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Title:
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IA-12 Needs and challenges in implementing key directives - EU Emissions Trading Directive (2003/87/EC)
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Author(s):
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Schwaiger, Hannes; Türk, Andreas; Arasto, Antti; Vesterinen, Pirkko; Vehlow, Jürgen; Kautto, Niina; Sijm, J.P.M.; Hunder, Marzena; Brammer, John
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Published by:
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Publication date:
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ECN
Policy Studies
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22-12-2006
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ECN report number:
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Document type:
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ECN-B--07-006
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Book
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Number of pages:
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Full text:
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60
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Download PDF
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Published in: Overcoming barriers to bioenergy. Final report to the Network of Excellence, 1, 61, Bioenergy NoE.
Abstract:
The main objective of this work package is to review the EU Emission Trading Scheme (EU-ETS) regarding its effects on the competitiveness of bioenergy. The project focused on NoE partner countries. The aim of the project was also to prepare a new jointly executed research (JER) project proposal.
After a general overview of national biomass use, the national allocation plans (NAPs) of the participating NoE countries were summarized and the most important elements regarding the setting of appropriate incentives to invest in low emitting technologies were compared and discussed.
Furthermore, the work package analysed the influence of the price of EU-ETS allowances on the competitiveness of bioenergy in the energy sector, on the basis of a model.
The model was developed (based on previous studies of the IEA) to assess the influence of the CO2 price on investment decisions in new power plants and on possible fuel-switches in existing plants. While decisions regarding fuel-switching are based on the Short Run Marginal Costs (SRMC), investment decisions in new plants are based on the Long Run Marginal Costs (LRMC).
With the help of the model the SRMC were calculated in dependence of the CO2 price, taking into account also country specific biomass prices. The results showed that in some countries, such as Finland, where the biomass fuel price is low, biomass is the most competitive fuel even without the EU-ETS. In other countries, where the biomass fuel price is high, a CO2 price up to 30€/t (country specific) is required to make biomass the cheapest option.
Within the model the LRMC also varied by CO2 price and country. The results are very country specific, as biomass fuel prices differ. In some EU countries, such as Finland, new biomass plants would become competitive with coal already at rather low CO2 prices. In other countries, such as Austria, the CO2 price would have to exceed about 50€/t. In these countries additional national incentives such as guaranteed fed-in tariffs are required to make biomass power plants competitive.
The project also compared the EU-ETS with other emerging emission trading schemes regarding the stimulation of the use of renewable energy sources and gave some preliminary recommendations how to improve the current design of the EU-ETS regarding the transition to low emitting energy sources.
In addition the project addressed the question how to increase the competitiveness of bioenergy JI and CDM projects. These can be used by companies under the EU-ETS for compliance up to a defined national limit.
Future research work in possible follow up JER projects would involve:
-?Identification of main influences on biomass use in NoE countries of the EU-ETS specific rules, allocation methods and existing NAPs in participating countries.
-?Analysis of the interaction and the design of the optimal mix of different European climate policy instruments
-?Assessment of including other sectors (e.g. transport)
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