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31 May.2016

The day Aristotle said: “The Tiered Approach doesn’t work”

This article appeared in the Parliament Magazine issue no 435, 30 May 2016

Aristotle often used the reduction ad absurdum to show the untenable consequences one would ensue from accepting the item at issue. If he was alive and would hear about the Tiered Approach in the ETS review, we would probably have engaged in the following dialogue:

Aristotle: What is the purpose of proposing a Tiered Approach?
N.Rega: To avoid the so-called cross-sectoral correction factor (CSCF) – a uniformed cut in free credits allocated to each industrial installation, should the total demand excess the total availability of free credits.

How would a Tiered Approach work? Sectors are clustered in different groups, and receive a different level of free credits. How would sectors be clustered?
On the basis of the different degree of the sectors’ exposure to the risk of carbon leakage, whereby industrial production would relocate outside the EU due to climate policies.

And how could different exposure levels to such risk be evaluated?
For every sector we should assess the impact of carbon pricing in and outside the EU, the carbon intensity of EU and non-EU production, specific trade patterns, products’ price elasticity, and so-forth.

Have any of these analyses been used in the proposed tiered approach?
Not really. Sectors have not been compared with their respective non-EU sectors. Instead, they have just been all lined up and assumed that the higher a sector strikes in terms of combined carbon and trade intensity, the higher it is exposed.

This is counter-intuitive: when a sector reduces its carbon intensity, shouldn’t it increase its exposure to the risk of carbon leakage?
Indeed, as relocation outside the EU in countries with less stringent carbon constraints would then increase global carbon emissions.

So far, the methodology behind the Tiered Approach doesn’t look very sound-based.
Indeed, one could argue that it is rather arbitrary and discriminatory.

Could it be legally challenged?
In case of rigid boundaries in defining the carbon leakage groups, companies not receiving the highest level of free credits will most likely go to court.

Would these companies have a chance to win?
Most likely, given the flawed methodology being used.

What would happen then?
Sectors would retroactively receive additional free credits at the highest level.

So, the risk of triggering the CSCF won’t be avoided.
Indeed.

And what if the boundaries were not be rigid but rather flexible?
In this case, sectors initially allocated in some clusters would still be allowed to prove their higher need for protection, via the so-called qualitative assessment.

But if sectors will be granted additional free credits, where would these come from?
Like in past cases, the Commission would have to take a relevant amount of free credits upfront and park them aside, in case all sectors would apply and receive full protection.

Does it mean that sectors will be deemed to receive 100% free credits?
Yes, as allowances potentially needed would not be allocated.

So, also in this case, the risk of triggering the CSCF won’t be reduced.
Indeed. Additionally, a generalised use of the qualitative assessment would exponentially increase both the administrative burden and the lack of transparency in the decision-making process.

Thanks to Aristotle, we have come to a straight-forward conclusion: the Tiered Approach defeats its original purpose, namely to reduce the risk of triggering the CSCF. With additional drawbacks impacting the stability, predictability and transparency of regulatory framework.

A better way to cost-effectively reduce industry’s demand for free credits is to focus instead on developing rules to stimulate and reward investments in low-carbon technologies. In this respect, tiering does neither. Something that even Aristotle would agree upon.
 

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31 May.2016

What next for our industry? A recarbonisation revolution

This article was written by Petri Vasara from Pöyry Management Consulting. Pöyry is one of our Partners. Read more about them here

Our industry faces exciting times ahead. The world needs a ‘recarbonisation revolution’ of global material flows as we must increase biomass and decrease non-renewable materials such as metals and minerals in the movement of global trade. Additionally, recarbonisation requires moving from fossil carbon to biocarbon. The re-carbonisation revolution offers a simple way to define the bioeconomy: re-carbonise materials, de-carbonise energy.

Society’s concern with climate change has shaped our language to always refer to “decarbonisation” policies and attempts to create a “low carbon economy”. Whilst these sentiments are honourable in their intention, they neglect a key truth – that carbon is the basis of life. The only area where the removal of carbon should be focused is in fossil-based carbon fuels. Outside of fuel - in a vast range of other materials - carbon is needed in the form of biomass to create a truly renewable and sustainable loop.

What does a recarbonisation revolution mean for our industry?

