IPPC vs Emissions Trading Lesley James Friends of the Earth (England, Wales & N.Ireland) and the European Environmental Bureau

Energy efficiency: (a) Part of general IPPC vs trading debate (b) Specific role in greenhouse gas trading

We have no view in principle either for or against trading … -- a right to pollute? -- putting a commercial value on that right to pollute? -- pollution hotspots? … what we’re interested in is results

Emissions trading vs IPPC site flexibility specific permits

OPTIONS FOR TRADING  Trade beyond IPPC  Exploit IPPC flexibility  Seek derogation from IPPC  Replace IPPC  Experiment with trading

(a)Trade beyond IPPC  Not all categories of installations are covered by IPPC  Some installations are outside the IPPC capacity thresholds  It is possible to go beyond BAT  Existing plants are free to trade until 2007  Still relatively little scope for trading

(b) Exploit IPPC flexibility Permits ‘…. Shall be based on the best available techniques … taking into account the technical characteristics of the installation concerned, its geographical location and the local environmental conditions.’ [Article 9(4)] Provides flexibility but not geographical mobility Could downgrade site-specific BAT to level required to meet EQSs But Commission threat of general binding rules.

(c) Seek derogation from IPPC : [1]  Amendment of IPPC Directive in Greenhouse Gas Emissions Trading Directive.  Initial proposal (late 2001) ‘… the permit shall not include an emission limit value for direct emissions of that [greenhouse] gas unless it is necessary to ensure that no significant pollution is caused.’ [Article 2(2)]: This Directive shall apply without prejudice to any requirements pursuant to Directive 96/61/EC that relate to energy efficiency.

(c) Seek a derogation : [2]  Are the two Directives now compatible? energy efficiency  Problems equivalence integration

(c) Derogation from IPPC : [3] Concern over energy efficiency  IPPC Directive: Member States shall take the necessary measures to ensure that installations are operated in such a way that energy is used efficiently [Article 3(d)] … to achieve a high level of protection for the environment as a whole [Article 9(1)]  Commission: The energy efficiency requirement of the IPPC Directive is ‘… a baseline or bottom line for the consumption of electricity or heat which European Industry should not be able to go below.’ (Jan 2002)’

(c) Derogation from IPPC [2] Energy efficiencyFinal GGETD [Article 26]:‘… the permit shall not include an emission limit value for direct emissions of that [greenhouse] gas unless itis necessary to ensure that no significant local pollution is caused.For activities listed in Annex I to Directive 2003/87/EC,Member States may choose not to impose requirementsrelating to energy efficiency in respect of combustionunits or other units emitting carbon dioxide on the site.’(c) Derogation from IPPC [2] Energy efficiencyFinal GGETD [Article 26]:‘… the permit shall not include an emission limit value for direct emissions of that [greenhouse] gas unless itis necessary to ensure that no significant local pollution is caused.For activities listed in Annex I to Directive 2003/87/EC,Member States may choose not to impose requirementsrelating to energy efficiency in respect of combustionunits or other units emitting carbon dioxide on the site.’ (c) Derogation from IPPC : [4] GGETD October 2003 [Article 26]  retains clause excluding GHGs from IPPC as long as they don’t cause significant pollution  removes the ‘without prejudice to IPPC energy efficiency’ requirement  imposing energy efficiency requirements is now optional under the GGETD

(c) Derogation from IPPC : [5] Problem of ensuring equivalence ‘… the quantities [of allowances] should ensure that the overall emissions of all of the participating installations would not be higher than if the emissions were to be regulated under the IPPC Directive’ GGETD (Explanatory Memorandum) But who’s counting?

(c) Derogation from IPPC : [6] The problem of integration UK integrated approach: -- indices for air, land and water, -- noise, odour and visual impacts -- photochemical ozone and global warming potentials -- consequences of accidents -- impacts of waste disposal options -- assessing trade-offs

(c) Derogation from IPPC :[7] ‘Concerns could be signalled on the extent to which the Commission proposal still achieves a high level of protection.’ [FIELD/IEEP, October 2002]

(d) Replace IPPC  Success in the US with acid gas trading?  USEPA official reports 2001 and 2003: -- 50% SO2 reductions 1980 – 2010, (57% reduction 1990 – 2010) compared to >90% in the UK 1994 – 2008 and 90% in Germany in the 1980s -- were cost savings even due to trading? -- no account taken of the effect of the level of ambition on cost savings -- effect of local air quality standards

(e) Experimenting with trading Financial investment requires certainty No mechanism for comparing GHG trading with IPPC

Do we throw away the key instrument of EU industrial policy in favour of a market-based system that has yet to demonstrate its ability to achieve at least equivalent results?

We don’t have any view in principle either for or against trading …. what we’re interested in is results…. And on that basis, the answer would have to be …. No