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Following today’s inter-institutional political agreement on the Emissions Trading System (ETS) the Confederation of European Paper Industries (CEPI) is broadly encouraged by improvements in the regulation for the 2021-2030 period.
“The conclusion of the ETS negotiations now restores the regulatory predictability needed for advancing industrial transformation. Investments in low-carbon technologies are core to what we stand for as an industry. A more stable regime and tools such as the ETS Innovation Fund will be crucial in accelerating the industry's transition towards a low-carbon circular bioeconomy” says Sylvain Lhôte, Director General of CEPI.
The final compromise text improves significantly the scheme with a more robust stability in carbon leakage provisions and firmer predictability in reviewing the benchmark values. The Innovation Fund will also act as a crucial mechanism in advancing the breakthrough technologies that will spur the industry’s low-carbon transition.
Nonetheless, several aspects of the text are lacking and these would need to be resolved. For instance, the Market Stability Reserve (MSR) was significantly amended without any prior assessment of its impact on “industrial competitiveness and the risk of carbon leakage”, even though this was an explicit requirement when amending the MSR decision. Likewise, no solution was found to effectively ensure compensation for indirect costs for exposed energy intensive installations. Finally, while the risk of a shortfall in free credits has been mitigated it has not been structurally eradicated thereby causing unnecessary regulatory risks. The impact of all of the above-mentioned aspects will become more evident by 2021, when all implementing legislation will be finalised. It is therefore imperative to swiftly finalise the full regulatory landscape by adopting all the implementing acts well ahead of 2021.
Note to editor:
Ensuring that the ETS also functions as a pro-investment tool is a core component of the European paper industries ‘2050 Investment Roadmap’. Check out our ‘Alignment matrix’ here to see how the ETS can provide a platform for catalysing and enabling industry transformation in Europe.
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Renewable Energy Directive: CEPI analysis of sustainability criteria for solid biomass fuels in the European Commission proposal for a Directive on the promotion of the use of energy from renewables (recast)
The sustainable forest management framework has evolved and strengthened over time balancing a market based demand for wood products and bioenergy with the other environmental and climate functions of the forest. More recently, the EU policy framework to support the use of energy from renewable sources has led to a strong increase of bio-energy use within short timeframes. The increased demand has led to rising imports of wood. To ensure the sustainability of the policy induced increase of bioenergy use and wood imports, the following issues have to be considered:
• Do the needs for wood biomass lead to any of the following critical consequences: resource depletion, land conversion, negative impacts on biodiversity?
• Is the direct burning of wood biomass an efficient use of a raw material that could first be used for higher value purposes?
• How could monitoring, reporting and verification ensure carbon sustainability?
CEPI believes that the Commission proposal provides in principle an appropriate response to the challenges caused by a policy induced increase in the use of biomass for energy.
CEPI welcomes the following principles:
1. Solid biomass fuels would only count towards the renewable energy targets if they comply with a number of forest management, LULUCF and greenhouse gas savings, and end use conversion efficiency criteria.
2. CEPI welcomes that the criteria are applied equivalently based on the type of biomass used and independently on which physical form (solid, gaseous or liquid) of the biofuels, bioliquids or biomass fuels produced.
3. There is a risk based approach for forest management and GHG criteria starting from the country level. Only if no evidence can be provided at country level, the forest holding level is considered. We believe however that an operator should have the possibility to assess the risk and proof sustainability at higher than forest holding level, if necessary information is available. The risk management system and the criteria refer to existing legislation, such as LULUCF accounting and environmental legislation.
4. The principle that the emissions from biogenic carbon are accounted as neutral in the energy sector is maintained as they are assumed to be already accounted in the LULUCF sector. We believe however, that for countries where emissions from LULUCF are not accounted, the criterion should be covered by the forest management criteria, especially the criterion that the long term production capacity of the forest is maintained.
5. Support to new conversions of coal based power stations to biomass with low efficiency would be ended from 2020. CEPI believes however, that Member States should be allowed to exempt above 20 MW installations from the CHP obligation based on climatic conditions.
6. The Commission proposes a system in which the burden of proof would be upon the energy producer rather than upon the individual forest owner. The criteria have to be fulfilled by installations of more than 20 MW fuel capacity, limiting the burden on small scale installations.
CEPI also believes that some provisions have to be improved:
1. Secure a functioning internal market: Member States should not have the possibility to go beyond the EU agreed sustainability criteria. This would hamper the functioning of the internal market and complicate the verification system.
2. Introduce meaningful LULUCF criteria at subnational level: For forest biomass from countries that do not account for LULUCF emissions it should be made clear that the core forest management criteria and especially the one on maintaining the long term production capacity of the forest should minimize the risk of LULUCF emission at the subnational level.
