especially the UK power sector
- the government has a clearer understanding of its obligations for reducing emissions in non-ETS sectors
- the carbon budgets are corrected for 319 million extra non-ETS carbon units generated through accounting anomalies
*There are some cosmetic formatting changes compared to the official ECC submission. An additional chart and some additional references have also been added.
This briefing urges Members of Parliament to promote strong and transparent rules for the 5th carbon budget by defending clause 80 in the 2015-16 Energy Bill.
Clause 80 seeks to make the government accountable for ensuring all of the UK’s greenhouse gas emissions stay within any new carbon budgets adopted. The government has moved to strike this Lords amendment from the Bill as it passes through the House of Commons.
Currently, the government is only responsible for meeting half of the UK carbon budgets. It is only accountable for reducing emissions from sectors like buildings, transport and agriculture. Meeting the other half of the carbon budget is completely outsourced to companies in the EU Emissions Trading scheme (ETS), and is treated as being met automatically, irrespective of whether actual emissions from these sectors are higher or lower than the UK’s ETS budget.
Our amendment for Report Stage - co-created by WWF, the RSPB, and ClientEarth - is available here.
*** Please note, the Italian data is incorrect due to a change in ENTSOE reporting. This report will be updated in the next few days when we understand what the correct data is. Sincere apologies for this. ***
Today, Sandbag releases a review of the European power sector in 2015.
2015 saw a record increase in renewables generation, equal to 2.5% of European electricity demand. But despite this, power sector CO2 emissions are expected to fall by only about 0.5%.
Guest authored by Suzanna Hinson, Stephen Tindale and Andy Kerr.
This report was commissioned by Sandbag to explore why the UK, in the light of the Paris Agreement at COP21 in December, could consider an additional ‘net zero emissions’ long-term goal for the Climate Change Act 2008.
This report makes recommendations relevant for discussion in the Energy Bill [HL] 2015-16, as it enters the House of Commons.