Abstract
In my economic model I calculate the impact of the new EU ETS Directive, the Industrial Emissions Directive and the new air protection law on future heat and electricity prices for combined heat and power sources. I discover that there will be a significant increase in heat and electricity prices, especially because of the implementation of new so-called benchmark tools for allocating allowances. The main problem of large heat producers in this respect is loss of competitiveness on the heat market due to emerging stricter environmental legislation, which is not applied to competitors on the heat market (smaller heat sources). There is also lack of clarity about the modalities for allocating free allowances, and about the future development of the whole carbon market (the future European allowance price).
Highlights
The Climate-Energy Package (Package) was adopted in June 2009
A transitional free allocation will be given for the modernization of electricity generation — fulfilling at least 1 of 3 criteria given by Directive 2009/29/EC, a Member State can ask for a partial free allocation of European allowances (EUA) for electricity producers
This tool provides for an increase in the free allocation for district heating (DH) systems according to their emissions related to the production of heat exported to private households from 1 January 2005 to 31 December 2008
Summary
The Climate-Energy Package (Package) was adopted in June 2009. It consists of 4 parts. Free allocation will be given to sectors endangered by so-called “carbon leakage” — meaning sectors like steel or lime production, which could be moved to countries outside the EU because of higher costs This rule is not applicable to DH sources. In December 2010, a Commission Decision on determining transitional Union-wide rules for the harmonised free allocation of emission allowances (source [3]) was adopted within the CCC body. This Decision introduces new rules for adjusting the allocation of free allowances in respect of heat delivered for private households. In my economic model I use the exception for district heating plants
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