The EU plans to meet its latest climate change goals with a system of trading. Sylvia Austermann and Jane Laffan look at what the international arrangements mean for FMs
27 January 2006
The EU emissions trading scheme, verification and carbon trading are only too familiar words for a small group of businesses which are covered by the EU Emissions Trading Scheme (EU ETS). However the whole issue of climate change and our response are set to be firmly on the business agenda for many years to come.
The UK government has made a significant commitment to the global climate change agenda with 2005 being a key year for UK climate policy. The challenge will be for the UK to meet its Kyoto targets. And facilities managers will have to respond to new legislation designed to encourage reduction in carbon emissions.
It is widely accepted that the government has a range of measures at its disposal including energy efficiency measures in households, public buildings, industry and transport. However as each group lobbies at government level it remains to be seen whether the reduction of UK carbon emissions will be fairly allocated or whether industry will end up holding a greater than fair share of the burden.
In any event whether it is industry or the public sector both, could have a significant impact on facilities managers. With the future of the government's climate change strategy hanging in the air, what should facilities managers be looking out for?
Kyoto and Emissions Trading
One of the active steps that has been taken is the signing (and ratification) of the Kyoto Protocol, which in turn has led to the EU ETS.
Under the umbrella of the Kyoto Protocol there are various objectives for the UK government, including:
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Kyoto target - the level of all greenhouse gases reduced 12.5 per cent below 1990 levels by 2008-2012
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National goal - CO2 20 per cent below 1990 levels by 2010
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Long-term goal reducing CO2 emissions by some 60 per cent from current levels by 2050
European Union Greenhouse Gas Emissions Trading Scheme (EU ETS)
EU ETS is a community-wide scheme for trading carbon allowances. It is seen as a major instrument for EU member states to meet their climate change goals and in particular their Kyoto target. The system works on a 'cap and trade' basis, the 'cap' being the carbon emission limit allocated to each installation.
Installation under EU ETS is defined as a single technical unit where one of more activities covered are carried out and any associated activities.
The operator is allowed to trade, ie buy or sell carbon to meet its individual allocation. Current installations included in the ETS are:
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Energy activities, including industrial combustion activities and those within the public sector - eg, universities, hospitals
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Pulp and paper processing
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Activities within the mineral industry
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Production /processing of ferrous metals
The pilot phase of the scheme, so called Phase I, commenced on 1 January 2005 and is designed to run for a three-year period. Each member state has been given a national allocation of carbon emissions, which were then distributed among the installations covered by the scheme. This distribution was set out in each country's national allocation plan (Nap). The Nap for the UK was published on 24 May 2005. The operators of each of the installations should hold a Greenhouse Gas (GHG) permit, which they should have applied for prior to January 2005. The permit states the maximum annual carbon emissions permitted from that installation.
Late entrants
Some commercial businesses have missed the fact that they are caught by the scheme because not all their combustion equipment is operated on an ongoing basis, i.e. most of their capacity is stand-by generation. Many of these run facilities for which a continuous power supply is essential such as hospitals, airports and sites with large computer suites.
Although their boiler capacity is below the 20MW threshold, adding their standby power generation capacity takes them above the limit and therefore into the scheme. In the UK, EU ETS has been interpreted as including these stand-by capacities but we understand that in countries like the Netherlands they are not.
The EU ETS cost becomes more significant for these so-called 'late entrants', installations applying for a GHG permit since May 2005. There are significant financial penalties for late or non-registration; a "standard" penalty of
25 per cent reduction in the carbon allocation for the installation.
Sylvia Austermann and Jane Laffan are consultants with Abricon
What is Cop Mop?
The United Nations Climate Change Conference on 28 November to 9 December 2005 was an historic event. Not only were the parties to the United Nations Framework Convention on Climate Change (UNFCCC) meeting for the 11th time, but 2005 also marked the entry into force of the Kyoto Protocol.
At Montreal, the first ever "Meeting of the Parties to the Protocol", known as Mop was held parallel to the "Conference of the Parties to the Convention" - ie, Cop. It attracted unprecedented business interest with some 8,000-10,000 participants.
Reflecting on the Montreal conference, its president, Canadian environment minister Stéphane Dion, said: "The Kyoto Protocol has been switched on, a dialogue about the future action has begun, parties have moved forward work on adaptation and advanced the implementation of the regular work programme of the Convention and of the Protocol."
More details are available on the UNFCCC website at www.unfccc.int/2860.php
