The EU established its criteria for awarding free CO2 emission allowances in 2013. However, it failed to take into account the tough economic conditions that lay ahead, writes Georgios Andriotis.
Georgios Andriotis is vice-chairman of Public Power Corporation (PPC) SA Hellas.
EU law on the greenhouse gas emissions allowance trading system targets a more effective implementation of the commitments undertaken by the EU and its member states for the reduction of greenhouse gas emissions.
The Council summit held in October 2014 made decisions about the targets for the 2020-2030 period and the key axes of the guidelines, including the criteria for granting special privileges to countries with low GDP per capita.
More specifically, with regard to member states that have a GDP per capita in current prices of less than 60% the EU average in 2013, provision is made for the free allocation of CO2 emissions allowances for the energy sector, which will be extended until 2030.
Moreover, provision is made for the establishment of a new reserve which will consist of 2% of the allowances and will support the high investment needs for the modernisation of energy systems.
All ten countries that meet the aforementioned criterion for 2013 belong to Eastern Europe. Such exception is granted as an aid to low GDP countries with a view to enhancing their economic growth.
In all other countries, including Greece which slightly exceeded that criterion for 2013 (GDP per capita 62%), no free allocations are granted to power generators. As a result, the relevant cost is included in electricity prices, wholesale and retail, thus increasing them significantly.
In the case of Greece in particular, both the Greek side and the European Commission did not take into consideration the continued recession of the Greek economy and failed to foresee the rapid fall of the Greek GDP per capita from 62% in 2013 to 59.7% in 2014, with no prospect of positive shift in the short term. That failure led to the unfair and unequal treatment of the country compared to the other countries with low GDP.
Therefore, due to the fact that 2013 is taken as reference year, the issue arises of distortions in electricity prices and in the strong competition – reflected by the extremely high levels of electricity imports. Greece in particular has a singular geographical position: on the southern edge of Europe, without strong power interconnections with other European countries.
All neighbouring countries, except for Italy, are not obliged to buy emissions allowances for electricity generation either because they are not members of the EU (Turkey) or because they are exempted from such obligation due to low GDP (Bulgaria).
The integration of Greece into the countries that receive free allocations for electricity generation would restore an injustice committed against Greece. The energy sector of the country has its own specific features which render the issue of CO2 allowances allocation extremely critical for the sustainability of the national economy, given the fact that lignite power plants constitute the basis of electricity generation.
Lignite continues to be essential for the recovery of the Greek economy. Moreover, it is a central pivot for the security of the energy supply, for the independence of the country from imported fuels, for the improvement of the trade balance, as well as for the employment and development of local communities in Western Macedonia and Central Peloponnese.
As a matter of fact, in such an unfavourable economic period, where the Greek government implements economic adjustment programmes to relaunch the national economy, the support of the European institutions is important in order to keep electricity prices down for the benefit of vulnerable customers, as well as of the business and industry sector.
Furthermore, as also evidenced by a series of initiatives such as the construction of two new lignite power plants, “Ptolemaida V” (already under construction) and Meliti II, combined with the withdrawal of the old power plants, by the year 2025 our country will have overshot the EU’s initial targets for CO2 emissions’ reduction set for the year 2030.
Therefore, it is necessary to broaden the criteria for the integration of more countries into the aforementioned provisions and, in particular, to set the year 2014 as the reference year.
PPC advocates the reduction of prices with regard to CO2 allowances with a view to reducing energy costs in order to promote the economic growth relaunch, the attraction of investments and the enhancement of the Greek economy’s competitiveness.
In this context, PPC investments are focused on replacing old and polluting power plants with modern and more efficient ones which shall significantly reduce emissions, combatting climate change, in accordance with the spirit of the European Union.