EU ETS: Rising to the Challenge

01 July 2008
By Daniel Radov

In January 2008, the European Commission published its proposed amendments to the EU Emissions Trading Scheme (EU ETS) for Phase III of the EU ETS for the period 2013-2020. The proposals reflected the Commission's view that there is a need to harmonise implementation of the EU ETS in different Member States (particularly the method of cap-setting and allowance allocation); to increase predictability to provide certainty for investment; and to raise various possibilities for expanding the scope of the scheme and streamline its operation.

In this article, published in Fundamentals of the Global Oil and Gas Industry 2008, NERA Associate Director Daniel Radov examines the potential impacts of the Commission's proposals for the EU ETS on the European refining industry. The article considers the potential effects on refinery margins and concludes that the Commission proposals could reduce margins substantially, with implications for the international competitiveness of European refineries and the attractiveness of Europe as a location for investment. The article compares emissions costs to the cost of shipping refined products to Europe and to European export markets to assess the potential significance of these competitive impacts. Such impacts could threaten the environmental benefit of the EU ETS, by leading to emissions "leakage" from the EU to other countries. Learn more.

Originally published in Fundamentals of the Global Oil and Gas Industry 2008, the official publication of the 19th World Petroleum Congress, by Petroleum Economist (