3. Review at the appropriate time: The review should take place in time before the post 2030 period, but a review in 2023 i.e. only after 3 years of application of the criteria is too early to be meaningful.
4. Ensure the forest management criteria are relevant, credible and implementable: CEPI proposes technical improvements to the forest management criteria at national and especially at the sublevel. CEPI is looking forward to a constructive dialogue with the European Commission services and other institutional and non-institutional stakeholders to ensure the forest management criteria are relevant, credible and implementable and will propose amendments in this respect.
In a first of its kind project the Confederation of European Paper Industries (CEPI) has called upon its member companies to voluntarily exhibit innovative, emissions-reducing projects that centre on increasing energy efficiency and promoting the use of renewable energy sources. The ‘To Our Roots and Beyond’ project puts the focus back on the industry’s leading role in contributing to a sustainable, low-carbon society. The project demonstates how industry is taking responsibilty in reducing its carbon emissions, as well as taking a leading role in providing bio-based solutions to decarbonise society at large. In total, the project gathers 14 innovative case studies from 10 EU countries, involving 12 companies representing a diverse array of projects. The innovative projects which focus on energy efficiency and/or renewables are indicative of the diverse means the paper industry has at its disposal to reduce emissions whilst building upon its unique strength as an entirely renewable material.
Project website: www.cepi-rootsandbeyond.org
In a first of its kind project the Confederation of European Paper Industries (CEPI) has called upon its member companies to voluntarily exhibit innovative, emissions-reducing projects that centre on increasing energy efficiency and promoting the use of renewable energy sources.
The ‘To Our Roots and Beyond’ project puts the focus back on the industry’s leading role in contributing to a sustainable, low-carbon society. The project demonstates how industry is taking responsibilty in reducing its carbon emissions, as well as taking a leading role in providing bio-based solutions to decarbonise society at large.
In total, the project gathers 14 innovative case studies from 10 EU countries, involving 12 companies representing a diverse array of projects. The innovative projects which focus on energy efficiency and/or renewables are indicative of the diverse means the paper industry has at its disposal to reduce emissions whilst building upon its unique strength as an entirely renewable material.
“Our industry has set a vision to unleash the full potential of the bioeconomy by 2050, driving both value creation and deep decarbonisation. This project demonstrates how we put words into action and what it takes, on the ground, to turn ¬vision into reality through smart industrial integration, innovation in energy efficiency or advanced use of renewables” says Sylvain Lhôte, Director General at CEPI
As part of its commitment to reducing emissions this project will be renewed on a bi-annual basis. This project will remain a permanent feature of the industry’s commitment to put into practice its vision outlined in its ‘2050 Investment Roadmap’. The project website, including a link to the brochure, can be found here.
About: CEPI 2050 Investment Roadmap
In February 2011 CEPI relaunched its Roadmap putting into action its vision to reduce emissions by 80% while creating 50% more added value. The Roadmap envisions the need for €44 billion additional investment - a 40% increase on current levels – to lead the transition towards a low-carbon bioeconomy by 2050.
Signatories of this letter welcome the Clean Energy Package as the means to set in place new rules for a consumer-centred European energy system, by implementing the three stated EU objectives: putting energy efficiency first, achieving global leadership in renewable energies and providing a fair deal for consumers.
Demand side flexibility is a resource that not only benefits and empowers individual consumers, both private and professional, but also reduces total system costs, facilitates renewables integration and contributes to building Europe’s smart energy leadership.
This remarkable resource however suffers from important market failures that the ‘Clean energy for all Europeans’ package attempts to address. Signatories of this letter, all strong advocates for demand side flexibility, urge you to include the necessary proposals to develop demand side flexibility in the final legislation, and ensure consistent enforcement through thorough planning and reporting obligations in the Governance regulation report.
The stakes are high. Not delivering Europe’s demand side flexibility potential risks affecting Europe’s competitiveness, undermining its decarbonisation efforts, undermining its benefits for consumers and jobs and growth opportunities for Europe as a whole.
The following points highlight key steps necessary to develop demand side flexibility by creating functioning wholesale energy markets; opening markets to consumers and third parties; and remunerating demand side flexibility fairly.
1. Creating functioning wholesale energy markets
The electricity directive and regulation can significantly contribute to establishing well-functioning energy markets that reflect the availability or scarcity of supply and the adequacy of the network. In particular,
• Reform short-term markets functioning to help increase the overall flexibility of the power system (Electricity Regulation Chapter 2).
• Harmonise features of intraday and balancing markets to encourage trading of energy across borders, and as close as possible to the time of delivery (Electricity Regulation, Articles 5 and 7).
