Ecofys

Ecofys

What is the feasibility of extending the use of product benchmarks in the EU ETS?

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Source: Ecofys

Increasing the number of product benchmarks used in the EU Emissions Trading Scheme could reduce the administrative cost and burden of the allocation process. This is one of the findings of an Ecofys study that was commissioned by the Dutch Emissions Authority. Ecofys investigated the feasibility of extending the use of product benchmarks in the EU ETS and looked at two different tracks to do so: either by enlarging the scope of currently existing benchmarks (track 1) or by increasing the number of product benchmarks (track 2).

Focusing on the Netherlands and 14 sectors, in which 183 installations (78%) deal with a fall back benchmark, Ecofys found that track 1 promises relatively quick but small wins, while track 2 offers the biggest wins, but also demands most efforts.

Since the start of the third trading phase of the EU ETS, the free allocation of emission allowances takes place using a combination of approaches: product benchmarks and three fall-back benchmark approaches (the heat and fuel benchmark and a separate approach for process emissions). If one of the fall-back benchmarks is used, administrative costs to companies can increase significantly, in particular related to the heat benchmark which requires the monitoring of parameters which are usually not monitored by companies. An increased use of product benchmarking could thus reduce the administrative burden.

For the 14 sectors analysed, this would mean in a best case scenario for track 1 that 19 installations could move to 100% use of existing product benchmarks, involving 242 ktCO2 of allocation. If track 2 was applied, a maximum of 114 installations could move to 100% use of product benchmarks, involving 5.4 MtCO2 of allocation.

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