A&L Goodbody LLP
  May 12, 2006 - Ireland

EPA Publishes Draft Allocation Plan for Second Period (2008-2012) of Emissions Trading

The Environmental Protection Agency (EPA) has published a draft of Ireland’s second National Allocation Plan for Emissions Trading in Ireland. This follows a recent announcement by the Minister for the Environment, Heritage and Local Government, Mr. Dick Roche, T.D., which set out the total quantity of Carbon Dioxide (CO2) allowances being made available by Government to Ireland’s emissions trading sector. This plan sets out the EPA’s proposals for distributing these allowances to the various industrial sectors and participants involved. A consultation process on the draft plan commences today (12 May 2006). The purpose of the public consultation phase is to facilitate the public in expressing their views on the draft second National Allocation Plan. All submissions received by 5.00pm on June 12th will be considered with a view to improving and finalising the plan before sending it on to the Commission by 30 June 2006. Commenting, Dr Mary Kelly, Director General, EPA said - "Our proposed allocations are based on a robust analysis of the sectors and installations included in the scheme. A report detailing this analysis has also been published on the EPA website today. "In designing the Draft Plan, full recognition has been given to the increasingly important role of renewables in electricity generation (power generation accounts for two thirds of the available national allowances). In this regard, the EPA is proposing to continue our approach in the first National Allocation Plan by setting aside dedicated emissions allowances designed to promote Combined Heat and Power (CHP) facilities in the power generation sector. CHP is a highly-efficient technology for energy production and one in which Ireland lags behind many of our EU partners." The Emissions Trading Directive (Directive 2003/87/EC, Directive 2004/101/EC) requires that companies be issued with a cap on the amount of CO2 they are allowed to emit in any year. Companies with emissions above the cap must either abate their emissions or purchase allowances to meet their requirements - while companies, whose emissions are below the cap, may trade their excess. It is possible that some companies - particularly in the power generation sector - may have to purchase some additional allowances to meet their emissions. Penalties of €100 per tonne of CO2 are in place for those who do not surrender allowances equal to their emissions at the end of each year. Commenting, Dr Ken Macken, Programme Manager, EPA said that - “Continued implementation of the Emissions Trading Directive will help Ireland to meet its Kyoto obligations in a cost effective manner. Whereas, developing the Draft Plan has been a complex task, I believe our proposals are fair and transparent and take into account the environmental integrity of the scheme and the potential effects on the economy. “The EPA is aware of the potentially significant economic consequences associated with the implementation of the Directive and is being advised by a National Allocation Advisory Group, which was appointed by Government to advise the EPA on how best to discharge its obligations in formulating the National Allocation Plan." Some 100 major industrial sites in Ireland fall within the emissions trading scheme, including - power generation, cement and general combustion. This latter includes lime, glass and ceramics plants and oil refining - together with other large companies in areas such as food & drink, pharmaceuticals and semi-conductors as well as a number of our larger institutions. The allocations identified in the second National Allocation Plan will ensure that these installations will contribute to meeting our national obligations with regard to Kyoto. Key Elements of the draft National Allocation Plan The total allocation of allowances is 115.07 million for the second emissions trading period - an average of 23.014 million allowances per annum for the five years 2008 –2012; Over 94 per cent of the these allowances will be allocated free-of-charge to existing installations; Allocations will be made based on historical emissions from existing participants; Approximately 5 per cent of the available allowances will be held back by the EPA for issue to new entrants not in the scheme as existing installations on 30 June 2006, when the National Allocation Plan is notified to the European Commission; 0.5 per cent of allowances are to be sold to defray the expenses of administering the emissions trading scheme; Adjustment for increased use of renewables in electricity production; Combined Heat and Power (CHP) to receive special treatment; Where companies close during the pilot phase, the EPA will withhold the issue of allowances for future years to these companies (subject to allowing installations that close retain 75 per cent of their annual allocation, up to a maximum of 25,000 allowances per annum, for the remainder of the period). Allowances retained in this way will be added to the new entrant set aside. To access the draft second National Allocation Plan - Click Here Irish emissions for 2004 (about one-third of which occur in the emissions trading sector) were at 23 per cent above 1990 levels, as against our agreed Kyoto target of 13 per cent above. While the EPA has reported that this is down from 27 per cent in 2001, we still have a greater distance to target than many of our EU neighbours.

The National Allocation Advisory Committee comprises the Chief Executives (or their senior nominees) of the Commission for Energy Regulation, Forfas, the National Treasury Management Agency and Sustainable Energy Ireland - together with the Director General of the EPA - under the chairmanship of Dr E. Walsh.