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The future of the EU ETS-

What to expect in Phase 3

Mary Veronica Tovsak PleterskiDirector B – European and International Carbon MarketsDG Climate ActionEuropean Commission

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-20%

2083 Mt/yr

Gradient: -1.74%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

A predictable EU-wide cap until 2020 and beyond

Starting point: 1974 Mt in 2013

1720 Mt

•Linear factor to be reviewed by 2025•Aviation to be included; will change figures correspondingly, but cap not reduced•Disclaimer: all figures are provisional and do not account for new sectors in third period

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A wider scope

• New sectors Aluminium Basic chemical production

• New gases (nitrous oxide, PFCs)• Aviation as from 2012

internal, inbound and outbound aviation, unless equivalent measures in 3rd countries

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Harmonised Allocation Rules

• Auctioning is default allocation method – for power sector as from 2013

• Phasing out free allocation for industrial sectors (80% in 2013 – 30% in 2020 – 0% in 2027), unless…

• …deemed exposed to significant risk of carbon leakage, then free allocation at 100% of benchmark

• Aviation: 15% auctioning

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Auctioning

• Regulation unanimously agreed by Member States and to be formally adopted end of October

• A common auction platform for 20+ Member States option for Member States to set up own auction platform

• Simple auction format• Predictable auction calendar• Adequate oversight:

a single auction monitor, solid know-your-customer checks and provisions to mitigate risk of market abuse

• Next steps: procurement of common auction platform and single auction monitor

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Benchmarking

• Commission internal discussions in the final phase

• Draft decision on harmonised allocation rules to be sent to Member States in view of vote in Climate Change Committee

• Then 3 months scrutiny in EP and Council• Implementation of an agreed Directive – hence

a technical rather than political task• Thanks to all stakeholders who have

contributed constructively to this process!

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Market oversight

• Com to examine level of carbon market oversight Preparing stock-taking Communication to EP and

Council (main gap is spot market)

Major study in 2011, incl. open web-based stakeholder consultation, impact assessment

Legislative proposal as appropriate end 2011

• In the meantime – Auctioning Regulation ensures integrity of auctions, even if allowances are auctioned spot

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Maritime transport emissions

• Commission invited to come forward with a proposal if there is no agreement in IMO/UNFCCC by the end of 2011 – act should enter into force in 2013

• Very difficult to progress in IMO/UNFCCC • No decision yet on policy or timing (other policies

could work)

• Design issues: Scope/coverage - like aviation (310 Mt/year) or different? Full auctioning? Competitiveness/leakage? Monitoring & enforcement issues

• ETS being actively discussed in IMO (IMO Expert Group report MEPC 61 INF. 2)

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Providing the right incentives through use of

international credits

• Credits from projects to reduce industrial gases Reports that they are poor value for money + of low

environmental integrity Concern that they reduce incentive for more

ambitious, appropriate own action in developing countries

COM is preparing a proposal to restrict their use as allowed by revised ETS Directive

• Coordination of use restrictions important: To avoid arbitrage opportunities between markets To increase incentive for more ambitious action, including sectoral

crediting, in host countries

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Differences between sectoral crediting and CDM

• Higher developing country government involvement Gathering sectoral data Setting crediting thresholds Facilitation reductions throughout the sector

• Different incentive structure Aggregate for all installations within the sector Individual installation gains depend on performance of

other installations Threshold below BaU

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Global carbon market:EC vision for the future

• Size of market• Incentives to move towards cap and trade

Reformed CDM

Sectoral crediting applied

Emissions not covered by cap and trade

Bilaterally linked cap and trade

TIME

Total global em

issions

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Info on the Climate Action and Renewable Energy Package at http://ec.europa.eu/environment/climat/emission/index_en.htm