Summary of Stakeholder Comments
Summary of stakeholder comments
Organisation / Comment / Note only – no action / Address in 1st study / Address in 2nd study / CommentsBDEW
Environmental Impact Assessment
The coarse grid size selection (10 km / 50 km) currently applied in the ENTEC study may not be adequate for assessing local health and environmental impacts, especially at current and potential future “hot spots”. / √ / 10x10km is limitation of model
The EMEP model was the most spatially resolved model available at EU level
1x1km is not feasible within this study
- When assessing environmental impacts, the assumption of a 30% reduction of air quality thresholds for 50 km grid cells - to take into account that due to the scale of the modelling (10x10 km² grid) air concentrations within a cell are averaged out - is applied. Further information on technical literature, implications and sensitivity of this crucial assumption would be needed. / √ / 30% was an arbitrary figure
Given the comments on the AQ impacts we can potentially consider a 50% reduction as well, and also for PM2.5 the indicative 20ug/m3 limit value, subject to confirmation with our subconsultants
- The environmental impacts of other “nearly optimal” solutions of the trading model are not analysed (sensitivity analysis). Such solutions – which may be as likely as the optimal solution considering data quality and sensitivity issues underlying the emission trading model – may eventually lead to very different spatial distribution of local impacts and exceedances. / √ / Comment not specific enough about potential sensitivity analyses
- The modelling process does not allow for the application of local measures imposed by local authorities in case of expected significant exceedances of local air quality thresholds:
o Hot spots: the impact of necessary local measures to overcome local health impacts or exceedances of air quality thresholds on an otherwise fully liberalised trade is not assessed.
o The local public acceptance for applying abatement technologies less stringent than BAT levels may significantly differ among member states and local communities and may, in particular, lead to very different consequences for the plant permitting process among member states.
o National/regional jurisdiction concerning occupational health and safety, plant permitting and operation with respect to other pollutants (e.g. CO, heavy metals) as well as protection o adjacent neighbourhoods may restrict emission trading of individual installations. / √ / The impact of local measures is relevant to both the reference scenario and the trading scenarios. It is not feasible to undertake local air quality analysis within the scope.
Further work will elaborate options for applying emission limit values, e.g. for protecting AQ while maintaining a cost effective approach.
- It is unclear how the contribution of the non-ETS sectors (transport, households, etc.) when assessing compliance with local air quality thresholds is considered in the model. Especially in the case of NOx, local emissions from the transport sector are often much higher than those from LCPs and industry. / √ / Check to make sure it is clear in report that these emissions are included in modelling
- The impact of transboundary air pollution from and to other Non-EU countries needs to be considered when assessing exceedances (especially in Central and Eastern Europe) / √ / Check there is a note to explain geographic scope of EMEP modelling.
- Seasonal variations (peaks) of environmental and health impacts due to differing activity rates
and meteorological conditions need to be assessed in more detailed (sensitivity analysis) / √ / Check note included to explain the potential impacts due to differering met conditions, although these will change all scenarios together so unlikely to have a significant impact on comparative assessment of ref and trading scenarios
- The effect of interannual meteorological variability on source allocation of pollutants is assumed to be about 10-20%, depending on the pollutant considered. Is this assumption based on real empirical data and how is this assumption included in the environmental assessment? / √ / Check source of this assumption. Also see above.
Administration / Monitoring, reporting verification (MRV)
- The assumed MRV and other administration costs for plant operators (10.000 EUR/a) and local authorities (1000 EUR/a and plant) appear to be very low. In any case, these costs need to be fully integrated into the modelling process. Data, experiences and verification from CO2-ETS monitoring, reporting and verification can only be used to a small extent. / √ / Check assumptions, eg number of stacks per installation.
Not clear on added value of integrating MRV costs into modelling process – costs are clearly presented
- Continuous emission monitoring and flue gas measurement costs depend heavily on assumed acceptable tolerances for measurement errors. / √ / Option for MRV with continuous monitoring for all plants in the scheme will be considered.
- The integration of MRV costs into the plant-specific modelling rocess would be necessary to take into account differing MRV costs for small and large installations. In particular, for small installations the necessary MRV requirements may heavily impact competitiveness and operation of such a plant as well as the selection of suitable cost-efficient abatement technologies. / √ / Work already accounts for differing MRV requirements for small and large plants
- Retrospective credibility / verification of reported flue gas and emission concentration data appears to be very difficult and potential adverse environmental impacts on the local and/or regional scale caused by fully liberalised emission trading would eventually require fast response by plant operators and/or local authorities. Therefore, MRV of emission data eventually must be “continuously”, e.g. on a monthly basis, increasing significantly the assumed MRV cost. / √ / To be checked
Modelling of Investments in Abatement equipment / Emission Trading
- New market entrants emissions may not lead to a non-compliance with local air quality thresholds and should also not affect the operation and emission trading of existing plants in the surroundings. It is unclear, how and where new market entrants will be located according to the underlying emission trading model. / √ / This is already a requirement of existing policies and would be unchanged with a potential SO2/ NOx trading scheme.
