Application of the Republic of Lithuania for transitional free allocation of emission allowances under Article 10c of Directive 2003/87/EC
Application of the Republic of Lithuania for transitional free allocation of emission allowances under Article 10c of Directive 2003/87/EC
Document no. 3020117069
Version 2.0
Date of issue 2012-01-16
Prepared JOZA
Checked INVA
Approved MANV
LITHUANIA
Table of Contents
Elements to be assessed in the framework of an application submitted by a Member State pursuant to Article 10c(6) of Directive 2003/87/EC 2
A. Evidence that at least one of the conditions laid down in Article 10c(1) of Directive 2003/87/EC is met 3
B. Eligibility of installations considered to receive temporary free allocation of emission allowances, total quantity of temporary free allocation of emission allowances and amounts of free emission allowances allocated to theses installations 5
C. Investments listed in the national plan, eligibility of investments in the national plan, balance between market value of free emission allowances and value of investments, non-transferable allowances 30
D. Monitoring and enforcement provisions with respect to the intended investments pursuant to the national plan 36
E. Transparency and public consultation 49
Annex I 50
Elements to be assessed in the framework of an application submitted by a Member State pursuant to Article 10c(6) of Directive 2003/87/EC
In the following, a template is provided that contains a list of elements to be used by Member States who wish to submit an application for temporary derogation from full auctioning for power in accordance with Article 10c of the revised EU ETS Directive (Directive 2003/87/EC). The structure of the template corresponds to Annex VII of the Communication from the Commission "Guidance document on the optional application of Article 10c of Directive 2003/87/EC"[1]. While the use of the template is not mandatory for Member States, the Commission recommends using the template, as it is designed to facilitate a swift and objective assessment of an application submitted pursuant to Article 10c(6) of the revised EU ETS Directive.
Member States are formally invited to submit all information they deem necessary to comply with Article 10c in general and Article 10c(5) in particular of the revised EU ETS Directive. The requirements of these provisions are set out in the above Communication.
The template does not necessarily represent a complete list of information to be assessed by the Commission, in the event an application pursuant to Article 10c(6) of the EU ETS Directive is submitted. For this reason, information additional to that required by the template may also be requested by the Commission for the assessment pursuant to Article 10c(6) of the EU ETS Directive.
The template and the information submitted by Member States using the template is without prejudice to the state aid assessment under Article 107 TFEU referred to in point 27 of the above Communication or to the information required under this state aid assessment. It is important to note that the information requested by this template does only relate to the assessment required by Article 10c(6) of the EU ETS Directive and is not related to the assessment required under the relevant provisions on State aid of the TFEU. For this reason, information not requested by or addressed in this template may be required for the state aid assessment referred to in point 27 of the above Communication from the Commission. Member States should notify the relevant information to the Commission in accordance with the relevant rules for state aid.
A. Evidence that at least one of the conditions laid down in Article 10c(1) of Directive 2003/87/EC is met
A. Eligibility of Member State
Article 10c of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (ETS Directive) allows Member States whose electricity systems meet certain criteria to provide for transitional allocation of emission allowances free of charge to installations for electricity production. In order to be eligible and benefit from the free allocation of emission allowances for electricity production, installations should have been put in operation by 31 December 2008 or relevant investment process was ‘physically initiated’ by 31 December 2008, if one of the following conditions is met:
a) in 2007, the national electricity network was not directly or indirectly connected to the network interconnected system operated by the Union for the Coordination of Transmission of Electricity (UCTE);
(b) in 2007, the national electricity network was only directly or indirectly connected to the network operated by UCTE through a single line with a capacity of less than 400 MW; or
(c) in 2006, more than 30 % of electricity was produced from a single fossil fuel, and the GDP per capita at market price did not exceed 50 % of the average GDP per capita at market price of the Community.
Lithuania can make use of this provision because it meets the condition of Article 10c (1a). In 1991, after the collapse of Soviet Union, some states of the Middle East (former Soviet Union countries), before joining the European Union, switched to the network operated by the Union for the Coordination of Transmission of Electricity (UCTE). Baltic States are the only countries in the EU that still operate in Russian standard-based IPS/UPS system. Operation of electricity energy system of Lithuania is absolutely dependent on general energy system of Russia (JES ROSSII).
