Emission projections 2008-2012 versus national allocation plans II

• Published in: Climate policy Vol. 6; no. 4; pp. 395 - 410
• Main Authors: Neuhoff, Karsten, Ferrario, Federico, Grubb, Michael, Gabel, Etienne, Keats, Kim
• Format: Journal Article
• Language: English
• Published: Taylor & Francis Group 01.01.2006
• Subjects: Allocation plan; Banking; Cost; Credit; Economic development; Emissions trading; Europe; European Union; Fuel; Markets; Prices; Projections; Japan, Honshu, Kyoto Prefect., Kyoto
• ISSN: 1469-3062; 1752-7457
• DOI: 10.1080/14693062.2006.9685609

We compare the national allocation plans (NAPs), proposed and submitted by EU Member States as of October 2006, with our estimations for CO 2 emissions by the installations covered by these NAPs. The collective allocations proposed under phase II NAPs exceed the historic trend of emissions extrapolated forward. Using our projections we find, depending on uncertainty in fuel prices, economic growth rates, performance of the non-power sector and CDM/JI availability, a 15% chance of a 'dead market' with emissions below cap even at zero prices. With an expected inflow of committed CDM/JI credits of 100 MtCO 2 /year, allowance supply will exceed demand in 50% of cases without any carbon price, and in 80% of our €20/tCO 2 scenarios. Banking of allowances towards post-2012 conditions could create additional demand, but this is difficult to anticipate and conditional on policy evolution. The proposed phase II NAPs would result in low prices and only small volumes of CDM/JI would enter the EU ETS. CDM/JI would almost exclusively be public-sector funded, placing the cost of Kyoto compliance entirely upon governments.