Check text includes comments on location of new plants
- The assessment of the current BAT uptake of existing installations in relation to the existing LCPD-requirements and the incoming IED-requirements are crucial for determining the costs associated with the reference scenario. Average and simplified assumptions of the ENTEC study regarding applicable flue gas factors, fuel mix, sulphur-content and plant layout and operation may lead to wrong conclusions regarding the current BAT uptake at individual installations. As a consequence, costs associated with the reference scenario could be systematically overestimated. / √ / Best available information was used. Comments not specific enough to consider / take action
- Existing (BAU) national legislation already going beyond LCPD and/or future IED requirements in various member states needs to be considered when defining the reference scenario. This is especially important for new plants built after 2006. / √ / Data collection sought to collect such information. Where available, this data is included in the modelling.
- Many solid fuel fired combustion plants co-fire waste and residues. Associated current Waste Incineration Directive (WID) requirements as well as future IED requirements for waste incineration are usually stricter than current LCPD or future IED requirements for large combustion plants and cover additional pollutants. It is unclear how the issue of waste incineration as such as well as waste co-incineration and associated impacts are addressed in the ENTEC study under a fully liberalised trading scenario. / √ / Check report indicates that WID would not apply to installations covered by trading
Cost Data / Selection of Abatement Technology
More differentiation of cost data is needed for modelling upgrades or new built of abatement equipment at both existing and new plants. / √ / More differentiation not feasible within scope; also even if it was feasible it is unlikely to affect the comparative assessment between ref and trading scenarios.
Instead of cost curves or ranges, only average (linear) cost data for modelling the application of abatement technologies were used by ENTEC in case of LCPs (one type of abatement, one cost ata set). As a consequence, key issues for selection and performance of batement equipment are not considered:
o Plant size
o Site specific conditions (availability of space, local climate conditions, etc.)
o Fuel and fuel-mix/flue gas characteristics
o Load patterns / number of start-ups and shut-downs
o Cross-media effects (water, waste, other air pollutants)
o Availability of by-products markets / √ / Not feasible to cover the indicated issues within the scope.
Cost curves account for installation specfic emissions and BAU abatement measures.
- Considering the very simplified and limited cost data sets underlying the modelling process, there should be at least a comprehensive sensitivity analysis regarding the impact of the most critical cost data sets for going beyond BAT on the overall results. / √ / Sensivity analysis already done for two critical measures in Section 7.4.1 (measures for non-LCP combustion units at refineries and NOx abatement for gas boilers and turbines).
Price Stability / Price Signal / Energy Scenarios
The cost-benefit curve of cumulative avoidance (abatement) potential versus unit abatement cost should be presented. Slope, steepness and shape of such a cost avoidance curve are the starting point for any analysis of a trading system. Information on the marginal abatement costs are crucial for understanding the impact of any emission trading scenario and associated cap setting. In particular, it is necessary to identify potential tipping points and crucial sensitivities of the system under scrutiny. / [See Eurelectric comments]
- What is the impact of the limited scope for flexibility mechanisms (banking/borrowing/offsetting) on price signals, investment decisions, risk strategies and behaviour of market participants? / [See Eurelectric comments]
- What is the impact of likely interannual energy scenario variations (activity data) on market prices for SO2 and NOx as well as environmental impacts? / [See Eurelectric comments]
- It is not clear how the increasing decentralisation of future energy supply is taken into account. In fact, there could be additional “leakage” of SO2 and NOx emissions from ETS to Non-ETS sectors
because of trading. / [See Eurelectric comments]
- The potential impact of SO2 and NOx leakage by transferring industrial production to Non-EU countries because of SO2 and NOx trading still needs to be assessed. / [See Eurelectric comments]
Business Europe
RISK OF DOUBLE REGULATION It is acknowledged in the draft report that air quality limits set by the Air Quality Directive will need to be respected and therefore may require imposition of emission limit values (ELVs). Although the modelling indicates that ELVs would be lifted, industry does not see this to be a likely scenario in the Member States. There is no assessment of the impact of setting ELVs for NOx and SO2 on top of an emission trading scheme (ETS), which is the likely situation. The Dutch experience shows that ELVs and a trading scheme for NOx do not work together as market liquidity is very low. / √ / This seems to cover 2 separate issues (a) ELVs to comply with air quality limit values and (b) BAT based ELVs in permits.