Imagine a solution where we recarbonise just 1% of the market of some key global material flows. The packaging market in 2013 was worth 590 billion euros alone with plastics and fibre producing 220 and 215 billion euros in turnover respectively. Therefore, if 1% of the packaging market which is currently created from fossil plastics was moved to biopackaging, it would equate to 6 billion euros in turnover.

Likewise, plastics correspond to about 300 million tons, meaning that moving 1% from fossil plastics to bioplastics would represent about 3.5 billion euros of new biobusiness. Finally, imagine that 1% of the global volume of fossil fuels is taken and substituted with biomass, and that biomass is processed further in the forest industry – this would mean a green recarbonisation of a part of the world’s materials flows. This could result in an estimated 30 billion euros of annual new biobusiness.

When combined these three 1% substitutions would provide an estimated 40 billion euros per annum to a new sustainable bioeconomy. The calculations above can be debated of course, but they are indicative of the potential size of the opportunity.

Why now?

Whereas in the past this level of change may have been implausible, new developments in technology and materials sciences have made it both possible and desirable. Four materials - Lignin, sugar, nanocellulose and graphene - stand out as examples of where recarbonisation can be truly effective. The first three are carbon-based and graphene is pure carbon meaning they have the potential to radically change the materials world.

As well as being technically possible, there is also a demand for these solutions from some of the world’s global brands such as IKEA, Toyota, Procter & Gamble and Coca-Cola. All have their own reasons for pushing biomaterials, both for functional or cost-related reasons. For example, biocomponents in cars weigh and cost less than metal or companies view it as a way of building brand image.

No revolution is easy, and the ‘recarbonisation revolution’ is no exception, but there is scope for many winners. Whilst alliances across sectors are not yet the norm, a transformation of the value chain must and is taking place. Companies operating in our industry must think ahead and align to benefit from this transformational shift.

We are only at the beginning of the recarbonisation journey and in many applications plastic is still much more competitive. However, even achieving a mere one per cent of the market would be a business worth billions of euros; the foundations are solid for this to happen and companies and brands from different sectors are already seriously looking at a biobased future. This is a positive sign for us all as the recarbonisation journey gets underway.
 

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23 May.2016

Strong industry concerns on the ITRE Draft Opinion on the EU-ETS Reform post-2020 and other thought experiments putting industries at risk of carbon leakage

Tiering is not the solution

The undersigned energy-intensive industries express their strong concerns regarding the proposal to introduce “tiered approaches” to carbon leakage protection, as introduced in the ITRE Draft Opinion.

According to all forecasts, “tiering” is not needed.

All forecasts, including the Commission’s Impact Assessment, predict that a shortage of free allowances is highly unlikely during phase IV of the ETS. A shortage can be as good as excluded if the proposed share of allowances to be auctioned were properly calculated. Those 700 million ‘unused’ allowances of phase III (that were earmarked for free allocation but remained unallocated due to business closures or a lack of new entrants) should remain available and within reach if needed for production, recovery and growth during 2021-2030. Thus, the ETS reform can deliver the agreed emission reductions cost-effectively, encourage best performance through safeguarding full and effective carbon leakage protection to the benchmark level. There is no need for exposing parts of EU industry to undue carbon costs.

The ITRE Draft Opinion proposes to expose a lot of industrial sectors to the risk of carbon leakage.

Burdening companies with undue carbon costs by cutting free allocation would divert resources from modernising and upgrading industrial infrastructure, thus exacerbating the risk of investment leakage to countries with less stringent climate policies. This does not send a positive signal to European
industry to accompany its decarbonisation investments and undermines our faith in, and support for, the ETS as a cost-effective means of reducing carbon emissions.

“Tiering” is based on theoretical assumptions and distorts the internal market

The proposed tiering has no environmental or economic justification and is based on flawed assumptions (“cost pass-through”) of unpredictable market dynamics. It reserves free allowances for some sectors at the expense of others. It goes against the principle set in the October European Council Conclusions that best performing companies in ETS carbon leakage sectors should not bear further carbon costs. Indeed, tiering would ensure that even best performers in most sectors would bear significant carbon costs and expose them to carbon and investment leakage.
Statistical indicators vary - sometimes greatly - with time and depend on many factors (market conditions, company structures, exposure to international trade, etc.). Hence, the setting of thresholds would be arbitrary and would risk not reflecting future needs and leakage risks of the sectors.

