Final report for One North East And NEPIC 21/12/10 - The Carbon ...

Annual emissions (MtCO2/yr)The case for a Tees CCS networkFinal Report14Total value at risk, EU ETS Phase III: (2012-20): £2.5 BnTotal Annual Exposure to EU ETS: £306 M/yr12£285 M/yr7 InstallationsPurchase - auction or market108£12 M/yr2 InstallationsFree allocationOutside scope of EU ETS642£7 M/yr13 Installations£2 M/yr6 Installations(1 Food & drink)(5 petroleum)£0 M/yr6 Installations0Power Iron & Steel Chemicals Others Biomass/BiofuelsSectorsFigure 3 Emissions and value at stake for existing and proposed CO 2 sources inTeesside 24 .The Government and most commentators expect the carbon price to rise steeply between2020 and 2050, as carbon caps are tightened and low cost carbon emission reductionoptions are exhausted. There remains a wide range in estimates for CO 2 price in all years.Looking ahead twenty years, DECC forecast prices are £35-105/t CO 2 in 2030, rising to£100-£300/t in 2050, whilst it is likely that free allocation will be significantly reduced afterPhase III of the EU ETS. Therefore, beyond 2020, the effects of carbon prices will be evenmore acute.Payments for compliance with the EU ETS from Teesside operators represent a significantcost burden to business – equal to around 44% of the total GVA of businesses onTeesside. This will likely have significant effects on the competitiveness and profitability oflocal businesses. If these price effects lead to relocation/carbon leakage, the cessation ofthese activities would have drastic effects for the local economy.Presently, around 25 existing carbon intensive businesses on Teesside form thecornerstone of the local economy, employing nearly 7,000 people and adding ca. £700mgross value added each year to the North East economy (Figure 4). Over the period of theEU ETS Phase III (2012-20) the value at risk posed by carbon leakage is around £5.424 Sectors based on UK National Allocation Plan classification. Assumes full auctioning for power sector, 100%free allocation to industry (Chemicals, Iron & Steel, Others) with assumed 7% shortfall on benchmark allocation.Bio-emissions outside the scope of the EU ETS, although may in future be eligible for “crediting” if they employCCS. Carbon price £25/t. CO 2 emissions data taken from parallel AMEC engineering study. Note inclusion ofgreen and blue bars present the potential to monetise EUAs received through free allowances/crediting.10