Ends Europe: Germany to make the most from ETS auctions

http://www.endseurope.com/index.cfm?go=25856

Germany's income from the sale of carbon allowances (EUAs) under the EU emissions trading scheme (ETS) will be twice that of any other member state, according to a draft report from academic network Climate Strategies.

The report, published on Thursday, puts Germany's final revenue from auctions over the third ETS phase (2013-20) at €37bn-€46bn. The countries with the next highest incomes are the UK (€19bn-€23bn), Poland (€17bn-€22bn) and Italy (€14bn-€18bn).

This is partly because of the carbon intensity of power plants in these countries. The power sector will have to buy 100% of their allowances from 2013, but there will be derogations for some eastern European plants. Other ETS installations will have to buy at least 20% from 2013, rising to 70% in 2020.

Authors suggest revenues should be reinvested in further emission reduction measures, including an expansion of NER300 funding for carbon capture and storage projects, loans to the renewable energy sector and energy efficiency projects.

Some member states might want to use auctioning revenues to help alleviate their national debt but this "has potential to damage and distort the fundamental purpose of the ETS", warn the authors, which includes British economist Professor Michael Grubb.

Auction revenues across the EU are likely to total €150bn-€190bn by 2020. But this would increase by €50bn-€120bn if the EU were to adopt a 30% emissions reduction target for 2020. A report by CAN Europe last month came to similar conclusions.

Climate Strategies also looked at introducing auctioning and border charges for the cement and steel sectors, instead of allocating free allowances. This would raise an additional €33bn-€50bn under the 20% cap, while still minimising the risk of carbon leakage, it says. The group has criticised the EU's approach on carbon leakage.

Follow-up:

Draft report(http://www.climatestrategies.org/research/our-reports/category/61/313.html) on auctioning revenues