As a result, we call on the Members of the ITRE Committee to react strongly to the Draft Opinion, so that the ETS reform delivers full and effective carbon leakage protection without the need for arbitrary discrimination. Jobs in one sector are neither more nor less important than those in other sectors.

We call for an approach based on realistic benchmarks, allocation based on more recent production data and an adequate reserve that ensures full allocation to benchmark levels. Fairness and solidity should become key principles of policy making. We ask you to create a framework that gives all sectors an equal opportunity to compete and thrive in Europe, and not to pick certain sectors to stay in Europe.

 

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04 May.2016

ETS Review: Five comments and proposals on the ITRE draft opinion

On 26 April the ITRE rapporteur published the draft opinion on the Commission proposal to review the Emission Trading System. While the report includes some positive proposals, other aspects still need to be improved. In some cases, some proposed solutions would need to be thoroughly thought through, as they would have the unintended consequence of negatively impacting industrial competitiveness and destabilising the regulatory framework.

The following five aspects are of primary importance:

1. Availability of free allowances for industry

On the positive side, the report seeks to increase the availability of free credits for new entrants and production increases. On the other hand, the report does not address the fundamental question of how to ensure enough free credits to meet industry’s needs.

CEPI proposal: as future industry demand for free credits is subject to many uncertainties, any firm decision taken now will likely result in either excess of unused free credits or an excessive shortage of these. We would thus suggest focusing on:

  1. Re-balancing the share free credits/auctioning to 47.5% /52.5%, to take into consideration free credits originally allocated to industry but unused due to the economic crisis.
  2. Stimulating and rewarding investments in low-carbon technologies: this would be the most cost-effective way to meet the free credits cap while improving industry’s competitiveness.
  3. Defining in the legislation a process whereby the availability of free credits is constantly monitored and, in case of upcoming shortage, the legislator is called to take the most informed decision, exploring all available options.


2. Carbon Leakage

The proposal from the rapporteur is simply unacceptable. The motivation that such a “tiered” approach would support the “sectors in greatest need” is arbitrary and lacks any evidence that such a system would target “those sectors genuinely and most exposed to carbon leakage”. Such a discriminatory approach, if approved, would inevitably entail legal challenges in courts, leading to an unstable and unpredictable regulatory framework. Moreover, it would increase the risk of carbon leakage for most sectors in the economy, putting millions of jobs across industries and local communities at risk.

CEPI proposal: keep the Commission proposal.

3. Benchmarks update

The proposal from the rapporteur is heading in the right direction. Building on the Commission proposal, it stresses the need to use real data and tries to accommodate the need of those sectors moving at a slower pace in emission reductions.

On the other hand, the slower reduction pace should be enlarged to any type of emission, not only to “unavoidable process emissions”. Moreover, the proposal does not address the risk for a sector of remaining “trapped” into one reduction pattern, independently of technological progress. The report also does not address rules for assessing progress in installations not covered by product benchmarks (so-called fall-back approaches), which are responsible for one third of industrial emissions.

CEPI proposal:

  1. Build on the rapporteur’s proposed amendments.
  2. Assess progress in comparison to latest benchmark value set in the legislation.
  3. Broaden the 0.3% category to any type of source of emissions.
  4. Specify in the legislation the rules for assessing progress in installations not included in product benchmarks (fall-back), based on energy intensity improvements.

4. Indirect carbon costs passed on in electricity prices

Although we strongly support the need to reduce the impact of carbon costs in electricity prices, the proposals will have little or no impact in this respect. This is because most industrial installations purchase electricity on the wholesale market. Differing levels of compensation will not impact the way the electricity market operates, thus the way carbon costs are passed through in electricity prices. Suggesting that no compensation should be paid if the carbon price is less than 15 euros would expose industrial sectors to real costs in the short to medium term and is based upon the same flawed “tiering” approach proposed in the carbon leakage policy area.

The proposals would therefore increase the carbon cost exposure for industries while not addressing the shortcomings of the current state aid regime, namely the lack of compensation in all Member States and the unpredictability of the rules. It should also be noted that, in some countries, the lack of compensation for indirect costs coupled with no free credits for electricity produced and consumed on-site (as in the case of CHP) is already leading to up to 40% shortage in compensation for on-site emissions.

CEPI proposal: the ETS review needs to ensure 100% compensation for both direct and indirect carbon costs throughout the whole trading period, at benchmark level.

