To: Vicky Pollard, Jan-Wouter Langenberg, Sylvie Feindt

April 2014

To: Vicky Pollard, Jan-Wouter Langenberg, Sylvie Feindt

Dear Vicky, Jan-Wouter

You may recall our meeting back in January when you kindly met us to discuss the implications of EU ETS for data centres. Following that meeting a number of data centres have registered for the scheme or are registering for the scheme on our advice. As a result we are able to build a better evidence base to illustrate the issues that this particular sector is experiencing with the scheme. Most complaints focus on the following:

·  Disproportionate administrative costs compared to costs of carbon allowances. The average ratio is 20: 1 In some cases administration costs are over £100 per tonne, where scope 1 emissions are particularly low, for instance.

·  Cumbersome and problematic registration process

·  Perverse incentives – the scheme increases scope 1 emissions – for instance companies have to test drive their generators to establish efficiency and this is using more fuel than would be consumed in normal activity. In time it may drive adoption of multiple lower power generators to minimise the units over 3KW thermal.

·  Absurd requests from regulators – for instance creating physical towers from which to put dipsticks into tanks.

·  Conflicting regulatory instruments interacting with EUETS.

·  Lack of clarity on what constitutes an EUETS installation – this is of particular importance and we have received conflicting advice even from a single regulator. Should the EUETS installation relate to the facility or be limited to the generator array only? We understand that it should follow the bounds of the facility.

Some of these queries, such as the last one, simply require formal clarification and I am sure they can be resolved, but others reveal some fundamental issues with both the EUETS legislation and the process by which it has been implemented. For instance, the alternative scheme for low emitters was not available to non phase II participants, or indeed to any new scheme entrants. This presupposes that there is no industrial growth in the EU.

At our meeting you mentioned the possibility of raising this issue with your compliance committee with the objective of seeking a pragmatic solution. Since more operators have signed up to the scheme, the level of discontent has grown markedly and we will have to escalate the issue on their behalf very shortly. If you could explain who we go about flagging this issue to your committee, any evidence you might need and the likely timescales, I think this would be a useful route to follow.

Thanks and kind regards

Emma

Emma Fryer

Associate Director, Climate Change Programmes

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