The reduction of carbon emissions in EU

1305 amount of GHG emissions that the buyer can use to meet its compliance objectives vis- à-vis climate change mitigation. Carbon transactions can be grouped into two main categories. Allowance-based transactions, in which the buyer purchases emission allowances created and allocated by regulators under cap-and-trade regimes, such as Assigned Amount Units AAUs under the Kyoto Protocol, or EUAs under the EU ETS. Such schemes combine environmental performance and flexibility, through trading, in order for mandated participants to meet compliance requirements at the lowest possible cost. Project-based transactions, in which the buyer purchases emission credits from a project that can verifiably demonstrate GHG emission reductions compared with what would have happened otherwise. The most notable examples of such activities are under the CDM and the JI mechanisms of the Kyoto Protocol, generating CERs and ERUs respectively. Carbon cap-and-trade regimes allow, for the most part, for the import of credits from project- based transactions for compliance purposes. This helps to achieve the environmental target cost effectively through access to mitigation potentials from additional sectors and additional countries. Mandatory wholesale mechanisms are the other key driver in the U.S. A variation of this, PURPA, led to much of the early wind energy development in the U.S. Other countries, such as Spain and Germany, have also used variations of this mechanism. A weakness of the PURPAfeed- in tariff approach is that it doesn‘t guarantee any particular long-term growth. Dr. Engelhard RWE Rheinbraun criticised that the caps are only given and only introduced for energy intensive installations, this means that only 13 of Greenhouse gases GHG of the EU are covered and that the cap in trade is introduced for CO2 not for all six Kyoto gases.Dr. Engelhard reckons with unavoidable distortions in competition and disadvantages for the European industries. Dr. Engelhard expects a transfer of energy intensive production to countries without regulations, this means to Eastern Europe, developing countries or to the United States. Combining technical assistance with financing, EBRD aims to help local authorities overcome common obstacles to financing energy efficiency: - Increasing awareness and prioritization of energy efficiency gains - Allocation of resources for energy audits and project preparation - Tendering procedures - Management of larger-scale programs that may need additional dedicated resources. Investment barriers addressed through credit for municipal EE investments and introduction of the sale of receivables as a means of EE financing. The renewable sector in Europe has long benefited from environmental concern over fossil-fuel fired plants, and has been further encouraged by European-wide and single-nation commitments to achieving 22 of electrical output from renewable sources by 2010, in order to meet Kyoto Treaty objectives. Renewable Energy Vision in Europe suggests: • A very high rate of deployment of renewable energy projects is needed • Additional form of financial support is required • Cannot rely on market alone • Regulatory encouragement • Supporting research and development Sustainable Energy Fund SEF, a private, non-profit, financial organization, offers commercial loans for new or retrofit energy-related projects to established commercial, industrial, municipal, 1306 and non-profit entities. SEF will also consider funding or co-funding the energy-portion of a new building construction or a building remodelling project. Created in 2000, the European Renewable Energy Council - EREC - is an umbrella organisation of the European renewable energy industry, trade and research associations active in the fields of photovoltaic, small hydropower, solar thermal, biomass, wind energy and geothermal energy, thus representing the entire renewable energy sector. 220 There are several benefits of renewable energy. The most important one is environmental benefits, which include avoiding carbon dioxide CO2 emissions which helps to combat climate change. Second, there are national security benefits, such as achieving greater energy independence, as renewable energy is largely a domestic resource; and reducing overall payments to potentially hostile regimes or other groups in countries with oil and natural gas reserves. Third, there are general economic benefits, including possible reductions in the price of fossil fuels by lessening demand for them, and increased stability in energy prices through diversification of power supplies. Finally, in some cases there is a specific economic benefit, when developing renewable energy is the lowest-cost option available, based on avoiding fuel costs and other economic considerations. 5. Financial strategies for energy in Europe In the early preparation phases of retrofit projects, financial issues, real or imagined, tend to become very important barriers to the realization of innovative low-energy projects in the minds of many decision-makers or technicians involved in the design and implementation of public buildings. This is mostly due to the fact that budgets for public building retrofits are often limited, and decision-makers tend to consider initial costs rather than operating, maintenance or life-cycle costs as those significant for refurbishment. The possibility of internal allocation of funds by a public enterprise, in order to apply energy efficient retrofitting measures to its own buildings is also quite promising. It is a widespread financing method called project finance and is mostly related to the development non-recourse financing of pipelines, electric generating plants, sports stadiums, industrial facilities and similar 220 EREC is composed of the following European non-profit associations and federations: AEBIOM European Biomass Association, EGEC European Geothermal Energy Council, EPIA European Photovoltaic Industry Association, ESHA European Small Hydropower Association, ESTIF European Solar Thermal Industry Federation, EUBIA European Biomass Industry Association, EUREC Agency European Renewable Energy Research Centres Agency, and EWEA European Wind Energy Association. The European Renewable Energy Council and the member associations are located in the Renewable Energy House REH. The REH is a model showcase for renewable energy technologies in a monument- protected building in the European quarter of Brussels. EREC is committed to the following objectives: Acting as a forum for exchange of information and discussion on issues related to renewables as well as to represent the European RES industry research community, Providing information and consultancy on renewable energies for the political decision makers on local, regional, national and international levels, Launching policy initiatives for the creation of positive frameworks for renewable energy sources, Encouraging European technologies, products and services on global markets. Europe is at the forefront of renewable energy development worldwide and has significant experience in the formulation of proactive policy measures in this area. Europe is in fact the global leader in RES technology development. Renewable energy sources RES make a major contribution to the security of energy supply, the risk reduction of fuel-based price increase and volatility, the mitigation of climate change, and environmental protection. Renewable energy sources are a key element for sustainable development including the creation of jobs and wealth oriented to thefuture. For more information on EREC and the REH see: www.erec- renewables.org . 1307 capital-intensive infrastructure projects. It encompasses a complex mix of sophisticated legal, financial, regulatory and management issues that only a handful of organizations have mastered. The key factors relating to the project finance include the following:  Solar, thermal and wind facilities  Gas processing and liquefaction facilities  LNG receiving terminals  Chemical and fertilizer plants  Paper recycling plants  Waste-to-energy facilities  Water treatment facilities and  Public infrastructure Long-term project financing is increasingly available in EU and Turkey though major deals are difficult to structure and will require innovative approaches. The EBRD also encourages developers to submit a proposal for renewable energy project funding. The World Bank has been assisting Turkey to develop its market economy helping develop and implement a strategy to take ad vantage of the Kyoto Protocol in the areas of ―green investment‖ and carbon trading. When the World Bank provides financing to its member countries for investment projects, each project is governed by a legal agreement between the World Bank and the government agency who receives the funds. See Appendix 2 and 3 for World Bank and European Investment Bank Financed Energy Projects in Turkey. IFC offers a wide variety of financial products for private sector projects in developing countries. A company or entrepreneur seeking to establish a new venture including energy project or expand an existing enterprise can approach IFC directly by submitting an investment proposal. Ex-Im Bank has Environmental Standards and Guidelines applied to each project considered under its Loan and Guarantee Programs. Environmental Exports Program Consists of pro-active business development and enhancements to existing Ex-Im Bank programs. Support for environmentally-beneficial exports and renewable energy, structured finance involves elements of both corporate and limited recourse project finance. Like project finance, it involves special features to enhance the credit of the borrower. Ex-Im Bank: top priority to support renewable energy and energy efficiency exports.Ex-Im Bank supports short, medium, and long-term financing to creditworthy international customers, and working capital guarantees to U.S. exporters. Overseas Private Investment Corporation OPIC Financing provides medium- to long-term funding through direct loans and loan guaranties to eligible investment projects in emerging markets. Projects are categorised according to their potential impacts, with those given an ‗A‘ rating requiring both an environmental impact assessment EIA and an environmental management programme EMP to be in place. The largest project known to have been given an A rating is the 3.6 billion BTC pipeline. This connected a new oil field in the Caspian Sea off Azerbaijan to a terminal at Ceyhan in Turkey. Project may also have found a way for the energy efficiency interventions to pay for themselves via the international carbon credit market.

