Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

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Stranlund conclude that the initial allocation of permits determines who will be the net sellers and net buyers of permits. According to the study of the European Commission, McKinsey, and Ecofys (2005), the EU ETS has already had an effect on corporate behavior in 2005. According to Stuetz (2008) from EGL, an energy-trading company, although most players on the European carbon market are from the industry, most of them are not willing to trade; they rather focus on their core business and only cover their needs to emit CO2. Hungarian findings confirm his results. According to his presentation, the most active players are fossil power station operators with strict risk management and banks. He presents the market as an opportunity to power producers and to industrial players; nonetheless he calls attention to the threat of uncertainty through the whole emissions trading process. According to the survey conducted by the European Commission DG Environment, McKinsey and Ecofys (2005) the current uncertainty about the long-term development of fundamental rules has short-term impact as well: uncertainty is seen as one of the biggest obstacles to liquidity in the CO2 allowance market. Liquidity in this market is largely driven by emission reduction efforts that would free up allowances to then be traded on the market. Some companies fear that emission reduction efforts could be sanctioned (by possible changes) in the next allocation plan, so they refrain from reducing emissions in the current period. This affects liquidity in the CO2 market negatively. These concerns were voiced during the Hungarian interviews, as well. The same survey shows that around 50 per cent of the interviewed companies already in 2005 have built system costs into their prices. Seventy per cent stated that this would continue to be the case in the future. Interestingly, this attitude was not reflected at all during the interviews with the Hungarian installations. This could be attributable to the East-West differences and the significant Eastern over-allocation. This dissertation, however, concludes that it was due to the generous allocation that Hungarian companies did not take carbon costs into account during the pilot phase. Competitiveness implications of the EU ETS The sectoral competitiveness implications of the EU ETS have been assessed for the European electricity industry (Neuhoff et al, 2006), for the iron and steel industry (Demailly and Quirion, 2007) for the power sector (Sijm et al., 2006), and for the cement sector (Demailly and Quirion, 2006), with also focus on Hungary (Szabó et al, 2006). First of all, the term “competitiveness” has to be defined. According to Johnstone (OECD, 1999) competitiveness is the ability (1) to minimize costs, (2) to capture market share, (3) to increase the technical efficiency of production, and (4) to exploit new market opportunities. As the interim report of the APREC research (Convery et al, 2008) puts it, “the microeconomic or sector-specific level, competitiveness is the ability to produce 46
high quality, differentiated products at the lowest cost possible to sustain market shares and profitability.” Oberndorfer and Rennings (2007) estimate the competitiveness effects of the EU ETS with a focus on existing simulation studies and deal with three levels of competitiveness: that of (1) a firm, (2) a sector, and (3) an economy. Environmental action can generate competitive advantages on all three levels. Klepper and Peterson (2004) find that the overall competitiveness effects of the Kyoto targets can become quite small in the ETS. In their simulations they find that the total output in Europe decreases by less than half percent compared to a BaU scenario, and output in all non-energy sectors falls by less than two percent. They argue that ETS sectors gain considerably from the cheap abatement opportunities in the accession countries – confirmed by Hungarian interviews. The results of the survey conducted by the European Commission DG Environment, McKinsey and Ecofys (2005) show that the fears of the majority of sectors concerned about strong negative competitiveness impacts of the EU ETS are not justified. According to the APREC study, “there is no evidence from Phase I that performance of the European macro economy, measured in terms of GDP or employment, has been damaged as a result of the EU ETS.” The study only focuses on short-term implications, which may arise as diminished profitability of incumbents, less competitive plants close their operations, and net imports increase. 47
Page 1 and 2: PhD Program in Management and Busin
Page 3 and 4: List of figures Figure 1. Optimal l
Page 5 and 6: „If you want to understand today,
Page 7 and 8: Neither the theory nor the empirica
Page 9 and 10: Table 1. Installations receiving th
Page 11 and 12: oth on national and corporate level
Page 13 and 14: 1. Climate Change Regulation The fi
Page 15 and 16: approaches, activities that are not
Page 17 and 18: In Europe the United Kingdom and De
Page 19 and 20: (2) Allocating emission rights is d
Page 21 and 22: Figure 2. The cap determines the ma
Page 23 and 24: Table 5. Tradeable certificates (ba
Page 25 and 26: value, sectoral and spatial coverag
Page 27 and 28: with their quantified reduction tar
Page 29 and 30: * * * Several authors (Hahn and Sta
Page 31 and 32: EU ETS Within the context of the UN
Page 33 and 34: establishing an international marke
Page 35 and 36: (c) Allowances can also be distribu
Page 37 and 38: • ETS in New Zealand; • Volunta
Page 39 and 40: emissions trading schemes, making i
Page 41 and 42: end of the pilot phase. Since Augus
Page 43 and 44: Figure 10. Distance to burden-shari
Page 45: Early attitude of companies towards
Page 49 and 50: investments needed in the industry.
