Greenhouse gas trading data show pharma overall within limits

By Gregory Roumeliotis and Ahmed ElAmin

- Last updated on GMT

Related tags Kyoto protocol

Preliminary data from the first year of the EU's greenhouse gas
trading scheme has highlighted disparities in the allocation of
plant outputs and in the tracking of carbon dioxide (CO2)
emissions, yet, all in all, pharma has stayed within its

Figures published yesterday show that CO2 emissions in the EU were 44m tonnes under the level permitted in 2005. Early reports last week that Germany's industry released far less CO2 than allowed under the trading scheme resulted in carbon prices falling by about 20 per cent on 12 May.

The data might result in regulators speeding up the programme to slowly lower allocations and put more pressure on industry to pollute less.

By the compliance deadline of 30 April 2006 a total of 849 installations were identified as not having surrendered a sufficient number of emission allowances.

Many of these have subsequently fulfilled their surrender obligation over the last two weeks, the Commission noted in a press release.

The preliminary statistics submitted by a number of countries also reveals how some of the EU's drug and specialty fine chemical firms are faring under the EU's Emissions Trading Scheme (ETS).

In Germany, BASF, Boehringer Ingelheim, Degussa and Merck KgaA all kept their emissions within their allocations, but Sud-Chemie emitted 10,483 units while allocated only 9,051.

Furthermore, DSM and Akzo Nobel in the Netherlands stayed within their allowed limits.

CIBA and Rhodia Pharma in the UK also did not exceed their quotas, while GlaxoSmithKline, which was found compliant in most of its British sites, surrendered more units than it was allocated on one occasion.

The data could provide ammunition for trade bodies such as the UK's Chemical Industries Association (CIA), which claim the greatest potential for reduction now lies with commerce, transport and households, which are not covered by the ETS.

"The data certainly gives us some food for thought and some further analysis has to be made in other member states that did not use all their allocations, it is difficult to conclude that there has not been some generosity there for that to happen"​ Nick Sturgeon, manager of the CIA's Broking and Trading Agency (CIABATA), told​.

"It would be helpful to have another year's data before we make a judgment however, and you also need to take into account those who have chosen to opt out of the ETS."

Holders of Climate Change Agreements and participants of the UK ETS have been given the option of opting out of the ETS for its first phase which began in January 2005.

The opt-out option will not be available in the second phase of the ETS scheme.

The ETS is part of the bloc's plan to reduce greenhouse gas emissions to meet international commitments under the Kyoto Protocol.

The "cap-and-trade" scheme allows companies to buy and sell CO2 emissions rights on specially constructed Internet sites.

Plants that emit more CO2 than their allocation need to buy allowances to cover the extra emissions. Companies that emit less than their allocation are able to sell the allowances to companies that need them.

The ETS currently covers around 11,500 installations that account for about half of the EU's CO2 emissions. Arriving at an EU-wide definition of which installations fall under the scheme is part of the challenge regulators face in complying with the agreement.

The 2005 data is the first verified emissions information for installations. The preliminary data released by the Commission today covers about 9,400 of the 11,500 installations falling under ETS in the EU's 25 members. Four members - Cyprus, Luxembourg, Malta and Poland - released no information to the Commission as their allowance registries are not yet operational.

The EU ETS regulations require operators of installations in the scheme to monitor and report their emissions each year, and to have their emissions independently verified. They must then surrender sufficient allowances to cover their verified emissions.

The deadlines for reporting and surrendering allowances each year are 31 March, when operators must report the verified emissions for the previous year, and 30 April, when they must surrender allowances to cover their verified emissions.

The EU ETS Directive requires the European Commission to publish compliance data for each installation on 15 May each year.

The Commission is now preparing for the scheme's second trading period, from 2008 to 2012. As required by the directive, member states must draw up national allocation plans for the period for notification to the Commission by 30 June.

These plans are important climate policy tools since collectively they will determine the total permitted level of CO2 emissions from installations across the EU as well as how many allowances each installation receives individually.

The new 2005 emissions data gives independently assessed installation-level figures for the first time and provides governments with a factual basis for deciding upon the caps in the second trading period, when the Kyoto targets have to be met.

The Commission plans to launch a review of the scheme and the directive later this year to see whether adjustments to its design should be introduced after 2012.

In the second phase member states and companies will come under increasing financial and administrative pressure to reduce CO2 emissions. They will have to buy credits if they want to expand.

In the guidance the Commission says the legislative framework for small installations will remain unchanged during the drawing up of national allocation plans. To ease the burden on small companies the Commission called on member governments to use the legislative flexibility already offered under the current plan.

It is also considering looking at measures to make the situation easier for small installations in its forthcoming review of the ETS. It will consider proposing an amendment to the directive to enable the removal of some small installations in the course of the second trading period, the Commission stated.

The Commission plans to revise the rules for monitoring and reporting of emissions in a bid to ease the administrative burden for small installations.

The Commission aims to have the changes in place by the start of the second trading period.The market in trading emission rights is estimated at about €35bn per year.

All of the EU's 25-member countries ratified the Kyoto Protocol on 31 May 2002. In 1996 the EU adopted a target of a maximum 2°C rise in average global temperature.

Trading in EU allowances may exceed $5bn (€3.9bn) this year, according to the Amsterdam-based European Climate Exchange.

Member state reports can be downloaded from the Commission's Climate Change website​.

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