On 18 January 2007, Parliament of the Republic of Lithuania adopted National Energy Strategy (NES), which provided for strategic interest of Lithuania in the Baltic region by developing co-operation with Estonia, Latvia, Poland and Scandinavian countries, to create a common Baltic market of electricity. One of the main tasks for the region, foreseen in the NES, was "to prepare for joining the UCTE in 2015 at the latest"[2].
The fact that in 2007 Lithuanian national electricity network was not directly or indirectly connected to UCTE is illustrated by Figure 1 below.
Figure 1. System of interconnected electricity networks of European countries
Source: www.desmie.gr/content/index.asp?lang=2&cat_id...
B. Eligibility of installations considered to receive temporary free allocation of emission allowances, total quantity of temporary free allocation of emission allowances and amounts of free emission allowances allocated to theses installations
B.1. List of installations deemed to be eligible for free temporary free allocation under Article 10c of Directive 2003/87/EC
Identification of Lithuanian electricity generators, meeting the eligibility criteria of Article 10c of the ETS Directive, was based on 2005-2010 verified emissions data from the GHG Emission allowance Registry (GHG Registry), data submitted by operators on electricity sale to the network, and data from National Control Commission for Prices and Energy on the prices of electricity in compliance with public interest in energy sector[3]. The links below provide for the lists of installations, operators and company groups, put in tables B.1.a., B.1.b. and B.1.c. of the Commission Template (Excel), corresponding to the Appendix II of this Report.
B.1.a. Company groups
B.1.b. Operators
B.1.c. Installations
Remark 1: In its 19-08-2011 Letter No. 218-1832 AB Panevėžio Energija notified the Ministry of Energy of the Republic of Lithuania that it did not intend to make any investments into modernisation of electricity production until 2020, thus no emission allowances will be allocated for the operator.
Remark 2: UAB Pramonės Energija plans to cease electricity production since 2013, however, no official notification whereof has been forwarded to the Ministry of Energy of the Republic of Lithuania and no data on electricity and heat production and the planned investments have been delivered, thus emission allowances will not be allocated for the operator.
Remark 3: No investment plan for 2013-2020 has been submitted by UAB Plungės Šilumos Tinklai company, thus no allocation of emission allowances will be made for the operator.
B.2. Total quantity of free allocation
In order to define the quantity of free emission allowances for allocation in 2013 and subsequent years for Lithuania under Article 10c of Directive 2003/87/EC, the following steps have been taken:
1) the average amount of annual emissions from 2005-2007 of all eligible installations (AAQEEL05-07) was determined according to the formula provided in Annex IIA of the Commission Decision[4] ;
2) the ratio of the annual average of gross final national consumption (GFNC) in 2005-2007 and the annual average of total gross electricity production (TGEP) in 2005-2007 was determined. The resulting figure (in percentage) indicates the share of emissions corresponding to GFNC05-07. The concept of gross final national consumption (GFNC) of electricity and formula for its calculation is provided in Annex II of the Communication[5]. The value of TGEP as a product with the code 6000 (Electricity), was found in the data base of Eurostat[6];
3) the average annual emissions from 2005-2007 (see 1) were multiplied by the share of emissions corresponding to GFNC05-07 (see 2));
4) the result reflects the quantity of allowances to cover 100 % of emissions from the generation of electricity corresponding to the GFNC. It is multiplied by a variable, which in 2013 must not exceed 0,7 (70 %), must decline each year after 2013 and must be 0 (0 %) in 2020, to arrive at the maximum of transitional allocation of free emission allowances allowed by Directive 2003/87/EC in 2013 and subsequent years.
The following formula (Annex I of Communication) determines the maximum quantity of free emission allowances pursuant to Article 10c(2):
TQFA x = (GFNC 05-07 /TGEP 05-07 ) × AAQE EI 05-07 × a2013 , i.e.
9.821 / 13.758 x 1.165.402 x 0,7 = 582.373 allowances for 2013,
where:
GFNC05-07 / 9.821 / Annual average 2005-2007 of gross final national consumption, TJTGEP05-07 / 13.758 / Annual average 2005-2007 of total gross electricity production (Eurostat code 107000 under product code 6000 ‘electricity’), TJ
GFNC ratio / 0,713883894 / Calculated as it is explained in 2).
