Benchmarking in the EU ETS and Beyond

The revised EU Emissions Trading Scheme foresees auctioning of allowances as the default option.  However, Article 10a of the Directive allows for transitional free allocation, based on Community-wide ex-ante benchmarks (if feasible) based on a number of objectives, essentially related to providing incentives for GHG reductions and the use of energy efficient techniques. Starting point is the "average performance of 10% most efficient installations" in a sector or sub-sector in the Community in the years 2007-2008.  Article 10b of the new Directive requires an assessment (”analytical report”) by the European Commission on those sectors potentially exposed to carbon leakage and possibly adjust free allocation or take other measures. Article 10c finally sets the strict conditions under which free allocation remains possible for the power sector. The Directive also calls for consultation of relevant stakeholders.

Against this background, CEPS is launching a new Task Force.
Overall objective of the Task Force is to i) increase the understanding and clarity on a number of issues, especially definitions and their implications, ii) benefit from ongoing work within the Commission and elsewhere to inform the debate outside of the EU, iii) examine some key controversial issues such as indirects, principles, comparability of sector contributions but also long-term impacts on technology development and more generally, decarbonisation. 

Thereby CEPS creates a multi-stakeholder processes where the European Commission (e.g. DG Environment, DG Enterprise, DG TREN, etc.), member states, business and industry, Members of the European Parliament, NGOs and independent experts meet in a non-negotiation mood to discuss and analyse difficult and delicate issues related to benchmarking in a more informal and analytical setting than for example the Climate Change Committee and thereby create more transparency.

The Task Force principal objectives are:
• Take stock of ongoing initiatives and discussions (mainly in the first meeting);
• Produce a briefing paper on key concepts, including definitions and their practical and policy implications
• Submit some of the emerging issues (e.g. the principles) to scrutiny;
• Create a broad network of interested stakeholders;
• Work out a set of concrete recommendations to be presented to local, national, EU and international policy-makers and negotiators.

Proposed main themes are:
• Definitions and their practical and policy implications
• Application of benchmarks in the EU: i) indirects, ii) principles, iii) comparability of sector efforts; iv) keeping the numbers of benchmarks small, v) how can benchmarks foster innovation and decarbonisation?
• EU and non-EU experiences on benchmarks: what lessons can be learned?
• Specific applications of benchmarks, e.g. carbon leakage, target setting and auctioning, CDM, global sectoral approaches.

Chair:
Anna Törner, Head of section in the Swedish Ministry of Enterprise, Energy and Communications.

Rapporteurs:
Christian Egenhofer, Senior Research Fellow, CEPS
Noriko Fujiwara, Research Fellow, CEPS
Anton Georgiev,  Research Fellow, CEPS

Christian Egenhofer presented the preliminary findings of the forthcoming CEPS Task Force report on “Benchmarking in the EU ETS: Policy Issues for the EU and Beyond” (due in January 2010) at a International Emissions Trading Association (IETA) side event at Copenhagen. He focused his remarks on the principles behind benchmarking, the comparability of sector efforts and how benchmarks can foster innovation and decarbonisation.

Meetings:
1st meeting: 23 June 2009 from 10:00 - 16:30 (agenda)
2nd meeting: 8 July 2009 from 10:00 – 16:30 (agenda)
3rd meeting 10 September 2009
4th (last) meeting 12 November 2009

Task Force Report published and available here, launched on 22 June in the Committee of the Regions, Brussels.

This launch event was covered in the summer 2010 issue of the Panorama des think tanks europeens a Bruxelles, click here to read the article (in French).

Prospectus of the Task Force

Presentations

1st meeting, 23 June 2009

Benchmarking in the EU ETS - Yvon Slingenberg, Head of unit Emissions Trading, Climate Change & Air, DG Environment, European Commission

Benchmarking for the EU ETS and Beyond. A Member State Perspective - Sarah Resouly, Dept. of Energy & Climate Change

Benchmarking: Preventing Carbon Leakage & Achieving Emission Reductions. Preliminary views of the Aluminium Industry - CEPS

CEPS Benchmarking - Isabelle Muller, Secretary General, Europia

Towards an allocation methodology for the EU ETS based on benchmarking - Maarten Neelis, Ecofys

What is benchmarking? Do we all mean the same thing? Practical experiences - Hubert  Van den Bergh

Main lessons from previous benchmarking exercises - Hubert Van den Bergh

Insights from Steel: Benchmarks and the Environment - Hans-Jörn Weddige, ThyssenKrupp Steel

Benchmark in the Cement Sector - Claude Loréa, Technical Director, CEMBUREAU

Cement benchmarking - Bruno Vanderborght, Vice President, Corporate Industrial Ecology, Holcim

Refining sector - Chris Beddoes, Executive Officer, Europia

Introduction of the McKinsey cost curves - Julien Pestiaux, McKinsey & Co Belgium

2nd meeting, 8 July 2009

Key messages from the first meeting - Christian Egenhofer, CEPS

3rd meeting, 10 September 2009

Benchmarking for the EU ETS - Maarten Neelis, Ecofys

Experience from the Netherlands - Elske van Efferink, Ministry of Economic Affairs, the Netherlands

The Swedish experience - Lars Zetterberg, IVL Swedish Environmental Research Institute

Benchmarking as Allocation Method - Chiara Di Mambro, Ministry for Environment, Italy

Dynamic allocation of allowances - Frédéric Lehmann, Ministry for the Economy, Industry and Employment, France

Introduction of Benchmarks under the Energy Efficiency Law in Japan - Akihiro Matsuta, Deputy Head of Energy Efficiency Division, METI, Japan

Tentative Outline of the Task Force Report - Christian Egenhofer, CEPS

Key Issues Matrix for the Task Force Report

Background documents

Trilogy Study: The benefits and feasibility of an Emissions Trading Scheme (ETS) based on benchmarks and actual production

Cover of Trilogy Study: The benefits and feasibility of an Emissions Trading Scheme (ETS) based on benchmarks and actual production

Task Forces                    Energy and Climate Homepage