EPS study misses the point

– The terms of reference for the study made it perfectly predictable that EPS would be deemed an inefficient way to combat climate change, says Eivind Hoff, director of Bellona Europa.

That is also what the Bloomberg New Energy Finance found in the study called ”Emissions Performance Standards – Impacts of power plant CO2 emission performance standards in the context of the European carbon markets” . The main conclusion of the study is that setting a CO2 emission performance standard (EPS) after 2020 to stop new builds of coal- or lignite-fired power stations without carbon capture and storage (CCS) would have little effect, according to ENDS Europe.

– It is positive that it demonstrates how new unabated coal-fired power plants no longer make economic sense under the EU Emission Trading Scheme, but it is not a serious study of what role an EPS could play to decarbonize the power sector, Hoff says.

In a letter to the European Commission, Bellona Europa makes the following points:

1. EPS for existing plants not included:  The Ecofys study ‘Scenarios on the introduction of CO2 emission performance standards for the EU power sector’ from January 2009 demonstrated that ‘both existing and new installations should be included in an EPS scheme in order to achieve substantial emission reductions.’

2. EPS that hits unabated gas not included: The Ecofys study modeled levels of 150, 350 and 500 gCO2/kWh and recommended a ‘suitably staged approach’ to prevent an EPS triggering only a ‘dash for gas’.

3. Timeline stops in 2030: Ecofys found ‘projections beyond 2030 would be necessary, as substantial CCS and retrofit activities are considered to only be available after 2020’.

4. Study allocates merely one sentence to the potential of an EPS in individual Member States (p. 12): The ECN study ‘Policy instruments for advancing CCS in Dutch power generation’ from December 2010shows how an EPS-only approach to incentivising CCS in the Netherlands only (without similar action from neighbouring countries or any financial instruments to stimulate CCS) will not deliver investments in low-carbon power generation. Any scenario where only one Member State sets an EPS would therefore be interesting only if it includes an EPS as part of a wider policy package (whether that be additional financial incentives or compensatory measures to impose an EPS on imported electricity as well as domestically produced electricity). The UK government proposals for electricity market reform take this perspective and should inform any scenario where a single Member State introduces an EPS.

5. Existing ETS-distorting policy measures not discussed: An EPS study would be truly interesting only if it compares an EPS with the many policy measures already in place that distort the working of the ETS (such as the renewable energy directive or the eco-design directive). What are the political and economic justifications for these distorting measures and to what extent are these relevant for an EPS?

6. Key assumptions and origin of cost estimates are not revealed.

These issues will need to be addressed. The forthcoming EU energy roadmap for 2050 provides an imminent opportunity for doing so.