1 risk and chances for the lime industry through the european emissions trading system dipl.-ing....
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Risk and Chances for the Lime Industry through the European
Emissions Trading System
Dipl.-Ing. Andreas von Saldern,
ESolutions GmbH, Germany
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The Europe-wide CO2–Emissions Trading System (ETS) exists since autumn 2004
•It includes installations of energy intensive industries like power stations, steelworks, cement, lime, bricks, ceramic…• Verified reports of CO2-emissions have to be generated, annually• An equivalent number of CO2-Emission Allowances have to be submitted to the authorities• Companies receive less CO2-Emisson Allowances than they need• Lacking CO2-Emission Allowances have to be bought, surpluses can be sold• Sales can be conducted between plant operators (OTC) or via Stock Exchange (e.g. Leipzig, London, Paris…)
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Direct CO2–dependency in Germany
CO2–Emissions of different industries in relation to sales
0
5
10
15
20
lime power(coal)
cement power (gas) steel brick paper NF-metals ceramic glass chemistry refractory
kg
CO
2/€
re
ve
nu
e (
be
fore
em
iss
ion
tra
din
g)
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Trading Periods
• the first trading period lasted 3 years, from 2005-2007
• the second trading period lasts 5 years, from 2008-2012 and
• the third period will last 8 years, from 2013-2020. The basic rules have been fixed for the third period, some important details will be determinied in 2009 and 2010
Reduction Target by the end of 2020: Setting I: -21% compared to the emissions of 2005 Setting II: -30% if an ambitious Kioto II agreement will passed
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Allocated Emission Allowances in the European Emissions Trading System
2083
1525 (-30%)²
2179
1720 (-21%)1
0
500
1000
1500
2000
2500
2005 − 2007 2008 − 2012 2013 − 2020year
MtCO2/year
1st
Trading Period 2nd
Trading Period
1reduction based on 2005 emissions 2if Kioto II occurs
3rd
Trading Period
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CO2-prices for 1st and 2nd trading period differed significantly in 2007
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
Jan. 07 Apr. 07 Jul. 07 Okt. 07 Jan. 08 Apr. 08 Jul. 08 Sep. 08 Dez. 08
€/t CO2
Spot 2007 Dec08 FutureSource: ECX
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Forwarding production from 2008 in 2007 add 24 € profit / ton
emission factor 1,1 t CO2 / t lime
CO2 emissions 11.000 t CO2 / year
CO2 reduction 10%
amount of CO2 reduction 1.100 t CO2 / Year
CO2 price 22 € / t CO2
value of CO2 reduction 24.200 € / year
percentage of revenue 40%
production 10.000 t lime / year
price 60 € / t lime
revenue 600.000 € / year
profitability 10%
profit 60.000 € / year
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What does a 21% reduction requirement mean?
21 % per product at 0% annual growth
42 % per product at 2% annual growth
62% per product at 5% annual growth
since 2005
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Current number of installation covered through the European Emission Trading
SystemCountries Number of Installations
Austria 31
Belgium 294
Czech Republic 394
Denmark 374
Estonia 50
Finland 572
France 1004
Greece 141
Germany 1665
Italy 934
Ireland 106
Latvia 73
Lithuania 98
Luxembourg 14
Malta 2
Netherlands 341
Portugal 212
Romania 217
Slovenia 89
Spain 1006
Sweden 743
United Kingdom 925
EU (total) 9285
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Industries which have to comply with the European Emissions Trading System
Industries covered by the European Emissions Trading System (ETS)
Combustion Emissions from various industries especially utility services
Mineral Oil Refineries
Coke Ovens
Metal Ore Roasting and Sintering
Production of Pig Iron and Steel including Continous Casting
Production of Cement Clinker
Production of Lime
Production of Glass
Manufacture of Ceramic products
Pulp and Paper Production
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The prices for CO2-Emission Allowances are highly volatile
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
Jan. 08 Mrz. 08 Mai. 08 Jul. 08 Sep. 08 Nov. 08 Jan. 09
€/t CO2
Dec 09 Future Source: ECX
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Different price predictions of CO2-Emission Allowances
Analysts predict a significant price increase
Phase II Phase III
(2008-2012) (2013-2020)
Citibank 20-25 EUR/t 20-25 EUR/t (2013-15)
50 EUR/t (after 2015)
Barclays Capital 9 EUR/t (2009) EUAs: 45 EUR/t (2013-20)
20,50 EUR/t (2010-12) CERs: 35 EUR/t (2013-20)
Société Générale 17-20 EUR/t 23 EUR/t in 2013
Deutsche Bank
25-30 EUR/t (fundamental)
<10 EUR/t (temporary)
Fundamental Price (incl. cost of carry of 4%) 48 EUR/t in 2020
Point Carbon 12-35 EUR/t (increasing)
Daiwa House 13-16 EUR/t (increasing)
Source: EET-Mac
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“Process”-emissions can hardly be influenced
Lime production emits 1.0 to 1.9 t CO2/t lime
CO2-emissions which are caused by the lime production
70%
30%
0%
20%
40%
60%
80%
100%
CO2
fuel
dissociation
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The duties of enterprises which have to comply with the European Emissions
Trading System include:
• Monitor their CO2-emissions
• Compose an annual CO2-emissions report
• Let the report be verified through an external accredited verifier
• Submit an according number of CO2-Emission Allowances
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The cost for CO2-Emission Allowances can lead to losses
30
10
10 20
0
30
20
50 6040
Euro/ Product
Euro/tCO2
CO2-price
Con
trib
uti
on
to
pro
fit
EF= emissions factor in t CO2/product
-10
loss EF=0.8
EF=1.0
EF= 1.2
example:
Contribution to profit = 25 €
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Reducing production can become profitable
CO2 - price
€
30
20
10 20
10
40
30
50 6040
Contribution to profit per product
Profit by selling equivalent amount of CO2-Allowances
€/tCO2
Contr
ibu
tion t
o p
rofit
Break even
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What impact does a 10% CO2 reduction have ?
10% reduction of CO2 would lead to 40% increase of profit
• At a price of 22 € / t CO2 (average 2008)
• 1 t CO2 / t lime
• at10% profitability (profit / revenue)
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A holistic CO2-Management offers the best chances
permission allocation of
free EUAs
energy consumption
distribution / production /
planning
purchase of
fuels and commodities
CO2-controlling & risk management
CO2
monitoring & reporting
purchase & sell of CO2
allowances
consideration of CO2 allowances in balances & tax
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Contacts:Dipl.-Ing. Andreas von Saldern
CEO / Accredited Environmental Verifier
Schoppastraße 2D-65719 Hofheim a. Ts., GermanyClose to Frankfurt AirportPhone: +49 (6192) 921 99 –
10Mobile: +49 (170) 911 84 23
E-Mail:[email protected]
Internet: www.esolutions.eu
Dr. oec. Susanne Achilles-Kuhnhardt Director Sales and Marketing
Reinhardtstraße 23 · D-10117 Berlin
Phone: +49 (30) 88 66 37 80Mobile: +49 (171) 33 55 377
E-Mail: [email protected]: www.esolutions.eu