No. 363/04
Berlin, 23.12.2004

Emissions trading to start on time

Emissions Trading Office concludes allocation procedure
Trittin: Germany is well prepared

Trading in emissions allowances can start on time in Germany at the beginning of the New Year: the German emissions Trading Office has allocated emissions allowances to all participants. "The federal Government has established the conditions needed to start emissions trading," said federal Environment Minister Juergen Trittin. "Germany is well prepared. Within just one year we have introduced a new environmental policy instrument for the market economy. I'm optimistic that it will prove its worth in practice."

1,849 installations belonging to around 1,200 energy companies and the energy intensive industries will participate in emissions trading. The allocation notifications specify how many free emissions allowances each of the installations will receive for the next three years. In total, emissions allowances for 1,485 million tonnes of CO2 will be available to companies from 2005 to 2007 - 495 million per year. At an assumed price of five euros per certificate at the start of emissions trading, the Government is distributing certificates worth over 7 billion euros to the industry in Germany.

The federal Government has allowed a lot of flexibility in the application procedure for emissions allowances, in order to take into account the diverse conditions in the individual sectors of industry. Companies have used this: in total the allocation applications contain 58 different combinations of possible allocation rules.

521 installations use the option of receiving an allocation based on production forecasts for the next three years. Not least for this reason, applications exceeded the legally prescribed maximum budget by around 14 million emissions allowances per year. This led to a redistribution of allowances: in order to keep within budget, allocations were also proportionally reduced for around two thirds of all installations.

All in all, use of the three special allocations provided for in the allocation act for early action, process-related emissions and electricity generation in combined heat-power plants (CHP) was as expected. "In particular the highly efficient combined heat-power generation will be visibly strengthened by emissions trading," said Trittin. The special budget earmarked for this sector was exceeded by 1.5 million tonnes - one third more combined heat-power installations in the period 2005 -2007 than previously estimated.

In contrast, the early action requirement is somewhat lower than expected. Notably, almost 84% of the budget for this special allocation went to the new Länder. "This takes account of plant modernisation and the especially dramatic emissions reduction in eastern Germany" said Trittin.

The allocation notifications from the German Emissions Trading Office inform each company precisely how many emissions allowances are available to it for the next three years. This provides investment security. At the same time, applications for opening accounts in the so-called emissions trading register were submitted. In these online accounts the Emissions Trading Office will book the first annual instalment of free certificates by 28 February 2005.

Emissions trading is not only a new environmental instrument. It also treads new ground from an administrative point of view. The German Emissions Trading Office is the first authority in Germany to be connected with its partners in industry almost completely via electronic means. This will speed up the processes in the Emissions Trading Office, which is funded by charges, thus keeping administrative costs down.

Note: for an analysis of the allocation applications a detailed background paper can be found on the web site of the German emissions trading office at www.umweltbundesamt.de/emissionshandel (in german language). Also on the office's homepage is a list of the installations participating in emissions trading.