AAQEEL05-07 / 1.165.402 / Annual average quantity of emissions from eligible installations 2005-2007, tCO2
The calculation results in the total quantity of emission allowances for Lithuania to be much lower than 70 percent from average emissions from eligible installations in 2005-2007 since the production of electricity in Lithuania in 2005-2007 was significantly higher than gross final national consumption.
According to Article 10c (2) of the ETS Directive, the number of emission allowances have to decrease gradually, resulting in no free allocation in 2020. However, Article 2.2 (11) of the Commission Communication states that "the condition of a gradual decrease would be fulfilled and that competition would not be unduly distorted where a Member State has provided for either a linear reduction trajectory or a non-linear reduction trajectory wherein the decline in emission allowances allocated for free between any two consecutive years in the period from 2013 to 2020 deviates at most 50 % from the average annual decline necessary in the remaining years to reach 0 % in 2020".
The experts have evaluated both, linear and non-linear reduction plans and proposed to apply the non-linear reduction plan. The link below provides for the non-linear allocation reduction plan for 2013-2020, put in table B.2. of the Commission Template (Excel), corresponding to Appendix II of this Report.
B.2. Total quantity
Year / 2013 / 2014 / 2015 / 2016 / 2017 / 2018 / 2019 / 2020Variable a / 0,7 / 0,645 / 0,585 / 0,515 / 0,435 / 0,345 / 0,205 / 0
TQFA / 582.373 / 536.615 / 486.698 / 428.460 / 361.903 / 287.027 / 170.552 / 0
In order to verify the correspondence of the annual reduction variables to the rule of Article 2.2 (11) of the Commission Communication, the following steps have to be made (the results are provided in tables):
Step 1. Reduction of variables of every two subsequent years is calculated as a difference between the values of variables [formula (1)];
Step 2. An average reduction, leading to 0 by 2020, is calculated by deducting the value of variable of 2020 from the value of variable of the later out of two subsequent years, and dividing this difference into the number of the years within an interval [formula (2)];
Step 3. Condition of deviation by no more than 50 percent is verified by comparing the values, derived in Step 1 with those of Step 2, +/- 50% [formula (3)];
Step 4. In order to verify if the reduction between two years is not higher than 50 percent of selected annual reduction in the remaining years, the values of Step 2 are compared with the calculated average of the reduction every subsequent year [formulas (4) and (5)].
1. di;i+1=mi-mi+1 / 2. (1)3. ∆=mi+1-m2020COUNTmi+1:m2020 / 4. (2)
5. ∆-0,5∆≤di;i+1≤∆+0,5∆ / 6. (3)
7. δi;i+1=AVERAGEdi+1;i+2;d2019;2020 / 8. (4)
9. δi;i+1-0,5δi;i+1≤di;i+1≤δi;i+1+0,5δi;i+1 / 10. (5)
where:
- di;i+1 – reduction of two subsequent years,
- mi, mi+1 – subsequent years under consideration,
- – an average reduction, needed to reach 0 in 2020,
- δi;i+1 – an average reduction determined by the differences of selected variables.
Table 1. Compliance verification of the of reduction plan variables according to Step 3.
Period / ∆ / ∆+0,5∆ / di;i+1 / ∆-0,5∆2013–2014 / 0,108 / 0,05 / 0,055 / 0,16
2014–2015 / 0,117 / 0,06 / 0,11 / 0,18
2015–2016 / 0,129 / 0,06 / 0,12 / 0,19
2016–2017 / 0,145 / 0,07 / 0,13 / 0,22
2017–2018 / 0,173 / 0,09 / 0,15 / 0,26
2018–2019 / 0,205 / 0,10 / 0,17 / 0,31
Table 2. Compliance verification of the reduction plan variables according to Step 4
Period / δi;i+1 / δi;i+1-0,5δi;i+1 / di;i+1 / δi;i+1+0,5δi;i+12013–2014 / 0,11 / 0,05 / 0,055 / 0,16
2014–2015 / 0,12 / 0,06 / 0,11 / 0,18
2015–2016 / 0,13 / 0,06 / 0,12 / 0,19
2016–2017 / 0,12 / 0,06 / 0,13 / 0,18
2017–2018 / 0,13 / 0,07 / 0,15 / 0,20
2018–2019 / 0,13 / 0,07 / 0,17 / 0,20
Figure 2 presents a graphic comparison of the allocation reduction plan for 2013-2020 and the level of verified emissions attributed to electricity production in 2010, i.e. the allowances demand and potential quantity of their receipt.