1. Dutch Pilot Allocation Plan for an European Emission Trading scheme Maurits Blanson Henkemans Ministry of Economic Affairs Netherlands Delhi 1-11-2002

2. What I want to discuss  Dutch position EU directive  Aim of our Allocation study  First results  Conclusions

3. Cost advantages of European Trade

4. Dutch position  In General positive to directive  For mandatory system from 2005 but..  Allocation must be fair  Crediting of Early actions  For the Direct approach Dutch industry  EU PSR system no CaP (!) for indirect approach.

5. Aim of the study  Can we make an Allocation plan?  On the basis of EU Directive/ and PSR indirect Allocation Criteria (Annex III)  Propose improvements on the basis of the study Procedure  Consultant makes study  Advice from Industry/NGO

6. EU allocation Burden Sharing Agreement participants IPPC + createria/correcties Allocation

7. Questions  Who are the participants?  What size is covert by EU directive?  How to set the Cap  How to Allocate - Direct or Direct and Indirect Allocate on basis of - Historic emissions/Grandfathering - Performance Standard Rate (PSR)

8. Definition of Participants  IPPC Def.  Cut through sectors  Lack of info Cogen e.c.  Add sector? > 20 MWth Definition: “installation” “energy activity” en “combustion installation”

9. What is Covered

10.  Wide interpretation: 47% of Total Emissions  CHP = Chemical ind. included

11. Set CAP for 2010 Cap: 90 Mt CO 2 Reductie UK1: Ca. 4 Mt CO 2 Statistieken

12. Set a Cap 1  National Climate Plan UK1 and UK 2  Benchmark Target = CaP for Participants/ DATA ???  Allocate 9o Mton  450 Mln EURO (5 EURO/CO2) Advantage  Support from Industry  Disadvantage: No Trade?

13. Direct versus Indirect (1) Advantage Direct  Simple/conform Kyoto Protocol Disadvantage  Market Power for E-sector  What will be Electricity-price

14. Direct versus Indirect (2) Advantage Indirect:  Conform Benchmark  Stimulate Efficiency User Disadvantage :  CO2 content electrity used unknown

15. Direct versus indirect

16. Allocation options  Grandfathering Direct and Indirect  Performance Standard Rate Direct/Indirect

17. Example of CO 2 emissions and PSR

18. Allocation on Basis of Historic emissions WKK Production growth New Entrants Data availability Windfall profits Ownership Statistieken 1990 2005

19. Performance Standard Rates Max. 300 PSRs Corrections for green/nuclear biomass Correction for indirect emissions complicated Europese Benchmarking: different fuelmix

20. Grandfathering options How to support early actions?  1995 with production adaptation Too many allowances  Allocation = 2005 Emissions. No incentive for trade/ no support early actions  Allocation = Actual emissions * (performance rate / performance standard rate) distance to world top

21. Conclusions 1  Directive Covers 47%  Cut through sectors ( opt in)  Lack of number on installation level  Indirect approach impossible in one country

22. Conclusions 2  Grandfathering direct  Actual dates correction for distance to world top (benchmark)  E-sector should not get to much power  Solution: big supply/low price/competition/CHP  Big role Commission for fair competion