Application of Sustainability Criteria in the EU ETS

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Title: Application of Sustainability Criteria in the EU ETS
Author: Inkinen, Ville
Other contributor: Helsingin yliopisto, Oikeustieteellinen tiedekunta
University of Helsinki, Faculty of Law
Helsingfors universitet, Juridiska fakulteten
Publisher: Helsingfors universitet
Date: 2014
Language: eng
Thesis level: master's thesis
Discipline: Land, water and environmental law
Maa-, vesi- ja ympäristöoikeus
Jord-, vatten och miljörätt
Abstract: In June 2012, the Commission introduced the Monitoring and Reporting Regulation (601/2012) by virtue of Article 14(1) of the ETS Directive (2003/87/EC). In recital 2 of the MRR the Commission puts forward an interpretation of the Renewable Energy Directive which marks a major policy change. According to the interpretation, the sustainability criteria for biofuels and bioliquids in Article 17 of the Renewable Energy Directive must be fulfilled as a precondition to the rule in Annex IV of the ETS Directive according to which emissions from the use biomass shall be considered zero. Applying the sustainability criteria in the Renewable Energy Directive results from the interpretation that biomass zero-treatment constitutes ‘financial support’ within the meaning of Article 17(1)(c) of the Renewable Energy Directive. Presently, due to the limited use of biofuels and bioliquids in the Emissions Trading sector, the policy change is of minor significance. However, the Commission is preparing a proposal to introduce sustainability criteria also for solid and gaseous biomass in heating and cooling and electricity. The proposal is expected to be formally tabled in fall 2013. In many Member States, emissions from the use of solid biomass are significant as compared to the current emissions in the whole Emissions Trading sector, and thus the economic consequences can be major. The treatment of emissions from solid biomass is also likely to have major implications for the Member States in fulfilling their binding national targets under the Renewable Energy Directive. Firstly, this study analyses the described interaction between the ETS Directive and the RED. The main finding in this regard is that the interpretation whereby biomass zero-treatment would constitute ‘financial support’ within the meaning of Article 17(1)(c) of the Renewable Energy Directive is highly problematic. Secondly, the competence of the Commission in amending the Annex IV of the ETS Directive is examined. This study posits that the Commission does not have the competence to modify biomass zero-treatment to the extent of imposing a precondition to fulfil the sustainability criteria. Lastly, the upcoming sustainability criteria for solid and gaseous biomass will be briefly discussed. The upcoming criteria will resemble those for biofuels and bioliquids with some alterations. Pivotal with respect to biomass zero-treatment will be the wording of the upcoming provisions. If the norm requiring fulfilling the criteria to be eligible for financial support will be formulated in the same manner as in the Renewable Energy Directive, the interpretation in recital 2 of the Monitoring and Reporting Regulation could have the result that the upcoming extension will apply in the Emissions Trading Scheme automatically.

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