THE POSSIBLE IMPACT OF THE AGE STRUCTURE OF POWER PRODUCTION ACROSS EU MEMBER STATES ON THE ALLOCATION OF EMISSION ALLOWANCES IN THE EUROPEAN EMISSION TRADING SCHEME

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THE POSSIBLE IMPACT OF THE AGE STRUCTURE OF

POWER PRODUCTION ACROSS EU MEMBER STATES

ON THE ALLOCATION OF EMISSION ALLOWANCES IN

THE EUROPEAN EMISSION TRADING SCHEME

Master’s Thesis of International Economics & Business

Faculty of Economics

Rijksuniversiteit Groningen

Author: Linda Lesterhuis

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The European Emission Trading Scheme has been a topic of discussion since its cre-ation. This thesis introduces the age bias problem which may arise in the assignment of emission allowances to installations. The allocation of the emission allowances is done by the Member States by the construction of a National Allocation Plan based on a number of criteria set up by the European Commission. This thesis focuses on the allocation to the power production sector of four countries, Germany, The Netherlands, Portugal and The United Kingdom. The allocation plans are evaluated based on the implementation of the criteria and the allocation mechanisms used.

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Appendix A

Power Plants Germany

Table A.1: Power plants Germany

Company Name Year Capacity (MWe) Source

E.On Kiel 1970 323 coal

E.On Rostock 1994 508 coal E.On Wilhelmshaven 1976 747

E.On Farge 1969 345

E.On Mehrum 1979 690 coal E.On Heyden 1987 865 coal E.On Datteln-I 1964 95 coal E.On Datteln-II 1964 95 coal E.On Datteln-III 1971 113 coal E.On Knepper 1971 325 coal E.On Scholven-B 1968 345 coal E.On Scholven-C 1969 345 coal

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Table A.1 – continued from previous page

E.On Scholven-D 1970 345 coal E.On Scholven-E 1971 345 coal E.On Scholven-F 1979 676 coal

E.On Buer 1985 714 coal

E.On Staudinger 1965 1923 coal E.On Bexbach 1983 714

E.On Zolling 1985 449 coal E.On Buschhaus 1985 330 coal E.On Schkopau 1996 900 coal E.On Kassel 1988 34 coal E.On Lippendorf S 1999 865 coal E.On Rostock 2000 865 coal

E.On Emden 1972 430 gas

E.On Huntorf 1978 290 gas E.On Kirschmoser 1994 160 gas E.On Robert Frank 1973 487 gas E.On Franken-1 1973 830 gas,oil E.On Irsching 1969 878 gas,oil E.On Audorf 1973 87 oil E.On Itzehoe 1971 87 oil RWE Frimmersdorf 1957 2003 coal RWE Neurath 1972 2056 coal RWE Niederaussem 1963 2607 coal RWE Goldenberg 1993 151 coal

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RWE Weisweiler 1955 2054 coal RWE Niederaussem-BoA1 2003 920 coal RWE Berrenrath 1993 52 coal RWE Wachtberg 1987 118 coal RWE Ensdorf-C 1971 282 coal RWE Ibbenburen 1985 709 coal RWE GW Bergkamen-A 1981 684 coal RWE Westfalen 1963 588 coal RWE Rostock 1991 125 coal RWE Werne-Kv2 1984 600 coal

RWE VSE-1 1994 95 coal

RWE Emsland-B 1973 410 gas RWE Emsland-C 1974 410 gas RWE Gersteinwerk-F 1973 410 gas RWE Gersteinwerk-G 1973 410 gas RWE Gersteinwerk-H 1973 55 gas RWE Gersteinwerk-I 1973 410 gas RWE Werne-Kv1 1984 112 gas RWE KW Bochum 1957 32 gas RWE GuD Dormagen 1979 260 gas RWE GuD Dormagen 1979 344 gas RWE KW Huckingen 1975 366 gas RWE KW Huckingen 1976 214 Gas RWE Gasmotoren Goldenberg 2004 4 gas

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RWE LEW Aviko 2000 10 gas RWE Sermuth 1995 17 oil RWE Grosskayna 1993 119 oil EnBW Altbach/Deizisau 1997 1200 coal EnWB Rheinhafen 1998 1260 gas,oil EnWB Heilbronn 1985 1020 coal EnWB Marbach 2005 395

