30 MAY 2002
Results of the Baltic Sea Region’s first CO2 emission and
electricity trading simulation presented at BASREC’s St Petersburg conference,
May 28, suggest that Kyoto
Protocol emission objectives will affect the profile of power generation in the
region. Other energy policy choices, particularly in the nuclear and renewable
dimension, will also have a prominent effect on strategies adopted to reduce CO2. The simulation also highlighted the impact of the CO2
market on the traded
electricity prices.
Governments of the ten Baltic Sea states
and 20 electricity and energy companies took part in the simulation during March
and April 2002 to explore the Kyoto Protocol’s flexible mechanisms and the
interaction between the electricity and emissions markets.
One of Kyoto Protocol’s flexible mechanisms, Emissions Trading lets countries
emitting less than their allowance of greenhouse gases sell their surplus
allowance to countries whose emissions exceed their allowance.
While not
intended as an accurate projection of the future, the simulation indicates that
countries’ CO2 emission allowances could affect
competition and pricing among power generators. “Under a fully-open electricity market, as was assumed here,
the electricity trade picture could change significantly once the cost of CO2
is included in electricity prices,” says Richard Baron, of the International
Energy Agency.
“How
governments will organise for trading under Kyoto is also an area where the
simulation raised a few issues,” Baron says. There were indications that
government emission reduction strategies would not be systematically adjusted to
the price of CO2, and that not all those with surplus
allowances for sale would sell them on the international CO2 market
in the first commitment period. Large
sellers could dominate the international CO2 market and determine CO2
prices and during the simulation they remained higher than expected.
This
was the first electricity trading simulation to cover such a large geographical
area with so many players, based on existing production and transmission
capacities and demand.
Emissions
Trading aims to achieve set emission targets at minimum cost. The simulation
carried out in the Baltic Region was aimed at deepening participants’
understanding of the mechanism. It showed that emission trading allowed
electricity generators to balance national energy strategies with CO2 reduction
objectives set by the Kyoto Protocol and to do so at reduced cost.
For further information please contact:
|
General enquiries: |
Specific
to the simulation: |
|
Olle Björk Alexander Popov, |
Richard Baron |
Governments, industry and experts gathered to discuss the implementation of the Kyoto Protocol’s flexible mechanisms in the Baltic Sea Region, from 26th to 28th May 2002, in St Petersburg, the Russian Federation. The conference will increase understanding of the mechanisms, which help countries meet greenhouse gas reduction targets, and outline the framework for their implementation among businesses, government and academia.
The conference is
arranged by BASREC in conjunction with the Nordic Council of Ministers, the EU,
BALTREL, Baltic Gas, and the International Energy Agency. For a speaker list and
agenda, please see www.basrec.org
The
Baltic Sea Region Energy Co-operation (BASREC) is a forum for the implementation
of the Kyoto Protocol and discussing other developments in the energy sector. It
is committed to clarifying the international framework aiming to reduce
greenhouse gas emissions. Founded following a regional ministerial and European
Commission conference in Helsinki in 1999, BASREC includes representatives of
the governments of Denmark, Estonia, Finland, Germany, Iceland, Latvia,
Lithuania, Norway, Poland, Russia and Sweden; and the European Comminssion’s
Directorate General for Transportation and Energy (DG TREN).
For more information about BASREC, please see www.cbss.st/BASREC