German coal plant fines would distort EU ETS rules – lawyer

The German plan that requires older lignite coal fired power plants to buy more emission allowances per ton of CO2 is out of line with EU ETS legislation, according to Wolfgang Spieth, a legal expert at Freshfields Bruckhaus Deringer.

The proposed plan is an effort to achieve Germany’s desired target of a 40% reduction in carbon emissions by 2020 compared to 1990 levels.

In order to cut 22m tonnes of CO2 by 2020, the German government is considering making any coal plant that is 21 years or older buy more EU allowances (EUAs) to cover emissions emitted above a certain threshold from 2017 (see EDCM 20 March 2015).

The threshold would be set initially at 7m tonnes CO2 per GW installed and gradually be lowered in the following years. Plant operators would have to buy EUAs for €18-20/tCO2e for emissions above the thresholds.

However, the plan could go against EU ETS legislation, which outlines that one EUA corresponds to one tonne of CO2e, Spieth said.

Each year operators must surrender their allowances by a 30 April compliance deadline. The number of allowances surrendered must equal total emissions from their installation the previous year.

“In my view the current plan is not in line with [EU] ETS legislation”, Speith said.

Initially proposed on 20 March, the German plan has provoked opposition across the country.

The federal states of Saxony, North Rhine Westphalia and Brandenburg now plan to form a working group with the Federal German economic affairs ministry.

A spokeswoman for the country’s federal economic ministry said that a letter was sent to employer associations, and the plan was not an unexpected move. More concrete discussions with companies are due to be held.

“The working group is not a continuous process, but simply a commitment to discuss further”, said the spokeswoman.

The plan will be put under public consultation in May or June, with a legislative proposal to be made before the end of the year. Saloni Sardana