All first deliverers of the electricity in the EU must be treated equally, whether they are in-Union generators or electricity importers.
The EU ETS major regulatory reform proposals according to the news feeds are expected to be presented by the summer break. In this context it is useful to note that Cap-and-Trade Program Electricity Workshop held by California Air Resources Board (ARB) on May 4, 2012 (the slides are posted at: http://www.arb.ca.gov/cc/capandtrade/meetings/meetings.htm) provides further interesting evidence that EU ETS is burdened with significant regulatory gaps not only with respect to the issue revealed by the current economic crisis (i.e. that an allowance cap is fixed in advance with no possibility for further adjustments reflecting changes in economic conditions) but also as regards some other fields, which so far didn’t evoke so much interest.
In this place let’s focus on the question indicated in the title.
The First Deliverers of Electricity are not the entities EU ETS legislation has so far paid much attention to. This remains in contrast with the California nascent carbon market regulations, which identified the said problem, analysed it and introduced a sophisticated mechanisms for managing the effects thereof (see: Why importers of electricity into EU doesn’t have compliance obligation under EUETS?).
The entities covered by the EU ETS are in principle emitters (of the GHGs). California cap-and-trade legislation extended this regulatory approach also to electricity importers.
The above-mentioned presentation of the ARB Workshop of May 4, 2012 indicates interesting fundamental assumptions adopted in California for this issue. Among them are:
1) AB 32 (California climate legislation) direction is to account for emissions from in-State generation and imported electricity,
2) regulatory approach assigns the first deliverer as the point of regulation,
3) electricity importer is first deliverer for imported electricity.
Moreover, the criteria that led the ARB staff to use this regulatory approach and identification of the first deliverer are:
1) first deliverer must be identifiable,
2) ARB must rely on verifiable data,
3) ARB must have jurisdiction over the first deliverer,
4) the approach must be able to be duplicated and integrated with a linked program in a regional or comprehensive GHG program
The presentation at issue further points out that the regulation and resulting compliance obligation must:
1) facilitate an appropriate and timely price signal,
2) minimize unintended market signals that would inhibit or interfere with market structure or operation,
3) treat all first deliverers equally, whether they are in-State generators or electricity importers.
Notably the last-mentioned argument - concerning a necessity for equal treatment of domestic electricity generators and electricity importers - is convincing. The other two are, however, equally appealing. Why this argumentation has not been considered so far as a sufficient basis for re-examination of certain assumptions formulated while adopting the climate-energy legislative package - it remains unknown.
As opposed to California, the EU ETS regulatory approach does not assign the first deliverer as the point of regulation. It seems, however, doubtful whether such a stance is viable any longer.