Page 51 and 52: 3.2. Emission Trading in the new EU
Page 53 and 54: environmental benefits at a relativ
Page 55 and 56: well below their Kyoto target (EEA,
Page 57 and 58: lawsuits against the Commission for
Page 59 and 60: The most active countries to host J
Page 61 and 62: Figure 14. Hot air as supply for AA
Page 63 and 64: There have been three proposals on
Page 65 and 66: transparency of AAU transfers; redu
Page 67 and 68: Figure 18. Tradeable Hungarian AAU
Page 69 and 70: “Think Globally, Act Locally” I
Page 71 and 72: At the same time, this relatively f
Page 73 and 74: processes on the whole act a sink,
Page 75 and 76: directly from CO2 emissions are ess
Page 77 and 78: 1.2. A Review of the Hungarian Lite
Page 79 and 80: 2. Introducing the EU ETS in Hungar
Page 81 and 82: databases containing common data el
Page 83 and 84: instances where inconsistent decisi
Page 85 and 86: emissions each calendar year Non-tr
Page 87 and 88: is found to be in order, they may s
Page 89 and 90: economy to a market economy, as is
Page 91 and 92: the EU ETS. Many observers believe
Page 93 and 94: Emissions allowances to be allocate
Page 95 and 96: 2005 2006 2007 Installation Alloc.
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Finance is putting much of the reve
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conclusion. It is safe to conclude
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allowance surplus, and then increas
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agent. 23 Denmark sold 2,762 thousa
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and Water prepared its proposal on
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What was the reason for this anomal
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considered a “transfer.” Apart
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When allowances are recognized as g
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provision is to be formed against t
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the model shall be supplemented wit
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Participants of the Hungarian EU ET
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program, full sets of emissions dat
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Figure 27. The Concentration of the
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Figure 30. The Hungarian EU ETS mar
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Figure 32. Positions of Hungarian E
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Figure 40 below shows the allocatio
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3.2. The Impact of the EU ETS on Hu
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interviews, that companies looked u
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neither emissions-reduction targets
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was considered, since they all obta
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spillover effect; this, however, co
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During the pilot period, Hungarian
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to comply shall have their names pu
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eact efficiently to regulations. Th
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ensuring great enough profit, it sw
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combined with an internal price tha
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Were Emissions Actually Reduced? Co
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column) and the verified emissions
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Figure 38. Hungarian reference peri
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* * * The effects of the EU ETS on
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(2) Transfer account of allowances,
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In an EU-context, Hungary held its
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installations the author spoke to w
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Companies, which were certain of th
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Figure 42. Hungarian transactions d
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phase. CITL Data The transaction da
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International Transfers The author
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Based on these numbers, it may be c
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The two right-hand side columns in
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sales, and how much was accounted f
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the CITL only contains data on wher
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approximately two-fifths of the vol
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(3) Installations that had shut dow
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production, one-fifth represented t
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IV. EXPERIENCES OF THE EU ETS PILOT
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starting in 2012, the European Unio
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originally allocated. Based on thes
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economic development rather than as
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Hungary has still to learn to opera
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Appendix I. - Questionnaire 3.c. Cl
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Had surplus but did not sell EUAs ,
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Appendix III. - Accounting Aspects
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Appendix V. - Overview and main fea
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Appendix VII. - Foreign emission al
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Hungária Cementipari Rt. 2006 HU 5
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Reductions Clean Development Mechan
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Linking Directive from project acti
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VII. REFERENCES Ahman, M. - Burtraw
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Burtraw, D. - Palmer, K. - Bharvirk
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EEA (2006): Greenhouse gas emission
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Hahn, R. - Stavins, R. (1999): What
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Kaderják, P. (1997): Economics for
Page 221 and 222:
Montero, J. P. (1997): Marketable P
Page 223 and 224:
Philibert, C. (2006): Certainty ver
Page 225 and 226:
Tietenberg, T. (1992): Relevant Exp
Page 227 and 228:
Woerdmann, E. (2003): Developing ca
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Hungarian law - Hungarian governmen
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Oxford University Press, USA http:/
Page 233:
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