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Appendix B

Power Plants The Netherlands

Table B.1: Power plants The Netherlands

Essent Amer-8 1980 645 coal Essent Amer-9 1993 600 coal Essent Donge-1 1977 121 gas Essent Geleen 1999 190 gas Essent Moerdijk-1 1998 339 gas Essent Maasbracht-A 1977 638 gas Essent Maasbracht-B 1978 640 gas Electrabel Almere-1 1988 67 gas Electrabel Almere-2 1994 53 gas Electrabel Bergum-10 1974 332 gas Electrabel Bergum-20 1975 332 gas Electrabel Eems-20 1978 695 gas Electrabel Eems-30 1996 341 gas

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Table B.1 – continued from previous page

Electrabel Eems-40 1996 3341 gas Electrabel Eems-50 1996 341 gas Electrabel Eems-60 1997 341 gas Electrabel Eems-70 1997 341 gas Electrabel Gelderland 1981 602 coal Electrabel Harculo-60 1982 350 gas Electrabel Flevo-30 2004 120 gas E.On Galilei 1989 209 gas E.On Maasvlakte-1 1989 520 coal E.On Maasvlakte-2 1988 520 coal E.On UCML 2004 80 gas E.On Roca-1 1983 24 gas E.On Roca-2 1983 25 gas E.On Roca-3 1997 220 gas Nuon Diemen-33 1996 249 gas Nuon Hemweg-7 1979 599 gas Nuon Hemweg-8 1995 630 coal Nuon Ijmuiden-1 1997 145 gas Nuon L.Weide-6 1996 247 gas Nuon Merwede-10 1979 96 gas Nuon Merwede-11 1985 103 gas Nuon Merwede-12 1990 217 gas Nuon Purmerend 1989 69 gas Nuon Velsen-24 1975 459 gas

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Table B.1 – continued from previous page

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Power Plants Portugal

Table C.1: Power plants Portugal

Company Name Year Capacity (Mwe) Source

EdP Carregado 1968 710 Oil, Natural Gas EdP Tunes 1973 197 Gas

EdP Barreiro 1978 56 Oil EdP Setbal 1979 946 Oil EdP Sines 1985 1192 Coal EdP Ribatejo 2003 1176 Gas Turbogs Tapado do Outeiro 1993 1192 CCGT Tejo Energia Pego 1998 990 Coal

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Appendix D

Power Plants The United Kingdom

Table D.1: Power plants The United Kingdom

BE Eggboroug 1967 coal

E.On Ratcliff 1968 2000 coal E.On Ironbridge 1970 1000

E.On Kingsnorth 1970 1940 coal,oil E.On Connah’s Quay 1997 1420 gas E.On Cottam Development Centre 1999 400 gas E.On Killingholm 1993 900 gas E.On Taylors Lane 1979 132 gas,oil

E.On Grain 1979 650 oil

E.On Castleford 2002 56 gas

E.On Humber 1997 25 gas

E.On Kemsley-1 1995 80 gas

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Table D.1 – continued from previous page

E.On Port of Liverpool 2004 4.5 gas E.On Sandbach 1999 56 gas

E.On Stoke 2002 56 gas

E.On Thornhill 1998 50 gas E.On Workington 1997 49 gas RWE Aberthaw 1971 1455 coal

RWE Cowes 1982 70 gas,oil

RWE Didcot-A 1972 3300 gas,oil RWE Fawley GT 1969 34 gas,oil RWE Aberthaw GT 1971 51 gas,oil RWE Little Barford 1995 665 gas RWE Littlebrook GT 1982 105 gas,oil RWE Tilbury GT 1968 34 gas,oil RWE Tilburry-B 1968 1029 coal,gas RWE Didcot GT 1972 100 gas

RWE Fawley 1969 484 oil

RWE Littlebrook-D 1982 2055 oil RWE Aylesford Newsprint 1994 98 gas

RWE BASF 1997 75 gas

RWE Bridgewater 2000 40 gas RWE Conoco Phillips 1999 40 gas RWE Dow Corning 1998 28 gas RWE Esso Oil 1999 135 gas RWE Georgia Pacific 1995 9 gas

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Table D.1 – continued from previous page

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Early Action Requirements

Germany Phase I

Table E.1: Early action requirements existing installations

Year commissioned Reduction in specific emissions to be demonstrated

1996 8% 1997 9% 1998 10% 1999 11% 2000 12% 2001 13% 2002 14%

Source: National Allocation Plan Germany 2005-2007 [?]