5. Innovation Fund

We welcome the rapporteur’s attempt to increase and facilitate access to the financing of innovative projects in the industry. We also welcome the attempt to clarify the parameters already upfront in the text of the directive; this will accelerate the process by timely releasing the first funding opportunities.

CEPI proposal: build on the rapporteur’s initiative. Strengthen provisions on the share of financing support, ensuring all industrial sectors can really benefit from this opportunity.

 

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19 Apr.2016

Reaction to the tiered approach to carbon leakage protection

The signatories (see below), energy-intensive industries express concerns regarding the so called “tiered approach” to carbon leakage protection under the EU ETS

The tiered approach1 would reserve free allowances for some sectors at the expense of others. It goes against the principle set in the October European Council Conclusions that best performing companies in ETS carbon leakage sectors should not bear further carbon costs. Indeed, it would ensure that even best performers in most sectors would bear significant carbon costs and expose them deliberately to carbon and investment leakage.

The proposed tiering has no environmental or economic justification and is based on flawed assumptions (“cost pass-through”) of in reality unpredictable market dynamics. Depriving sectors of carbon leakage provisions would not deliver decarbonisation through investment and innovation. Moreover, it could well prove to have been entirely unnecessary. All forecasts, including the Commission’s Impact Assessment, predict that there will be sufficient allowances available to ensure full free allocation to benchmark levels at least until 2025: and there are other proposals for ETS reform that would deliver full and effective carbon leakage protection without the need for arbitrary discrimination.

To that end, we continue to support an approach based on realistic benchmarks, allocation based on more recent production data and an adequate reserve that ensures full allocation to benchmark levels. The proposed share of allowances to be auctioned shall also be recalculated downwards, as analysis of the EC proposal shows, it does not properly include the number of allowances which were to be given out for free (i.a. unallocated and left-over NER allowances).

In the circumstances, the “tiered approach” would introduce an unnecessary and unfair discrimination between sectors. Fairness and solidity should become key principles of policy making. Jobs in one sector are neither more nor less important than those in other sectors. The signatories fully share and support the BusinessEurope views on tiered approach as expressed in a statement on April 14th.

We ask you to create a framework that gives all sectors an equal opportunity to compete and thrive in Europe, and not to pick certain sectors to stay in Europe. It would undermine our industry’s faith in, and support for, the ETS as a means of reducing carbon emissions.

For further information please contact Peter Botschek, Cefic Director Energy & HSSE, e-mail pbo@cefic.be

1 i.e. as presented in a Non-paper on a Tiered Carbon Leakage List in Phase IV of EU ETS (authored by France, the United Kingdom)

 

 

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18 Apr.2016

Global Forest Products Industry is Part of the Solution to Climate Change

São Paulo – The International Council of Forest and Paper Associations (ICFPA) and its members welcome the signing of the landmark United Nations agreement to tackle climate change, set to take place on April 22. The agreement urges countries to implement policies that would allow them to keep a global temperature rise below 2 degrees Celsius. The global forest products industry has a highly significant role to play in the implementation of these targets.

“The global forest products industry has made significant strides in reducing its carbon footprint, stocking carbon, and generating greenhouse gas removals – all helping to mitigate climate change”, said ICFPA President and Brazilian Tree Industry (Ibà) President Elizabeth de Carvalhaes. “This agreement is crucial to implementing some of the policies that consider biomass as carbon neutral when harvested from sustainably managed forests and to further recognize all positive contributions that forests and forest products provide in combating climate change.”

The inherently-renewable global forest products industry remains committed to mitigating climate change for the benefit of the green economy and society at large. ICFPA members have achieved an impressive 5% reduction in their greenhouse gas emissions intensity since 2010/2011 and 17% since the 2004-2005 baseline year (2015 ICFPA Sustainability Progress Report).

The European pulp and paper industry has been a global champion in mitigating greenhouse gas emissions. It has set itself in 2011 a clear vision of becoming carbon neutral by 2050 and since then, taken concrete steps to reach that goal,” said Jori Ringman, Acting Director General of Confederation of European Paper Industries (CEPI). “Thanks to responsible sourcing practices and sustainable forest management, the forest area is growing in Europe by an area of over 1,500 football pitches per day. CEPI is pleased to see development in the same direction globally”, he added.

