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place for coal and lignite. Coal mining in Germany is subsidised until 2018; lignite production does not need
subsidies and more than 90 is used for electricity and heat generation Poyry, 2013. In 2011 and 2012, old coal-
ired power plants with a total capacity of 1,700 MW were permanently closed down. However, also 2 new
coal-ired plants with a total capacity of 2,700 MW started production in 2012, 2 plants with a total capacity
of 1,500 MW started production in 2013, and 8 are currently 2014 under construction, which will provide a
total additional capacity of 7,000 MW in the coming year Sourcewatch, 2013a; Bundesnetzagentur, 2014.
In the Netherlands, three new coal-ired power plants with a total capacity of 2,700 MW started production in
2014. These plants will not replace closed down old power plants, but have been built in anticipation of the
closure of some old plants, for which complying with the emission standards set in the Large Combustion Plants
Directive
LCPD, 2011 is expensive. For example, 85 of Poland’s power generation is supplied for about 85 by
coal-ired plants, of which two thirds are over 30 years old CCE Bankwatch, 2013. In most EU Member States, these
new coal plants are said to be ‘CCS ready’, i.e. the infrastructure would allow for a carbon capture and
storage CCS facility next to the power plant.
The United Kingdom has not constructed any new coal- ired power plants over the last decade DECC, 2012.
Moreover, it has already converted three plants to biomass with a total capacity of 5,160 MW, and closed
another four coal-ired plants with a total capacity of 14,670 MW Sourcewatch, 2013b; Reuters, 2012d;
Airlie, 2011.
Spain has also decreased the share of coal in its power generation, considerably, and continues to do so by
quadrupling the tax rate on coal and not renewing the subsidies for such coal-ired plants. Since 2010, Spain has
been delivering more than 20 of its electricity from renewable sources by widespread deployment of wind
power and is investing further in wind and solar technologies Poyry, 2013. Recently, Spain has made a
series of large legislative changes to its renewable energy policy, in order to control the country’s growing electricity
tarif deicit, turning renewable energy into a fully regulated business resulting in a levelling-of of further
growth Economist, 2013b; Ernst and Young, 2012.
The European Council gives strategic orientations with respect to consensus on ETS, non-ETS, interconnections
and energy eiciency and agreed in October 2014 on the 2030 Climate and Energy Policy Framework EC, 2014h,
commiting mainly to: – A binding target of at least 40 domestic reduction in
GHG emissions by 2030 compared to 1990, delivered by the European Union collectively through reduc-
tions in the ETS and non-ETS sectors; – A binding target of at least 27 in 2030 is set for the
share of renewable energy consumed collectively in the European Union and 27 for improving the
energy eiciency; – To ensure the achievement of a minimum target of
10 of existing electricity interconnections by 2020; – To increase the EU’s energy security for electricity
and gas. To achieve the overall 40 target, the sectors covered by
the EU emissions trading system EU ETS would have to reduce their emissions by 43 compared to 2005.
Emissions from sectors outside the EU ETS would need to be cut by 30 below the 2005 level. The new Energy
Eiciency Directive entered into force in December 2012 and establishes a common framework of measures for
the promotion of energy eiciency within the Union in order to ensure the achievement of the Union’s 2020 20
headline target on energy eiciency and further improvements towards 2030 EC, 2014c. The European
Council agreed to review by 2020 the 2030 targets, which remain so far indicative. The willingness of all 28 EU
Member States to go together for 40-27-27 by 2030 sends a clear message for the next UNFCCC round of COP21 in
Paris, 2015. The unanimous backing of the Council on the 40 reduction target, including a 43 target compared
to 2005 for the ETS sectors also sends a political signal to the market that the EU ETS remains a major greenhouse
gas reduction mechanism for the European Union.
During the irst two phases, the EU ETS struggled by oversupply and falling carbon prices – up to one order of
magnitude. In addition, so-called windfall proit increased due to free allowances given through
grandfathering to sectors that can include these potential costs in their price seting. In the irst phase
from 2005-2007 oversupply was a genuine issue because the Member States had allocated too much, while in the
second period 2008-2012 the oversupply was due to a larger than expected emissions drop caused the
economic recession. During the third EU ETS phase from 2013 to 2020 auctioning of allowances for the power
generation was introduced progressively from January 2013 onwards. Some estimates suggest that the current
surplus of allowances amount to 1.5 billion – 2 billion tonnes of carbon and might even worsen before the end
of Phase 3 in 2020. The surplus prompted the implementation of ‘backloading’, involving the removal
of 900 million allowances from the market in 2014–2016, which will be reintroduced in 2019–2020, when allowance
prices are expected to be more resilient EC, 2014b.
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A new instrument, rendering the supply of emission allowances on auction more lexible and making the ETS
more resilient to any future large-scale event that may severely disturb the supply–demand balance was
considered: a Market Stability Reserve of CO
2
MRS, which will be introduced from 2021 onwards EC, 2014b.