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Appendix F

Additional Information to

Allocation Formula

Netherlands:

Source: Netherlands national allocation plan for greenhouse gas allowances 2008-2012.[?]

Growth

Growth has been set at 1.7% per year for all sectors for the period from 2006 to 2010, 2010 being the middle year of the planning period 2008-2012. This is a matter of CO2-related growth. It is based on the estimates of Energy research centre of the Netherlands (ECN). In this regard ECN looked separately at some large expected new entrants. They are above all new entrants that can be expected with sufficient certainty to be going to emit CO2 in the trading period. A single growth figure for all the sectors has been chosen because the ECN estimates show that the growth figures for each sector in general are reasonably close to one another, once a number of new installations have been removed. With a further division sector by sector the sector-sensitivity of an individual installation remains very high. This has been offset by going to a higher aggregation level. In this way ’plant closures’ and ’new installations’

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cancel each other out more and the direct impact of assessment uncertainties in the sector figures is also reduced. In this way sufficient account is taken of the average growth of the participants in the emissions trading system.

Relative energy efficiency

The measure for the relative energy efficiency for the combustion emissions has been derived from the performance levels within the energy covenants. In this way account is taken of the use of (voluntary) energy-efficient technologies in the past.

Table F.1: Performance levels

Electricity generation Heat (maximum on the basis of gas) Gas & oil 52% 90%

Oil offshore 40% 90%

Coal 39% 90%

Furnace gas 40% 90%

Correction factor

To make the sum of the allowances allocated to each installation equal to the avail-able CO2 capacity the same correction has been applied to each installation for the quantity of allowances for all installations. This correction factor will be applied to all the individual installations so that all the installations contribute to the Dutch climate objectives and in this way to lower CO2 production. There are however two

exceptions to this: this correction factor will not be applied to new entrants nor in principle to 50% of the process emissions of an installation. New entrants do not receive a correction factor because they must already meet the highest standards.

UK:

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Capacity

The individual plant’s registered Transmission Entry Capacity equals its capacity for 2008 as given in National Grid’s Seven Year Statement 2006.

The TEC listed is the amount of generating capacity on which the power station pays Transmission Network Use of System (TNUoS) tariffs for a certain year. The maximum export limit that can be physically supported is the site’s Connection En-try Capacity (CEC). TECs are constrained to be no greater than the site’s CEC. This definition of station capacity has been chosen by the Government because it is likely to accurately reflect use; and for ease of verification.

Load factor

The load factor is derived from 2000-2003 historic data other than an adjusted case to reflect the limited running time allowed to plants which opt out of the LCPD.

The proportion of a plant’s capacity that produces electricity each year is reflected in the load factor. Plant owners decide how to run their plant taking into account factors such as an individual plant’s technical capabilities, present and expected future prices of electricity, carbon and fuel allowances, environmental considerations, etc. As such it is not possible to identify ”best practice” or to state that one load factor is ”better” than another. Therefore has the UK sought to identify representative average load factors for each sub-sector within the LEP.

Emissions factors

The category-specific emission factors of electricity produced (tCO2/MWh) are

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sub-sector standard emissions factor = efficiency factor * fuel emission factor

The following table shows coal and oil plant efficiencies, fuel emission factors and the resulting emission factors. Fuel emission factors are obtained from the UK Green-house Gas National Inventory Report (2005)52. Thermal electrical efficiencies are in agreement with those used in the Updated Energy Projections.

THE POSSIBLE IMPACT OF THE AGE STRUCTURE OF POWER PRODUCTION ACROSS EU MEMBER STATES ON THE ALLOCATION OF EMISSION ALLOWANCES IN THE EUROPEAN EMISSION TRADING SCHEME