Section C. Estimated Emissions Adjusted for Trading Within the EU Emissions Trading System (EU ETS)
What is the EU Emissions Trading System (EU ETS)?
Launched in 2005, the EU ETS is an EU policy aimed at mitigating climate change by limiting greenhouse gas emissions from industry sectors and aviation. Participants include more than 11,000 heavy energy-using installations in power generation, the manufacturing industry and airlines across 31 countries in the European Economic Area (EEA).
How does it work?
The EU ETS is a 'cap and trade' system. A limit (cap) is placed on the overall volume of emissions from participants in the system. Within the cap, organisations receive or buy emissions allowances which they can trade (1 emissions allowance equals 1 tCO2e). Each year, an organisation must surrender enough allowances to cover its emissions. The cap is reduced each year so that by 2020, the volume of emissions permitted within the system will be 21% lower than in 2005. The reducing cap alongside the financial considerations of trading emissions allowances, incentivises organisations within the system to find the most cost effective way of reducing their emissions.
Scotland in the EU ETS
The EU ETS contributes to delivering Scotland's Climate Change Targets through incentivising the reduction in emissions from Scottish organisations participating in the system. In 2012, there were 86 Scottish installations that surrendered emissions allowances in the EU ETS.
What are 'traded emissions' and 'non-traded emissions'?
In the greenhouse gas inventory, source emissions can be categorised into traded and non-traded. Traded emissions capture those that come from installations covered by the EU ETS, whereas Non-traded emissions are those which do not fall within the scope of the EU ETS. The emissions from some sectors, such as the residential sector, are completely non-traded whereas emissions from other sectors, such as energy supply, business and industrial process are a combination of traded and non-traded. For 2012, CO2 emissions from domestic and international aviation are estimated as being within the traded sector.
What are adjusted emissions and the Net Scottish Emissions Account (NSEA)?
The Scottish climate change targets are assessed against the Net Scottish Emissions Account (NSEA), which is detailed in the Climate Change (Scotland) Act 2009 and has been reported for the years 2010, 2011 and 2012 as part of the Act. The NSEA accounts for the greenhouse gas emissions from sources in Scotland, Scotland's share of emissions from international aviation and international shipping, the effect of any relevant emissions removals (e.g. "carbon sinks" such as woodland) and the effect of the sale and purchase of relevant carbon units (tradable emissions allowances) in the EU ETS.
The EU ETS element of the NSEA is calculated by taking the difference between Scotland's notional share of the overall EU ETS cap and the number of emissions allowances surrendered from Scottish installations in a given year. This amount is then added to non-traded net emissions to get the NSEA.
The NSEA formula is as follows:
For 2012 emissions, the calculation of the NSEA are known as adjusted emissions, as they are adjusted to take into account of trading with the EU ETS. This adjustment takes the form of a 5-step process, which is outlined in Chart C2.
Calculation of adjusted emissions
Take the Scottish greenhouse gas emissions from Scottish greenhouse gas inventory (for 2012, it is 52.895 Mt CO2e). This figure has been comprised of:
- traded emissions units surrendered from Scottish Environment Protection Agency (SEPA) for fixed installations (20.349 Mt CO2e)
- an estimation of surrendered CO2 emissions from domestic and international aviation (1.456 Mt CO2e)
- non-traded emissions from sources such as residential emissions (31.090 Mt CO2e)
Remove an amount relating to surrendered emissions as well as an estimate of surrendered emissions from aviation. This amounts to 21.805 Mt CO2e
Add on the value of the EU ETS cap which is the specified amount within The Carbon Accounting Scheme (Scotland) Regulations 2010. The specified amount is the amount of permitted CO2e emissions by the traded sector for a given year. For 2012, this was 24.659 Mt CO2e.
Adding on the value of the EU ETS cap gives a value of 55.749 Mt CO2e.
At the end of Phase II of the EU ETS in 2012, the UK was required to cancel all allowances which have not been either issued or auctioned by that point. These cancelled allowances have the effect of reducing the overall cap for the whole of Phase II. For presentational purposes, this amount has been distributed evenly over the five years of Phase II, effectively reducing the cap for Scotland by 0.084 MtCO2e each year from 2008 to 2012.
In 2012, the adjusted emissions to take into account of trading in the EU ETS in 2012 is 55.665 Mt CO2e. This is 2.770 Mt CO2e higher than the value of estimated source emissions in 2012.