The forest industry’s significant role in mitigating climate change was highlighted in the ICFPA-commissioned report Analysis of Forest Contributions to the INDCs by acclaimed researcher Paulo Canaveira. Having looked at the contributions of forests in the national targets of ICFPA member countries (INDCs) and global mitigation effort from 2020 onwards, the report concludes that many countries identify forests and the land-use sector as relevant to policies and measures implemented to meet their targets. Reducing emissions from deforestation, but also sustainable forest management, afforestation and reforestation are commonly mentioned as key mitigation practices. In some developing countries, they even constitute the country’s main contributions.

Other climate change mitigation efforts of the global forest products industry include supporting national and regional climate policies and programs; investing in technologies with low carbon footprints and ones that improve carbon sequestration; and developing bio-based technologies to find innovative ways to use wood fiber and substitutes for goods traditionally made from fossil fuels.
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Note to the editor:

The ICFPA represents more than 30 national and regional forest and paper associations around the world. Together, ICFPA members represent over 90 percent of global paper production and more than half of global wood production.

For more information about the global forest and paper industry, visit icfpa.org.
 

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12 Apr.2016

Bioeconomy 2.0 will help lead the EU’s renewable revolution - with the right support

On the occasion of ‘BioEconomyUtrecht2016’, the fourth Bioeconomy Stakeholders’ Conference, the European Bioeconomy Alliance (EUBA) calls on the EU to lead a worldwide transition towards a renewable, low-carbon economy. Europe has all of the means necessary to become a global leader in the bioeconomy, if its potential is realised and embraced by European policy makers.

The bioeconomy encompasses the sustainable production of renewable resources and their conversion into food, feed, fibres, materials, chemicals and bioenergy through efficient, innovative technologies. It is already worth €2 trillion annually and employs 22 million Europeans, but holds the potential to significantly further boost competitiveness and long-term economic growth. At a time when the pressure is on to deliver on post-Paris climate commitments, the bioeconomy offers a viable solution to today’s fossil carbon equivalents and has the potential to save up to 2.5 billion tonnes of CO2 per year.

In advance of today’s conference, EUBA members, together with other stakeholders in the growing bio-based community have produced a set of recommendations on how Europe can promote bio-based products in public procurement. The report, which will be launched today in Utrecht, outlines what needs to be done at EU, regional and national level to create dynamic new markets for home-grown, EU-sourced bio-based products.

Speaking on behalf of the EUBA, Pekka Pesonen, Secretary General of Copa and Cogeca commented: ‘We are at a pivotal moment in the development of the European bioeconomy. The EU’s strategy is currently being reviewed and we find that we have both great achievements to celebrate as well as some much needed new measures to put in place. Financial tools are needed to boost innovation and investment in existing and new bio-based value chains. In addition, boosting public procurement of bio-based products is one example of how Europe can develop renewable product markets and accelerate the move towards a circular bioeconomy.’

Also speaking on behalf of the Alliance, Jamie Fortescue, Managing Director of Starch Europe, a member of the Primary Food Processors added: ‘Europe has, in abundance, the renewable resources, industrial base and know-how to lead its own bioeconomy revolution. What we now need, to attract more contributors and investment, is open and inclusive discussion underpinned by unwavering, cross-sectoral, political commitment. We want to look back at Utrecht in five years’ time and marvel at what has been achieved in the interim.’

EUBA member EuropaBio’s Industrial Biotech Council Chair, Stephan Tanda, concluded: ‘With the steadfast support and leadership of the European Institutions, the Member States and their regions, huge progress has been made over the past five years with many national authorities setting out their own tailor-made roadmaps towards vibrant and regenerative home-grown bioeconomies. In addition, thanks to the development and launch of the EU’s first ever Bio-based Industries Joint Undertaking for €3.7 billion, ground-breaking cross-sectoral innovation has been given a new lease of life. As a result, we will see new partnerships forming across borders and disciplines in the development of smarter, more sustainable products and processes. The potential is there to be harnessed and, with the right support, Europe will lead the way in the development of a world leading bioeconomy.’

Note to the Editor

BioEconomyUtrecht2016 is taking place 12-13 April in Utrecht, the Netherlands, and is hosted by the Dutch Ministry of Economic Affairs and the European Commission, under the auspices of the Dutch EU Presidency. The aim of the conference is to explore how Europe can enhance its bioeconomy and input into the review of the European Bioeconomy Strategy that will take place in 2016.

