District heating delivered to private households pursuant to the Benchmark Decision – different tariffs needed
Thursday, 10 February 2011 23:16

 

In both of the said models there are decreasing curves of allocation but the main difference (different factors excepting) is that the base for allocation for heat production for private households could be real historical emissions – without using natural gas benchmark.

 

Background

 

As follows from the Directive 2009/29 full auctioning is the general rule from 2013 onwards for the power sector (subject to the special provision in Article 10c). For other sectors, a transitional system is put in place for which free allocation in 2013 would be 80 % of a relevant ex-ante benchmark reducing gradually to 30% in 2020. Sectors deemed to be exposed to a significant risk of carbon leakage for the relevant period will receive 100% of the benchmark.

 

Currently the Draft Commission Decision on Free Allocation Rules for the Emissions Trading Scheme ('Benchmarking Decision' – version adopted by the Climate Change Committee on 15 December 2010) is under consideration in the comitology procedure.

 

District heating delivered to households – what’s the problem

 

Some are of particular concern with future prices of district heating delivered to households, especially with respect to coal-fired installations. The main problem is that natural gas is used as the reference fuel for the setting up benchmarks which puts coal-fired installations at a considerable disadvantage.

 

It should be reminded that pursuant to the Article 10(2)(b) point (i) of the Draft Decision for the heat benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the value of the heat benchmark for measurable heat as referred to in Annex I to the Draft Decision (i.e. 62.3 allowances/TJ) multiplied by the heat-related historical activity level for the consumption of measurable heat.

 

Taking natural gas as a reference fuel, district heating coal-fired installations really could face a major problems. For instance, in order to reflect the current, average emission values in some Member States (where the coal-fired district heating installations prevail) the factor 112 allowances/TJ should be adopted.

 

Furthermore, the Directive 2003/87 stipulates in Article 10a(11) that the amount of allowances allocated free of charge in 2013 shall be 80 % of the quantity determined with application of the benchmarks. Thereafter the free allocation shall decrease each year by equal amounts resulting in 30 % free allocation in 2020, with a view to reaching no free allocation in 2027. Annex VI to the Draft Decision contains detailed factors in that field for each of the years in the period 2013 – 2020 as follows:


Year

Value of the factor

2013

0.8000

2014

0.7286

2015

0.6571

2016

0.5857

2017

0.5143

2018

0.4429

2019

0.3714

2020

0.3000

 

Natural gas benchmark in combination with the system leading to a decrease of free allocation pursuant to Article 10a(11) of Directive 2003/87 means there are Member States where the initial allocation figure for 2013 (80%) is in reality only 40%.

 

Consequently, if the coal-fired district heating installations already in 2013 bought 60% of allowances in the auctions, it would make the prices of heat delivered to private households totally unacceptable. Such a situation could effect in people switching from district heating to individual installations in their homes, and in the final analysis the emissions could rise.

 



 

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