(a) This could obviously take place as requirements to comply with AQD remain in place. This point is already covered above.
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(b) Reference to Dutch experience not relevant as ETS under consideration in this study does not require BAT, whereas Dutch scheme does (which causes low liquidity)
COSTS FOR INDUSTRY ARE NOT PROPERLY ADDRESSED: The way that costs are presented in the draft report brings confusion in the perception of the relation between costs and benefits between sectors and Member States. For example, the costs for industry have been mixed with the environmental benefits and costs for society as a whole. In addition, the costs for industry are presented as savings compared to a reference scenario. In fact, they remain costs for industry. In order to ensure well-informed decisions, the final report should be improved on these aspects in order to provide clarity on who bears which costs and who receives the benefits. / √ / Clarity on who bears which costs and who receives the benefits to be checked. Although note that more detailed work on allocation under the potential trading scheme will be covered in the second study.
There will of course be costs associated with complying with the IED (ie the reference scenario (scenario 2)). With an ETS there may be reductions in these costs and this is what should be understood by the term "savings".
For companies applying IPPC-permit conditions, an ETS would bring additional costs whatever the allowance allocation system is. The situation for companies already operating at a Best Available Techniques (BAT) level would even be more unfair, as an ETS would bring additional costs in the absence of full free allocation. In any case, the administrative costs would come on top of this: / √ / √ / Comment not true – a company applying BAT permit conditions may be able to sell allowance, thus providing a benefit compared with IPPC system.
Cost impacts of different allocation options will be explored in 2nd study.
The estimation of costs presented in the draft report does not take into consideration the huge administrative work associated with the organisation of an ETS as the experience with the ETS for CO2 shows. All the adjustments which are required to avoid pollution-leakage and economic downturn, such as benchmarking, auctioning organisation or national registries have not been taken into consideration. / √ / MRV section includes the administrative costs.
Check whether additional elements need to be included
The total of €35 million per year regarding monitoring, reporting and verification (MRV) costs of ETS for NOx and SO2 seems to underestimate the reality. The draft report fails to recognise the many technical challenges associated with measurement and/or estimation of NOx and SO2 emissions under actual industrial conditions. Where such challenges are encountered (e.g. no suitable location for installation of a continuous emission monitoring system in an existing facility), investment costs and engineering time required to establish adequate monitoring and reporting systems will escalate far above the optimistic numbers assumed in the report. / √ / Check assumptions in MRV section
The draft report provides no assessment of the indirect costs to energy-intensive industries due to the effect of an ETS on power prices. These effects need to be assessed at a national level. On 10 February, DG Environment mentioned that the indirect costs will be taken into consideration into the second study. Therefore, it must be clearly stated in the final report of the first study that it has not addressed the indirect impacts on power prices and therefore cost impacts are limited in scope. / √
LACK OF GUARANTEES ON THE WORKABILITY OF ETS FOR NOX AND SO2. The draft report provides no assessment of the liquidity of the market under the different ETS scenarios. The fact that new installations should in practice have little room to trade is an example of key elements which should be carefully assessed. / √ / Assessment of liquidity not in scope. Liquidity not likely to be a problem as the majority of installations in 2016/2020 will be existing and not new; installations will not need to comply with BAT; coverage will be whole EU.
The draft also lacks of a sensitivity analysis of the capacity to maintain an ETS in the long term, which is the basic condition to influence market operators‟ behaviours. / Comment is not clear – study looked at different options in terms of ambition levels
Experience shows that the perfect market conditions assumed in the report in fact do not exist. This is clearly illustrated by the ETS for CO2 and it has a significant impact. For example:
- In the case of auctioning, “Benefits” of trading are immediately reduced if the system moves away from total revenue recycling, which is ignored as a possible outcome of the legislative process. / √ / The extent of impact if there is no direct revenue recycling will be explored in the 2nd study, which will consider what happens to the revenues.
- CO2 and NOx emissions are often coupled (CO2 lowering will increase NOx). The overlap and interference between ETS for CO2 and ETS for NOx is not properly addressed in the report and remain a “gray area” with potential far-reaching negative impacts on industry. / √ / EU policies already require reductions in both CO2 and NOx so it is not clear how an ETS for NOx would create a different issue to what already exists.
Operators would optimise behaviour on two ETS markets + other relevant markets (currently behaviour is optimised in 1 ETS market + other relevant markets + IPPC requirements ).
- Key drivers of the price in the ETS for CO2 are oil price impacts, organisation of auctioning, sector caps, etc. The report assumes the lowest cost technical options will set the price, which in fact is by no means the case in ETS for CO2 / [See Cembureau responses]