No abstract

We quantified the volume of free allowances that different national allocation plans proposed to allocate to existing and new installations, with specific reference to the power sector. Most countries continue to allocate based on historic emissions, contrary to hopes for improved allocation methods, with allocations to installations frequently based on 2005 emission data; this may strengthen the belief in the private sector that emissions in the coming years will influence their subsequent allowance allocation. Allocations to new installations provide high and frequently fuel-differentiated subsidies, risking significant distortions to investment choices. Thus, in addition to supplying a long market in aggregate, proposed allocation plans reveal continuing diverse problems, including perverse incentives. To ensure the effectiveness of the EU ETS in the future, the private sector will need to be shown credible evidence that free allowance allocation will be drastically reduced post-2012, or that these problems will be addressed in some other way

The climate impact from the use of peat for energy production in Sweden has been evaluated in terms of contribution to atmospheric radiative forcing. This was done by attempting to answer the question "What will be the climate impact if one would use 1 m 2 of mire for peat extraction during 20 years?". Two different methods of after-treatment were studied: afforestation and restoration of wetland. The climate impact from a peatland -wetland energy scenario and a peatland -forestry energy scenario was compared to the climate impact from coal, natural gas and forest residues. Sensitivity analyses were performed to evaluate which parameters that are important to take into consideration in order to minimize the climate impact from peat utilisation.The main conclusions from the study are:• The accumulated radiative forcing from the peatland -forestry energy scenario is comparable to natural gas in a 180-year perspective, and between forest residues and natural gas in a longer perspective (300 years) assuming a medium-high forest growth rate and original methane emissions from the virgin mire.• The accumulated radiative forcing from the peatland -wetland energy scenario, will lie between coal and 2/3 of natural gas in a 300-year perspective, depending on the assumed carbon uptake rates for the wetland and assuming a medium-high methane emissions from a restored wetland.

In the EU emission trading scheme (EU ETS), the treatment of new entrants has proved to be one of the most contentious issues. This article analyses the impact of allocation to new entrants in the energy sector, and identifies options for improved regulation in this field. The point of departure for the discussion is a comparative analysis of the allocation in phase I and phase II of the EU ETS to two hypothetical energy installations located in different EU Member States. The study focuses on the Nordic countries due to their integrated energy market. The quantitative analysis was complemented by interviews with policy-makers and industry representatives. The results suggest that current allocation rules can significantly distort competition. The annual value of the allocation is comparable to the fixed investment costs for a new installation and is not insignificant compared to expected revenues from sales of electricity from the installation. The study finds that the preferred option would be that Nordic countries should not allocate free allowances to new entrants in the energy sector. This should be combined with adjusted rules on allocation to existing installations and closures in order to avoid putting new installations at a disadvantage. A second, less-preferred choice would involve harmonized benchmarks across the Nordic countries.

We quantified the volume of free allowances that different national allocation plans proposed to allocate to existing and new installations, with specific reference to the power sector. Most countries continue to allocate based on historic emissions, contrary to hopes for improved allocation methods, with allocations to installations frequently based on 2005 emission data; this may strengthen the belief in the private sector that emissions in the coming years will influence their subsequent allowance allocation. Allocations to new installations provide high and frequently fuel-differentiated subsidies, risking significant distortions to investment choices. Thus, in addition to supplying a long market in aggregate, proposed allocation plans reveal continuing diverse problems, including perverse incentives. To ensure the effectiveness of the EU ETS in the future, the private sector will need to be shown credible evidence that free allowance allocation will be drastically reduced post-2012, or that these problems will be addressed in some other way.