• Tackle overcapacity of generation to re-establish long term price signals for investors and minimise the risks that capacity mechanisms create for the development of efficient wholesale markets, as well as consumer empowerment, demand response and the deployment of innovative low carbon and energy efficiency technologies. The best way to minimise such risks is to:
o Only implement capacity mechanisms as a last resort, when proven strictly necessary by a European adequacy assessment which factors in the contribution of renewables, self-consumption and on-site generation (including cogeneration) and assesses flexibility needs (Electricity Regulation, Article 18).
o Ensure capacity mechanisms are open to all resources such as energy efficiency, demand response, storage, all generation technologies, and cross border capacity (to add to Electricity Regulation, Article 23).
o Review the need for capacity mechanisms regularly:
- So as to ensure consistency between procurement of capacity and the size of the adequacy concerns (to add to Electricity Regulation, Article 23) on the basis of the latest European resource adequacy assessment
- So as to ensure consistency with the overall competitiveness and decarbonisation objectives
o Ensure that the duration of the capacity contract is short enough to correspond to the regular reviews.
o Require Transmission System Operators (TSOs) to report on redispatch and countertrading measures they undertake, including underlying costs, and the level of effectiveness and openness of market-based curtailment or re-dispatching mechanisms to all energy resources. In turn, the creation of liquid and efficient markets and the deployment of demand side flexibility resources will reduce the need for additional measures to guarantee system adequacy.
2. Ensuring market access for consumers and third parties
Rules must be established and enforced so that demand-side resources have unhindered access to all energy markets (wholesale, balancing, ancillary services) in all timeframes, including through product requirements fit for supply and demand-side resources alike. This also means direct market access for consumers and new market entrants, including third party aggregators and ESCOs.
• Give consumers the right to participate in energy markets with dynamic price contracts. This includes providing customers information on actual time of use at near real time and the right to respond to price signals, as well giving consumers the right to sell flexibility independently of any contractual arrangements to procure energy, directly or through an (independent) aggregator. Smart metering is a pre-requisite as the certified basis for billing consumer using multiple tariffs for market-based pricing. It also forms the foundation for the development of additional consumer services (Electricity Directive, Articles 11, 17, 20, 21).
• Enable fair market access for Demand Response and service providers. Deployment of demand side flexibility has so far been impeded by outdated market rules, insufficient market access for service providers and ineffective price signals. Demand response should have non-discriminatory access to all markets (Electricity Regulation, Articles 1, 3, 4, 5, 6, 7, 11, 12, Electricity Directive, Articles: 3, 15, 16, 17) and Demand Response Aggregators should be enabled to access the market without prior agreement of other market parties who are often competitors (Electricity Directive Article 17).
• Network tariffs should be fully transparent and allow the development of self-consumption and self-generation. They should be based on the marginal costs of the use of the system and take into account the avoided capital (e.g. grid investments) and operational expenditures due to flexible generation and flexible load embedded at the local level, as well as avoided CO2 emissions. (Electricity Regulation Article 16; Electricity Directive Article 15).
• Accelerate the cost-efficient decarbonisation of the existing building stock, notably through reaping the flexibility benefits of technical building systems and other appliances to support consumer empowerment: set in place a proper framework for the deployment of infrastructures (i.e. on-site renewable electricity generation, high efficiency cogeneration, smart metering or electro-mobility) and of demand-responsive devices that will facilitate the buildings’ integration into a wider energy ‘eco-system’ where active prosumers self-generate, self-consume, aggregate, trade and sell surplus electricity to the grid. In this new setting, buildings will no longer be a load but a micro-energy hub contributing to consumer empowerment and cost-efficiency of the energy system. The smartness indicator of buildings should support consumer empowerment and the development of buildings as part of the energy system.
• Create a comprehensive framework for grid monitoring, so as to increase the visibility of flexibility, including demand-side flexibility. It should be based on information that TSOs and DSOs would publish regularly as regards to the performance of their networks , in particular the volumes and sources of curtailed energy (Electricity Directive, Article 59). Comprehensive reporting on grid evolution, together with appropriate tariff structure, will be an essential basis for cost-effective network management and enable the targeted acquisition of flexibility services from the market by system operators instead of CAPEX only investments (Electricity Directive, Article 32).
• Ensure enforceability of the right for citizens and businesses to self-generate, self-consume, and valorise their flexibility; (Electricity regulation Article 16; Electricity directive Article 15).
• Establish a constructive framework for energy storage which takes into account the specificity of the energy storage technologies, and recognizes that TSOs and DSOs should not own, develop, manage or operate storage assets, unless a market based procurement based on an open and transparent tendering procedure is proven of not being possible and is regularly reviewed. (Electricity Directive, Articles 36 and 54)
Signatories of this letter are convinced that such a way forward will provide consumers with the satisfaction of managing their own energy consumption while optimising their overall carbon and environmental performance.