Memorandum submitted by EURELECTRIC
EURELECTRIC is the sector association representing
the common interests of the Electricity Industry at pan-European
level, plus its affiliates and associates on several other continents.
The European Electricity Industry recognizes the responsibility
of the power sector as a major emitter of GHG and is taking actions.
That is why 61 electricity companies' CEOs—representing
well over 70% of total EU power generation—signed in March
2009 a Declaration whereby our sector clearly committed itself
to carbon-neutrality by 2050. As a requisite, the declaration
also draws attention to the need for a properly-functioning electricity
market in Europe, the desirability of an international carbon
emissions market and the role of all technologies, including nuclear,
renewables and CCS, to efficiently evolve to a low carbon electricity
system.
EURELECTRIC had already expressed its concerns
with attempts made to introduce an EPS for CO2 at European
level or to allow Member States to introduce such a standard.
We would like to use the opportunity of this inquiry to submit
our arguments on the implications of the introduction of a national
Emissions Performance Standards for CO2.
THE INTRODUCTION
OF AN
EU-WIDE EPS FOR
CO2 WOULD CAUSE
NO ADDITIONAL
REDUCTION IN
EMISSIONS
EURELECTRIC regards the EU-ETS as the key policy
instrument to reduce CO2 emissions in Europe. Properly
constructed and with continued political support, the EU-ETS will
provide a reliable carbon price, which will act as a signal for
market participants, including power generators, to direct their
investment towards less carbon-intensive production in an economically
efficient manner. As a result, CCS and other low-carbon technologies
will over time become competitive. It is important that EU-ETS
remains technology-neutral. The European electricity industry
will be subject to full auctioning of CO2 emission
allowances from 2013. The power sector will therefore pay the
market price for all its CO2 emissions and this cost
will be taken into account in any plant investment and operation
decision.
However, EU ETS can only operate efficiently
if market players can freely choose between various abatement
options. In EURELECTRIC's view, there is therefore no role for
mandating or banning any particular technology under the EU-ETS,
and such approaches can only undermine the carbon market and reduce
its economic efficiency. Moreover, there is no environmental justification
for introducing regulation in this area, as CO2 emissions
from the ETS sectors are in any case capped.
BANNING OR
MAKING MANDATORY
ANY PARTICULAR
TECHNOLOGY BY
SETTING AN
EPS FOR CO2 WOULD
BE COUNTER-PRODUCTIVE
As a consequence of the introduction of an EPS
for CO2, advances in CO2 capture technologies
would be derailed. EPS would immediately make CCS mandatory for
coal-fired power stations. It must be noted that in its impact
assessment of the proposal for a CCS Directive, the Commission
had found that a hasty and mandatory CCS would cost €6 billion
more than when the technology is more mature. An EPS would limit
technological and cost-efficient options to reduce CO2
emissions and would thereby increase marginal costs of CO2
reduction. In addition, energy supply would become more dependent
on imported gas. Since electricity generation at CCGT plants with
CO2 capture would be more expensive and less efficient,
unabated gas plants would be built instead of coal-fired plants
ready for CCS—depending on the threshold. If coal is driven
artificially out of the market by an EPS, the efficiency of the
carbon market would be reduced impacting short-and medium-term
investments in low carbon technologies. This would have a negative
impact on security of supply and cause higher price volatility.
It is impossible to consider the introduction of an EPS for CO2
before the potential and costs of CCS have been properly assessed,
both for coal and gas.
THE INTRODUCTION
OF A
DOMESTIC EPS FOR
CO2 WOULD CAUSE
NO ADDITIONAL
GLOBAL REDUCTION
IN EMISSIONS
A domestic EPS for CO2 would increase
the domestic cost of electricity production (and price to customers).
It would reduce the overall demand for CO2 allowances
from the EU ETS and, as a consequence, reduce the price of allowances
in the EU market. In parallel, electricity costs (and prices to
customers) in other EU Member States would be reduced. It would
lead de facto to a transfer of revenues from the sponsoring
Member State to all others.
ARTICLE 193 TFEU
AND INTRODUCTION
OF NATIONAL
EPS FOR CO2
EURELECTRIC would also like to challenge the
legal interpretations claiming that member States should be allowed
to introduce CO2 EPS based on article 193 TFEU (ex-article
176 TEC). A national EPS for CO2 would not constitute
"more stringent protective measures" according
to 193 TFEU (ex-article 176 TEC). Indeed, more stringent measures
are measures which go in the same direction as the EU measure
but achieve outcomes beyond those envisaged at EU level. The objective
is to further enhance the level of environmental protection achieved
at EU level. The implementation of national emissions performance
standards in addition to the ETS would not lead to a stricter
environmental approach but would indicate the choice of an altogether
different approach. Member States would be choosing other measures
and not "more stringent protective" ones.
EU ETS HAS DELIVERED
ON THE
OBJECTIVES
EURELECTRIC would like to repeat its support
for the EU ETS. It provides long-term transparency and stability
as well as near-term clarity, which is essential for investors
in the European electricity industry. It delivers agreed carbon
reductions at least cost by setting a market carbon price and
it has succeeded to date in this aim.
September 2010
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