Pollution prevention legislation will not hamper emission trading

The European Commission has issued a ‘non-paper’ clarifying the relationship between its plans for a EU-wide carbon emissions trading scheme and the 1996 Integrated Pollution Prevention and Control (IPPC) directive.

The Commission is keen to counter claims that the IPPC requirement to use energy efficiently should mean that there is no scope for further improvements, which could be read to mean that installations complying with this directive would not have any spare emissions capability to trade.

The ‘non-paper’ concentrates on the synergies between the two, while highlighting some positive differences, such as the fact that the trading scheme covers combustion installations – incinerators and similar systems – of 20MW and above, rather than 50MW, as covered by IPPC, because smaller combustion installations are significant sources of carbon dioxide emissions.

The emissions trading proposal goes further into integration by allowing governments of member states to combine their IPPC permitting with their emissions trading permit, although there is no obligation on governments to combine them. Where they are not combined, the two processes will need to be coordinated.

The document stresses that the issue at the heart of the clarification, IPPC energy efficiency requirements, is not compromised by the emissions trading scheme. It says IPPC provides a “common level of effort for energy efficiency” which is a baseline or bottom line for energy consumption that European industry should not be able to go below – rather than a limit they should not go above. It notes that this “is not expected to be problematic” and that it underlies the front-line emissions trading schemes in Denmark and the UK, for which the EC has approved state aid.

A further amendment affects the way that IPPC works with respect to CO2 emissions. Under IPPC, emission limit values should be set for pollutants, following best practice, but implicit in emissions trading is the possibility for companies to increase their CO2 emissions by buying spare capacity. The trading scheme amends IPPC so that it cannot set a limit for a greenhouse gas at an installation if it is covered by the trading scheme. “Emissions trading should allow greenhouse gas emissions to vary according to the economic decisions of the operator,” the paper notes.

This is justified for CO2, the only greenhouse gas currently within the trading scheme, because, the paper says, it does not have local effects so an emission limit value could not be set under an IPPC permit. For other greenhouse gases that might have local impacts, the paper warns that the yardstick for any agreement will be whether increasing the limits would cause significant increases in local pollution.

There are other potential synergies. For instance, if an operator has to spend money to reduce a pollutant under IPPC and this process incidentally reduces the amount of greenhouse gas it produces, it may be that – depending on the member state concerned – this reduction could be sold within the emissions trading scheme to recoup some of the company’s costs.

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