Carbon trading ‘stifling EU energy-savings potential’


The EU’s emissions trading scheme has so far failed to deliver any reductions in CO2 emissions while at the same time strangling energy-efficiency investment in the electricity sector, according to a former European Commission official. 

Jørgen Henningsen, a senior adviser at the European Policy Centre, a Brussels think-tank, was addressing a conference organised by the combined heat and power generation sector (CHP) on Tuesday (21 April).

Speaking at the event, Henningsen, who has previously worked as a director at the Commission’s environment department and once held a position at DG Energy and Transport, argued that there was “no reason for optimism” in the next few years regarding energy savings from technologies like CHP. 

He singled out the EU executive as the biggest obstacle in the way of developing the technology.

The Commission has acknowledged that installing cogeneration capacity in power stations could help the EU to cut down its CO2 emissions significantly. This is because CHP plants operate at a far higher efficiency level than conventional power stations, as they produce both electricity and useful heat at the same time.

However, Henningsen argued that the Commission had based its climate policy overwhelmingly on the EU’s Emissions Trading Scheme, which is not delivering on its original purpose of cutting emissions cost-effectively.

“The Commission has clearly been over-optimistic about the contribution of emissions trading to CO2 reductions. So far, the system has hardly delivered anything and the low CO2 prices at present support the fear that not only the present trading period, but also the 2013-20 period, will be a failure,” Henningsen said.

He criticised the Commission for tackling the problems apparent in the first two phases of the scheme only partially when revising it for the third period. He said that as the economic crisis had dragged the carbon prices down, they currently roughly corresponded to what businesses could afford to pay for their CO2 emissions.

“The EU has deliberately made the ETS market-driven,” Henningsen said, adding that this had failed to introduce price predictability to the scheme. Combined with the financial crisis, it is likely to lead to a repetition of over-allocation of emissions permits up to 2012, effectively killing energy efficiency investments, he said.

“There is very little hope that we will see the main policy instrument supportive of CHP up to 2012,” Henningsen concluded.

IEA says government policy needed

Meanwhile, a new report from the International Energy Agency, launched at the conference, argues that governments could give a significant boost to energy savings from combined heat and power technologies (CHP).

In contrast with Henningsen, the IEA report was optimistic about the potential of cogeneration. It stated that while CHP is used to generate just 10% or so of global electricity, the figure is above 50% in the leading country, Denmark.

“The challenge for CHP is that people still think of it as a fossil fuel industry,” IEA Senior Energy Analyst Tom Kerr said. Moreover, a lack of information about the cost-saving opportunities and barriers to grid connection are huge obstacles to building more capacity, he explained.

The report argues that the most effective way to promote cogeneration is to adopt a comprehensive CHP strategy, the implementation of which is entrusted to a central policy department or agency. All leading governments in the field have developed such strategies to suit their own circumstances, it said.

IEA consequently recommended that governments should create a “champion” or agency to promote cogeneration.

Swedish Presidency hopes to revive CHP

Meanwhile, Annette Petersson, an energy counsellor at the Swedish foreign ministry, said earlier this week that the incoming Swedish Presidency would put great emphasis on energy efficiency during its six-month stint at the EU’s helm.

Speaking to EURACTIV on Monday, Petersson said the Swedish Presidency wanted to “start a discussion” on the revision of the EU’s energy-efficiency action plan, which is expected in January next year. The EU’s CHP directive, which dates back to 2004, was in need of an update, she said.

Cogeneration - or combined heat and power (CHP) - involves the simultaneous production of both electricity and useful heat or steam, either in large industrial plants and in micro-stations integrated into private houses (see EURACTIV LinksDossier on 'CHP'). The European Commission regards it as an important tool, contributing to Europe’s energy challengies by helping to cut down energy use as well as emissions.

Cogeneration was first promoted at EU level in a Green Paper on security of energy supply published in November 2000. The paper argued that if the EU's share of cogeneration, which only accounted for 11% of total electricity production in the EU in 1998, were to be increased to 18% by 2010, the ensuing savings could amount to 3-4% of total gross consumption in the EU. 

In February 2004, the EU adopted the CHP Directive to promote cogeneration in the EU by addressing several problems, including insufficient control of energy monopolies, inadequate support from local and regional authorities, incomplete market liberalisation, regulatory obstacles and a lack of European standards for network connection.

The implementation of the directive has nevertheless been slow, and the Commission proposed further measures in the EU's 2006 Action Plan. It asked governments to address barriers in its Second Strategic Energy Review, launched in November 2008.

  • 1 July-31 Dec.: Swedish Presidency of the EU.
  • Early 2010: EU to adopt a new Energy Savings Action Plan.

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