6. Incentives to the Energy Production from Renewable Sources

The incentives are intending exclusively for the production of energy from renewable sources for usage, while they are not available to energy producers that solely intend to sell energy. The parties that may benefit from these incentives are specified in the project notices. The projects include the following programs: Photovoltaic Cell; Sun-energized municipality; Projects for smaller islands; Photovoltaic plants of high architectural value; Solar-energy Program for 1308 Municipalities and gas-works. The increasing production of energy from renewable sources is in fact considered by the EU as a high priority target of the Community. European incentives for energy investments involve feed in tariffs, price premiums, tradable green certificate, competitive tendering, investment subsidies, and tax incentives. Energy consumption per capita in EU 25 was equivalent to 3, 6 toe in 2005, compared to 7, 8 toecapita for the USA and 4, 1 toecapita for Japan. In EU there is a clear trend for more liberalized markets. Poland 17 and United Kingdom ββ are countries in which the leading generator‘s market share is lower whereas in Cyprus and Malta there is only one generator. Romania and Bulgaria are energy intensive countries. The share of renewable energy should be above 20 by 2010 in EU whereas according to current data Austria 78 has higher shares of RES. The EU 27 production of primary energy is 871,247,000 toe., United Kingdom 183,946,000 toe and Germany 136,850,000 toe are largest producers. Energy dependency of Europe is 52. Cyprus 100.2, and Portugal 88.2 are more dependent whereas Norway -609 is not energy dependent. Below is the EU 27 consumption breakdown of energy resources. Source: Eurostat May 2008 The mainstay of the new policy is a core energy objective for Europe: that the EU should reduce greenhouse gas emissions from its energy consumption by 20 by 2020. This objective will enable for EU to measure progress in re-directing nowadays energy activity towards one that will fully meet the challenges of sustainability, competitiveness and the supply security. The EU target needs to be seen in the context of the need for international action of industrial nations on climate change. When such a commitment exists, the EU will need to do more. The target should therefore be to increasing the target to a 30 reduction by 2020 and 60-80 by 2050. The concern is not only about climate change, it is also about Europes security of energy supply, economy and the prosperity of its citizens. Achieving the objective can limit the EUs growing exposure to increased volatility and prices for oil and gas, bring about a more competitive EU energy market, and stimulate technology and employment. 221 The main criticism of alternative energy is that, even with government assistance, it is still more expensive than many traditional sources of energy. But advocates argue that simply comparing the cost of generating electricity by burning coal with the cost of generating electricity by 221 European Commission; An Energy Policy for Europe - the need for action; Proposed EU Energy Policy; p.2.