Benchmarking of refinery CO2 emissions

01 Oct 2009

The EU Greenhouse Gas Emissions Trading Scheme (ETS) foresees a number of mechanisms for distributing emission allowances amongst market players. In the first and second emission trading periods under the original ETS Directive, the majority of allowances were distributed free of charge using historical emissions as the distribution key (so-called ‘grandfathering’) with a uniform reduction percentage. In the third trading period, starting in 2013, the generic rule will be auctioning, i.e. allowances will be put on the market on a regular basis by governments and sold to the highest bidder. Trading of allowances already issued will still be possible on the open market. While this process is relatively simple and provides strong market-related signals, it does result in a potentially heavy and uncertain financial burden on EU industry, to which equivalent installations outside the EU are not subjected. This could affect the competitiveness of the EU industry. In addition, and of crucial significance in a programme designed to reduce greenhouse gas (GHG) emissions, this could result in so-called ‘carbon leakage’, i.e. moving of carbon-emitting activities from inside the EU to other regions that are not subject to similar restrictions. Not only would global emissions not decrease, they could actually increase as a result of additional need for transport of goods and possibly of less energy-efficient manufacturing outside the EU.