Developing the EU Emissions Trading Scheme

An analysis of some key issues for the Nordic countries

image of Developing the EU Emissions Trading Scheme

The EU Commissions is currently review the EU Emissions Trading Scheme (ETS). Three are of special interest for the Nordic countries: auctioning of emissions allowances, simplification of the rules for small installations, and the exclusion of certain small installations from the scope of the EU ETS, on the ground of excessive administrative costs. In the Nordic countries the thresholds for participation in the EU ETS would exclude primarily heat stations from the EU ETS. In several other industries, significant numbers of installations would be also excluded from the scheme, and this could lead to negative impacts on competition. The results of conducted survey show that costs for participating in the EU ETS vary in a large range. Most of the costs are not proportional to the size of the emission or the size of the allocation, why participating in the EU ETS is particularly burdensome for small emitters. We have explored possibilities to reduce the administrative cost by treating district heating network as one single installation and/or by utilizing pooling. Analysis shows that efforts cannot be reduced by changing the definition of an installation in the Emissions Trading Directive or by treating district heating network as single large installation instead of multiple small installations. In some cases, the change of definition could create new problems, because it would force some companies to act under a similar kind of procedure than pooling.



Cost of participating in the EU ETS

The savings in compliance costs cost brought about by an emissions trading scheme may, in general, be countered by two types of transaction costs: costs of administrating the scheme and costs of participating in it. Here we focus on the latter. Because a large share of the costs incurred by companies is not dependent on the size of the emissions, we are especially interested in the costs per emitted ton of carbon dioxide for small emitters.


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