Climate Change Levy and Emission Trading

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Climate Change Levy andEmission Trading
Climate Change Levy and Emission Trading Bob
Tricklebank Kemira Agro UK Ltd
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Kyoto Protocol Dec 1997

• Agreement by 38 countries to reduce emissions of
  6 GHG from 1990 to 2008-20012

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Kyoto Protocol Dec 1997

• Agreement by 38 countries to reduce emissions of
  6 GHG from 1990 to 2008-20012
• Overall reduction 5
• United States 93
• Japan 94
• EU 92
• France 100
• Germany 79
• Italy 94
• UK 87.5
• Russia, FSU, Eastern E 102

Covers 65 of global energy
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Kyoto Protocol Dec 1997

• Agreement by 38 countries to reduce emissions of
  6 GHG from 1990 to 2008-20012
• Overall reduction 5
• United States 93
• Japan 94
• EU 92
• France 100
• Germany 79
• Italy 94
• UK 87.5
• Russia, FSU, Eastern E 102
• India, China, SE Asia, S America (80 of World
  population) excluded

Covers 65 of global energy
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Marshall Report Nov 1998

• All sectors - business, domestic, transport -
  need addressing
• Mixed approach
• economic
• regulatory
• voluntary agreements
• Economic options
• Emission Trading
• Energy Tax
• Energy intensive industries need attention to
  avoid damaging international competitiveness
• Detailed consultation necessary

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Chemical Industry Concerns

• No consultation
• Existing voluntary agreement successful

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Energy Efficiency CIA Membership
1990 100
Target -20
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Chemical Industry Concerns

• No consultation
• Existing voluntary agreement successful
• Tax and NIC rebates disproportionate by up to
  1001

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Chemical Industry Concerns

• No consultation
• Existing voluntary agreement successful
• Tax and NIC rebates disproportionate by up to
  1001
• No other major economy using energy taxation

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Chemical Industry Concerns

• No consultation
• Existing voluntary agreement successful
• Tax and NIC rebates disproportionate by up to
  1001
• No other major economy using energy taxation
• Potentially terminal for many energy intensive UK
  industries

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CLIMATE CHANGE LEVYPre Budget Report November
1999

• Revised rates of levy
• Gas / Coal 0.15p/kWh 4.4 p/therm 20
• Electricity 0.43p/kWh 15
• NIC rebate 0.3
• Energy efficiency support of 150m pa
• Emission trading supported
• Exemptions include
• electrolysis
• dual purpose use of gas as feedstock/fuel
• good quality CHP
• 80 discount for energy intensive sectors with
  negotiated efficiency agreements . Basis IPPC

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CLIMATE CHANGE LEVYShortcomings of the Tax

• This does not meet the test of good taxation
• Energy costs have already doubled in the last 12
  months
• It is not equitable
• Capital and energy intensive businesses are hit
• Service sectors, Local Government etc benefit
• Promotes the North - South divide
• Industry is already investing in efficiency
  without taxation

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Ince Ammonia Plant Energy Efficiency
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CLIMATE CHANGE LEVYShortcomings of the Tax

• This does not meet the test of good taxation
• Energy costs have already doubled in the last 12
  months
• It is not equitable
• Capital and energy intensive businesses are hit
• Service sectors, Local Government etc benefit
• Promotes the North - South divide
• Industry is already investing in efficiency
  without taxation
• Taxation reduces the funds for investment
  

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CLIMATE CHANGE LEVYShortcomings of the Tax

• This does not meet the test of good taxation
• Energy costs have already doubled in the last 12
  months
• It is not equitable
• Capital and energy intensive businesses are hit
• Service sectors, Local Government etc benefit
• Promotes the North - South divide
• Industry is already investing in efficiency
  without taxation
• Taxation reduces the funds for investment
• The administration is very bureaucratic
  

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CLIMATE CHANGE LEVYShortcomings of the Tax

• This does not meet the test of good taxation
• Energy costs have already doubled in the last 12
  months
• It is not equitable
• Capital and energy intensive businesses are hit
• Service sectors, Local Government etc benefit
• Promotes the North - South divide
• Industry is already investing in efficiency
  without taxation
• Taxation reduces the funds for investment
• The administration is very bureaucratic
• Our international competitors will not be
  taxed

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CLIMATE CHANGE LEVYShortcomings of the Tax

• This does not meet the test of good taxation
• Energy costs have already doubled in the last 12
  months
• It is not equitable
• Capital and energy intensive businesses are hit
• Service sectors, Local Government etc benefit
• Promotes the North - South divide
• Industry is already investing in efficiency
  without taxation
• Taxation reduces the funds for investment
• The administration is very bureaucratic
• Our international competitors will not be taxed
• The implementation timescale is
  unrealistic

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Emission TradingPrinciples

• Permits issued to emit CO2
• Government controls and then reduces number of
  permits to achieve climate change targets
• There is a market in permits
• Ensures efficiency investments are made in most
  cost effective location

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Emission TradingDevelopment

• Recommended by Marshall and supported by
  Chancellor
• ETG (Emissions Trading Group) set up by CBI and
  ACBE (Advisory Committee on Business and the
  Environment)
• Government Consultation Paper on Emission Trading
  Nov 2000, based on work of ETG
• Target to publish rules Q4 2001

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Emission TradingPossible Scheme

• Scheme based on CO2
• Permits are issued on a Grandfather basis - to
  match existing emissions
• Permits then reduced to match efficiency targets
• Banking and Borrowing options
• Market created

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Emission TradingIssues

• How does this work internationally ?
• Is the scheme based on output related or absolute
  targets ?
• How do we cater for new entrants and closures ?
• How is this monitored and enforced ?
• What are the penalties ?
• Does this replace CCL ?

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CCL Emission TradingConclusions

• The Chemical Industry has an excellent efficiency
  record
• Voluntary agreements have worked well
• The CCL is flawed and should be replaced asap
• Emission Trading is a better option and more
  likely to succeed
• It needs careful design to avoid CCL pitfalls
• International aspect is vital