Commission Expert Group for Bio-based Products, Working Group Public Procurement of Bio-based Products, Recommendations 2016:
http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8767

Innovating for Sustainable Growth: A bioeconomy for Europe: http://ec.europa.eu/research/bioeconomy/pdf/bioeconomycommunicationstrategy_b5_brochure_web.pdf
 

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05 Apr.2016

The EUBA warns against a tiered approach to the carbon leakage list

A number of the sectors which are fundamental to the implementation of the EU Bioeconomy strategy, represented by the European Bioeconomy Alliance (EUBA), are identified as being subject to the risk of carbon leakage under the Commission’s proposal for the ETS post 2020. These are: starch, oilseeds and protein meals, pulp and paper and sugar. The EUBA supports this approach because there is indeed a real risk that these sectors may relocate their operations outside the EU in the absence of a global level playing field on energy cost.

However the EUBA is also aware of the so-called tiered approach towards carbon leakage put forward by the French and British governments. Under this proposed approach some of the sectors being exposed to carbon leakage would receive more compensation than others. In practise this would mean that fossil-based industries, who are intrinsically most carbon-intensive, would receive 100% free allocation, to the detriment of the sectors which are contributing to the bioeconomy and thus reducing the EU’s fossil fuel dependence (who would receive from 0% to a maximum of 80% free allocation). This would create a competition distortion, undermining efforts to develop renewable bio-based materials to replace fossil fuel based ones.

The objective of the EU Emission Trading System is to combat climate change and reduce greenhouse gas emissions. The objective of the European Commission’s bioeconomy strategy, endorsed by both the Council of the EU and the European Parliament, is that fossil fuels should be replaced with “sustainable renewable alternatives as part of the shift to a post-petroleum society”. The objectives are and must remain complementary and consistent.

According to OECD, “the full climate change mitigation potential of biotechnology processes and bio-based products ranges from between 1 billion and 2.5 billion tons CO2 equivalent per year by 20301”.
Both the EU ETS and the EU bioeconomy strategy are fundamental to the European Union's policy to reduce industrial greenhouse gas emissions cost effectively. The EUBA therefore congratulates the European Commission for being consistent and strongly warns against any attempts by Member State governments to undermine that consistency.

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04 Apr.2016

Joint declaration by a group of industry associations “2016, time to deliver… an ambitious power market reform”

The signatories of this declaration gather leading associations and industry groups with a clear stake in Europe’s energy policy. We share the conviction that only a flexible and dynamic energy system, making the best use of innovative and distributed supply and demand options, can ensure a cost-efficient and sustainable transition towards a decarbonised energy system.

We strongly believe that a market-driven environment is the best means to provide long-term investment signals while meeting all system needs and accommodating the growing share of renewable energy in the energy mix. The completion of the Internal Energy Market will improve system adequacy and efficiency, increase security of supply, support the competitiveness of European industry, and help deliver the energy and climate goals stemming from the COP 21 agreement and EU’s post 2020 objectives on emissions reductions, energy efficiency and renewables.

However, we see many constraints persisting in the energy sector that affect investment decisions, in particular: 1) depressed wholesale market prices due to overcapacity; 2) fading EU-coordination of energy policies with a tendency towards renationalisation; and 3) an antiquated set of market rules.

Market rules have been tailored to centralised production within national boundaries for too long. Not only have they failed to adapt to developments in energy technologies and evolution of demand patterns both at industry and end-consumer level, but some of them hamper the deployment of renewables, storage and demand-side flexibility. These new technologies can today provide valuable services including balancing energy offering significant flexibility to the system.

The energy system is now more complex to plan, control and balance. It needs enhanced flexibility that could be provided by a mix of options, but this would require significant changes in the relevant legislation. In this respect, we consider the upcoming legislative package on market design as a unique chance to provide the energy sector with a predictable investment framework, fairer market conditions, and ultimately seize new opportunities arising from decentralised energy production and demand side participation.

In particular, we deem essential that any ambitious reform of the energy market addresses the following issues:

1. Providing adequate price signals and further integration of short-term markets across borders
2. Ensuring a balanced approach to system adequacy that fully takes into account the contribution from renewable energy supply and demand sources
3. Implementing a level playing field for all flexibility providers to foster the pan-European trading ofelectricity and grid support services.

