Memorandum by The Scottish Government
LEVEL OF
EMISSIONS REDUCTIONS
1. The proposed level of emissions reductions
and the automatic change from 20% to 30% should an international
agreement be reached
The Scottish Government supports the Commissions
proposal for the level of the EU ETS central cap, and the proposal
for its automatic adjustment once a comprehensive international
climate agreement has been reached.
SCOPE AND
OPERATION
2. The sectors and gases that the Commission
proposes to include and exclude. We would be particularly interested
in views on the inclusion of Land Use, Land Use Change and Forestry
(LULUCF) sectors, including agriculture
The Scottish Government agrees with the Commission's
proposals for the inclusion of CO2 emissions from petrochemicals,
but not with the inclusion of aluminium smelting, due to the risk
of carbon leakage in this sector.
The Scottish Government is collaborating with
the UK Government to explore the potential for including emissions
from LULUCF into the ETS. The Scottish Government supports the
UK position that difficulties with monitoring, reporting and verification
of emissions from this sector mean it is not suitable for inclusion
at this stage.
3. The practical application and enforceability
of the scheme
In our partnership with the UK Government in
implementing the scheme, the Scottish Government has not encountered
any problems with application or enforceability that were not
to be expected in a major, ground-breaking scheme such as the
ETS.
4. The key strengths and weaknesses of the
proposal. You may wish to consider in particular:
the extent to which the scheme as currently
designed will encourage technological innovation;
whether it will result in the appropriate
price signal being sent;
whether it will be efficient and/or equitable.
The Scottish Government believe the Commission's
proposals are generally strong and in the right direction. In
particular, a set trajectory for reductions in the central cap,
together with increasing levels of auctioning, will result in
a robust price signal being sent. Proposals for opt-out of small
emitters are also welcome.
5. The potential application of the new Article
24a permitting allowances to be issued in respect of projects
outside the scope of the Community scheme that reduce greenhouse
gas emissions
The Scottish Government is collaborating with
the UK Government to examine the issues raised by this proposal.
One of the matters we'll want to examine from the proposal is
the need for limits on credits.
ALLOCATION AND
AUCTIONING
6. Whether decisions about the proportion
of permits to be allocated for free rather than auctioned should
be taken at the EU level or at the Member State level, and what
the time-frame for such decisions should be
The Scottish Government considers that the proportion
of allowances to be distributed free of charge should be set using
a central methodology. But auction levels should be determined
on the basis of a minimum level. This would provide flexibility
to allow Member States to auction more should national circumstances
call for it. The Scottish Government considers the date for determining
EU rules on free allocation should be brought forward to Dec 2009
to provide earlier certainty.
7. Which sectors (if any) should continue
to receive a proportion of their emissions permits allocated free
of charge, and for how long
The Scottish Government supports the Commission's
intention that from 2013, with the exception of electricity generators
and Carbon Capture and Storage infrastructure, and except where
there is deemed to be a risk of carbon leakage, all installations
will receive 80% of their share of the EU cap free of charge.
The Scottish Government also agrees that this should decrease
by an equal amount each year to arrive at 0% free allocation in
2020. The Scottish Government agrees with the Commission's view
that an evidence-based approach to decisions on the risk of carbon
leakage is required, and is involved in the UK Government's discussions
with industry on this issue.
8. Whether the redistributive element of
the Commission's proposal (whereby poorer Member States are allocated
more auctionable emissions permits, thereby increasing the revenues
accruing to their Treasuries) is appropriate
The Scottish Government recognises this is partly
a reserved issue, but it would have impacts for implementation
of the scheme, which is a devolved matter. The Scottish Government
strongly supports the UK Government's view that environmental
legislation is not the appropriate framework for the redistribution
of resources between Member States.
THE INTERNATIONAL
DIMENSION
9. The extent to which EU operators should
be allowed to meet obligations under the ETS by investing in projects
to reduce emissions outside the EU through the Clean Development
Mechanism (CDM)
The Scottish Government considers there should
be a limit on the use of credits from outside the EU, but is currently
involved in discussions with the UK Government on the Commission's
proposals for the use of, and limits on, project credits.
10. The likely feasibility of creating links
between the ETS and other similar schemes around the world
The Commission's proposals increase the feasibility
of creating links between the ETS and other similar schemes around
the world. The Scottish Government welcomes the flexibility in
this regard as this is key to encouraging mandatory cap-and-trade
systems around the world.
18 June 2008
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