Scottish Climate Change Targets
Scotland has a number of targets for reducing greenhouse gas emissions contained in legislation, within the Climate Change (Scotland) Act 2009. These targets can be summarised as follows:
The Act creates a statutory framework for greenhouse gas emissions reductions in Scotland by setting an interim target of at least a 42 per cent reduction for 2020, and at least an 80 per cent reduction target for 2050. These reductions are based on a 1990 baseline (1995 for the F-Gases). The Act also requires that Scottish Ministers set fixed annual targets for emissions at least 12 years in advance.
In October 2010 the Scottish Parliament passed legislation setting the first batch of annual targets, for the years up to 2022. Targets for 2023-2027 were set in October 2011, and will continue to be set at 5-year intervals.
The 2012 target is 53.226 MtCO2e.
Achievement of Scotland's targets is measured against the level of the Net Scottish Emissions Account (NSEA). There is a limit on the net amount of carbon units that may be credited to the NSEA in addition to those from the EU Emissions Trading System. The Climate Change (Limit on Carbon Units) (Scotland) Order 2010 specifies that the net amount of carbon units that may be credited to the Net Scottish Emissions Account for the period 2010-2012 is zero. The Climate Change (Limit on Carbon Units) (Scotland) Order 2011 sets limits for the period 2013-2017.
Chart C3 contains data from the latest (1990-2012) inventory, adjusted for trading in the EU Emissions Trading System as well as progress against the 42 per cent and 80 per cent reduction targets. These percentage targets are based on a percentage reduction from the Baseline in the latest inventory.
Chart C4 contains data from the latest (1990-2012) inventory, adjusted for trading in the EU Emissions Trading System. The fixed annual targets are also presented on this chart. The fixed annual targets were set at the time of the 1990-2008 inventory. Emissions adjusted for trading in the EU ETS using the 1990-2008 are shown for context.
National performance framework sustainability purpose targets
In addition to the statutory Climate Change Targets, these statistics are used to monitor progress against the Scottish Government's Sustainability Purpose Targets
There are two targets:
- The long term target (2050) now equates to the target in the Climate Change (Scotland) Act 2009.
- The Scottish Government has also set a short term target to reduce emissions by 2011 compared with a 2006 baseline.
Information on progress towards these targets can be found on the Scottish Government Scotland Performs website.
Effect of the adjustment to take into account of trading in the EU Emissions Trading System
Chart C5 demonstrates the smoothing effect of the adjustment for trading in the EU ETS, for calculation of the Net Scottish Emissions Account (NSEA).
In four of the last 8 years, the adjustment has increased reported emissions, with the latest two years (2011 and 2012) showing sizeable increases from the adjustment.
|No allowance for EU ETS||Total Scottish greenhouse gas emissions (including international aviation and shipping)||75.6||75.4||74.2||70.3||72.0||71.3||67.0||66.7||64.4||63.1||66.8||62.2||60.2||56.3||58.3||52.5||52.9|
|Percentage change from baseline||-0.3%||-1.8%||-7.0%||-4.7%||-5.6%||-11.4%||-11.8%||-14.8%||-16.6%||-11.7%||-17.7%||-20.4%||-25.5%||-22.8%||-30.6%||-30.0%|
|Differences between EU ETS cap and EU ETS surrendered emissions for Scotland||0.6||-4.0||-0.5||-0.8||1.0||-1.0||3.0||2.9|
|Scottish share of net purchases/(sales) by UK Government at the end of Phase I of EU ETS||0.2||0.2||0.2|
|Scottish share of cancelled allowances by UK Government at the end of Phase II of EU ETS||-0.1||-0.1||-0.1||-0.1||-0.1|
|Differences between EU ETS cap and traded emissions for Scotland - adjustment to emissions||0.8||-3.8||-0.3||-0.9||0.9||-1.1||2.9||2.8|
|With allowance for EU ETS||Total Scottish greenhouse gas emissions||75.6||75.4||74.2||70.3||72.0||71.3||67.0||66.7||64.4||63.8||63.0||61.9||59.3||57.3||57.2||55.4||55.7|
|Percentage change from baseline||-0.3%||-1.8%||-7.0%||-4.7%||-5.6%||-11.4%||-11.8%||-14.8%||-15.6%||-16.7%||-18.1%||-21.5%||-24.2%||-24.3%||-26.7%||-26.4%|
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