EU power firms claim CO2 trading success

Simulation exercise "shows that greenhouse cuts can be made at lower cost through trading"

A simulation exercise run by power firms has shown that parallel trading of electricity and carbon dioxide (CO2) could help reduce greenhouse gas emissions at lower costs to individual companies, the European and EU electricity supply industry associations Unipede and Eurelectric claimed yesterday.

Sixteen "virtual companies" spent eight weeks this summer simulating 12 years of trading from 2001 to 2012, attempting to meet predicted demand growth for electricity while reducing greenhouse gas emissions. The companies were assigned different levels and mixes of production, including renewables, and a wide range of production levels and CO2 intensity.

Rules for the simulation included "banking" permits for later use and periods of "grace" during which participants could acquire permits. The Paris Bourse supplied a virtual stock exchange for the scheme, which involved 19 European power firms in 14 countries.

John Scowcroft of Unipede/Eurelectric told ENDS Daily today that the exercise would provide "extremely valuable input into the European policy debate" especially as this was the first time a simulation has been carried out on this scale. Mr Scowcroft said: "An open market quickly created price signals allowing companies to make intelligent investment decisions and deliver compliance in the most cost effective way. One very interesting aspect of the results was the comparative ease with which the system worked using the screen-based trading system devised by the Paris Bourse".

The report concludes that the virtual participants found no technical difficulties and quickly became accustomed to CO2 trading as a market mechanism, developing analytical tools to make decisions about electricity production and CO2 emissions while gaining experience on linking electricity and CO2 emissions trading with new generating capacity planning. However, two of the companies failed to meet their emission targets, although the report says that they adopted high risk strategies that would not have been pursued in a real business environment.

By publishing their results now, Unipede/Eurelectric will be hoping to influence an EU green paper on climate gas trading promised by new EU environment commissioner Margot Wallström earlier this month (ENDS Daily 6 October). Signalling that she may take a more positive approach to trading than her predecessor Ritt Bjerregaard, Ms Wallström told MEPs that, if based on sound rules, trading would help to deliver emissions cuts in a more cost-effective way.

Follow Up:
Unipede/Eurelectric, tel: +32 2 525 1005. References: "Greenhouse Gas and Electricity Trading Simulation".

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