Obama raises hopes…

© BMU / Berd Müller

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…for better prospects of the international climate protection efforts. Agreements on stabilising greenhouse gas emissions were already signed at the 1992 Rio de Janeiro World Summit as part of the United Nations Framework Convention on Climate Change. In 1997 legally-binding commitments were made mainly by industrialised countries in Kyoto: over the 2008 – 2012 period, emissions were to be brought down by five per cent, compared to 1990 levels. International climate protection efforts are aimed to tackle one of the major challenges of the 21st century and they should not end in 2012.

In 2005 the EU was the first region in the world to introduce greenhouse gas trading among companies. To meet the objectives laid down in the Kyoto Protocol, member states accepted commitments to reduce CO2 emissions, where such avoidance efforts would involve minimum costs. Activities to further ecological objectives are being implemented with economies in mind. Certificates are tradable. They thus represent some kind of currency. Should a company achieve required reductions in emissions on account of its own minimising efforts, any surplus certificates may be sold on the market. Alternatively a company may purchase additional certificates if its own efforts would turn out to cost more. Sanctions will be imposed, should a company not meet its reduction quota. Costs will reach € 100 per ton of CO2 during the second trading period from 2008 – 2012. Additionally, unmet reduction targets shall have to be reached on top of next year’s obligations.

Renewed US involvement

After the inauguration of President Obama, there are increasing hopes for a new era in international climate protection efforts. Washington returned to the fold, after the US announced its withdrawal from the Kyoto Protocol in 2001. If the President lives up to his promise, US climate policies would again be involved in the global negotiating network. By 2020, the new Obama administration wants to bring down greenhouse gas emissions to 1990 levels and reduce them by eighty per cent till 2050. It is of decisive importance for the US, however, that countries like India and China also join these efforts. While so far, leadership in international climate protection had fallen to the EU, there are now increasing chances for a successful outcome of the 14th Conference of Parties to be held in Copenhagen in late 2009. The EU’s overarching goal is to bring to conclusion an international climate protection regime that fills the gap which would otherwise emerge after the first commitment period under the Kyoto Protocol runs out. The focus of attention of negotiations to be held in Copenhagen will therefore be on a binding contribution offered by the US but also by the emerging countries and their growing economies.

© BMU / Brigitte Hiss

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Take chemical industry, for example

In December 2008, agreement was reached between the European Parliament [Anm. d. Übers.: EU-Parlamente im Original??] and the European Council concerning a new EU Directive for the 2013 – 2020 period: By 2020 industry shall have to bring down its greenhouse gas emissions by 21 per cent as against 2005 levels. A massive reduction in emission entitlements means that expected certificate prices shall be considerably higher than during the first two periods. In an impact assessment submitted by the EU Commission, the latter expects a median price of € 39 and maximum price levels of up to € 57 per ton of CO2.
Looking to the chemical industry, for instance, almost all greenhouse-gas-producing plants shall have to face up to emission trading obligations as from 2013. This also includes cracking installations and other plants turning out base chemicals used as inputs for the manufacturing of plastics. Their future commitment burden shall be decided by the numbers of entitlements they will have to buy at these high prices, or how many of these they will get free of charge. Beginning from 2013 the largest share of emission entitlements shall have to be acquired at auctions. Also starting in 2013, electricity generating companies will no longer be given free entitlements. They will have to buy theirs at auctions or from the markets. Electricity generators will have to discount those in electricity pricing and will pass them on their customers. As industry needs a lot of electricity, it shall also have to bear most of the costs. Plans provide that for industrial manufacturing eighty per cent of emission entitlements shall be still be issued free of charge in 2013. This percentage, however, will be reduced to thirty per cent by 2020. These percentages are not related to respective requirements – they shall depend on technical standards still to be defined. These will be oriented on the best ten per cent of European plants. The amounts to be paid by individual plant operators shall therefore also depend on the state-of-the-art integrated into their plants.

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A threat to international competitiveness

Limiting this trading system to the EU might significantly threaten international competitiveness of individual energy-intensive industrial sectors. To prevent a situation, in which these industries will disappear from Europe altogether, those under particular threat are to be identified with the help of specific criteria. They will then receive completely free benchmark-based entitlements for the entire period. Member states may also offer compensatory financial amounts to support plants under threat.