1. Providing adequate price signals and further integration of short-markets across borders
In a well-functioning electricity market, unhindered price-formation drives operational choices and investment decisions. Transparent and undistorted market prices must be in place in all time horizons, and allowed to move freely without caps. Wholesale electricity prices reflecting scarcity would signal the need for investments in new capacity. Therefore, price spikes should be treated as a positive sign of an efficient and cost-effective energy system where market participants are free to choose the level of hedging they prefer to contract, revealing the true value of flexibility and energy at all times.
Market rules also need to be adapted so as to enhance clean and flexible energy providers to trade power over broader geographical areas and as close as possible to the time of delivery. In this context, the opening and cross-border integration of intraday market is essential, especially for energy producers whose output is variable. A as long as separate procurement of balancing capacity and energy is guaranteed, another important aspect is the possibility to negotiate the duration of contracts, e.g. for balancing contracts. This is crucial, as certain flexibility technologies may require considerable capital investment and, therefore, contracts with a longer duration.

2. Ensuring a balanced approach to system adequacy that fully takes into account the contribution from different energy sources

The main challenge for security of electricity supply is not the availability of capacity as such, but the availability of flexibility that is needed to support the system and provide for a constant balance between supply and demand.
In order to identify potential, locally constrained adequacy issues, system adequacy assessments should be carried out according to a common methodology and metrics transparently defined in EU legislation1. Such analysis should be performed at regional level and consider the potential of all flexibility options, from the various energy supply and demand sources. This would ensure a rigorously needs-based approach to the introduction of Capacity Remuneration Mechanisms (CRMs) when the market cannot not deliver the adequate flexibility.
If CRMs are deemed necessary, they should be designed in a way that minimises any negative impacts on price formation on energy markets. They should avoid contributing to continued overcapacity situation by keeping redundant and polluting power plants online, and prioritise clean flexibility options as foreseen in the energy state aid guidelines.

3. Implementing a level playing field for all flexibility providers2 to foster the pan-European trading of electricity and grid support services

In addition to the modernisation and further opening of the balancing market, a proper market for ancillary or grid support services needs to be fostered to provide additional non-discriminatory revenue streams to flexibility providers, as well as overall operating cost savings for the energy system. As of today, a number of services and solutions from decentralised generation and demand-side response are technically feasible, but current market conditions do not properly value their commercial provision.
The continued adaptation of balancing and ancillary services markets should foster liquidity and incorporate innovative and decentralised solutions. Prohibitive pre-qualification requirements and access conditions for independent aggregators, extended product-durations or minimum thresholds and symmetric bids are some of the aspects currently hampering an effective market. Moreover, contradictory regulatory signals, e.g. regarding network tariffs, the operation of industrial loads or co-generation should be addressed to ensure demand side flexibility further develops without impeding the achievement of robust energy efficiency targets.

1 Incl. a clear system adequacy target level for all control areas in the EU as many countries are lacking one
2 “A service provided by a network user to the energy system by changing its generation and/or consumption patterns in response to an external signal” (Task Force Smart Grids report, 2015)in

 

 

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04 Apr.2016

European paper industry launches revised Paper for Recycling Quality Control guidelines

The Confederation of European Paper Industries (CEPI) has revised its guidelines on Paper for Recycling quality control, with recommendations for Paper for Recycling suppliers and paper mills. The objective of the guidelines publication is to achieve greater harmonisation, to improve the implementation of the EN 643 Standard and to facilitate commercial relationships between paper mills and paper for recycling suppliers.

The revised guidelines put a strong emphasis on the inspection procedure for quality control at the paper mill and explain what controllers should consider during an inspection in order to decide if a load should be accepted, conditionally accepted or refused. After a general control, further important parameters for quality control are named, i.e. bale conditions, moisture control and control of unwanted materials. The control procedure recommended is described in detail and illustrated by a decision tree at the end of the document.

The guidelines give furthermore recommendations on the level of information for suppliers, documentation and staff education.

CEPI will organise a free webinar in the weeks to come, to present the revised guidelines and to answer any questions that may arise.

You can download the publication at: http://bit.ly/1ouOkFm

For more information, please contact: Ulrich Leberle, Raw Materials Director at CEPI: u.leberle@cepi.org, +32 2 627 49 23.
 

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