1. Meeting with Member State experts on Life Cycle Assessment of fuel in relation to Article 7a of proposal COM 2007(18)
Interaction with ETS
17 July 2007
European Commission

2. EU ETS Oil refineries are covered by EU ETS
The Article 7a scheme will stimulate higher cost reduction options within refineries than ETS
What would be the implications of this?
Are there problems that need to be addressed or avoided?

3. Potential Problems
Double Incentives
Higher incentive for refinery GHG reductions than non-refinery GHG reductions.
Leakage from ETS to Article 7a
No overall effect due to leakage from Article 7a to remainder of ETS

4. Potential Problems 1. Double Incentive
Emission reduction obligation of 10% by 2020 under Art 7a
Emission reduction opportunities under ETS

5. Potential Problems
2. Higher incentive for refinery GHG reductions than non-refinery GHG reductions.
Emission reduction Art 7a and ETS
Emission reduction only Art 7a

6. 3. Leakage from ETS to Article 7a
Potential Problems
3. Leakage from ETS to Article 7a
CDM
Purchase of
allowances
ETS JI
Used for compliance with Art 7a

7. Potential Problems
4. No overall effect due to leakage from Article 7a to remainder of ETS
emissions
Sale of surplus allowances
emissions

8. Analysis
Double incentives exist in other areas e.g. renewable electricity.
Undesirable to have different incentive levels.
This risk should not exist since the idea is for greenhouse gas savings under Article 7a to actually be demonstrated.
This potential leakage can be addressed through requiring ETS installations to cancel the allowances for any savings that they wish to claim under Article 7a

9. Conclusions FQD 7a need not affect ETS operation
The scheme will stimulate higher cost reduction options within refineries than only the ETS
If allowances relating to emission reductions that are eligible under FQD and are carried out in ETS installations are required to be surrendered and cancelled when the reduction is claimed then any potential risk of leakage would be avoided.

10. Thank you for your attention