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EMISSIONS TRADING: BENCHMARKING FOR INCUMBENTS. Nicola Kirkup Department of Trade and Industry. 07 January 2020. Non-differentiated case. Government’s overall sector cap on emissions (teCO 2 ) Divide by sector capacity (MW) Equals benchmark allocation (teCO2/MW)
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EMISSIONS TRADING: BENCHMARKING FOR INCUMBENTS Nicola Kirkup Department of Trade and Industry 07 January 2020
Non-differentiated case • Government’s overall sector cap on emissions (teCO2) • Divide by sector capacity (MW) • Equals benchmark allocation (teCO2/MW) • Each station receives that amount, multiplied by its individual capacity
Differentiated case • Capacity • Multiplied by Loadfactor • Multiplied by Carbon factor • Equals Absolute allocation • Multiplied by Scale factor
Benchmark: Absolute allocation Load factor Carbon/MW MWh/year Carbon factor Capacity Carbon/hour
Scale factor • Total sector cap • Divided by • Total sector BAU projection • Equals • c. 70%
Alternative approach: Post-hoc determination Your actual production/total sectoral production Multiplied by Sector cap Or: Your actual production Multiplied by A fixed tCO2 per unit of production
Alternative methodology: Discussion Con: Post hoc detemination: Restricted predictability. May lead to last-minute adjustments and instability at reckoning points Pro: Improves the incentive to assess your carbon efficiency vs. the sector average and/or your competitors, and adjust accordingly Leads to the “right” outcome
Thank you Nicola Kirkup Department of Trade and Industry 09 February 2007