1 Introduction
During the last century the Earth’s average surface temperature has
risen by 0.6 degrees Celsius. It is expected to warm by 1.4 to 5.8
degrees Celsius by the end of this century. The current warming trend is expected to cause extinctions. Many plant and animal species, already damaged by pollution and loss of habitat, are not expected to survive till the next century. Human beings are likely to face mounting impacts such as raising sea level, decrease of drinking water springs and, deserts may expand into existing farmlands. The main reason for growing thermometer is the industrialisation with burning of ever-greater quantities of oil, gasoline, and coal, the destroying of forests and some farming methods which especially causes carbon dioxide, methane, and
nitrous oxide. These activities cause an increasing amount of
‘greenhouse gases’ in the atmosphere. The effect is that the global
temperature is increasing artificially. Global warming involving the entire world which most countries joined an international treaty, under the umbrella of the United Nations, to begin to consider what can be done to reduce global warming. Therefore, in 1997 governments agreed to an addition to the consisting treaty, namely the ‘Kyoto Protocol’ (UNFCCC, 2005).
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Table of Contents
1 Introduction
2 The Kyoto Protocol
3 The European Climate Change Programme
4 Emission trading in Germany: the case of RWE and E.ON
5 Conclusion
Research Objectives and Themes
The primary objective of this assignment is to analyze the implementation and impact of emission trading systems on major energy companies, specifically focusing on the operational challenges and strategic responses of RWE and E.ON within the German market.
- Mechanisms and legislative frameworks of the Kyoto Protocol.
- Development and implementation of the European Climate Change Programme (ECCP).
- Regulatory environment and National Allocation Plans (NAP) in Germany.
- Strategic implications of carbon emission rights for large-scale energy producers.
- Economic analysis of compliance, investment in technology, and carbon credit trading.
Excerpt from the Book
4 Emission trading in Germany: the case of RWE and E.ON
Beside the NAP several governments including Germany have been developing their own law providing guidelines. It affords at 1stJanuary 2005 the implementation of emission trading on national level and to achieve its commitment to reduce carbon dioxide emissions. According to the German law this includes that around 2.400 selected installations are able to receive certificates proportionality to their allowances. As a matter of fact just 1.849 Plants has announced to take part in the first trading period. At this, 67 percent of the plants are assigned to the power industry as shown in the diagram below.
Electric power companies generate the overriding electricity from fossil fuels mainly coal. Coal is burnt to make heat that produces electricity. So the effect of emissions trading is likely to have the greatest impact on facilities with significant amounts of coal and oil-fired generating capacity, such as E.ON and particularly RWE. These two companies are the main producer of electricity in the German power industry with big carbon emissions (Panda, 2004). Appendix C shows a detailed diagram for it. Therefore they have thus been actively preparing themselves for the emissions trading system through taking part on the fist trading period. Therewith it will avoid getting future penalties or other sanctions by National or European monitoring institutions. Another reason is that both have too many coal-fired power stations without any alternative solutions in the short- and medium-term.
The following example shall more precisely show a trade between E.ON and RWE in the German market with actually facts from the 2003 because of its availability. But first of all, every company gets allowances in according to the NAP to meet the emissions target like mentioned before. The allowances in form of electronic credits are issued per company not per unit or per plant. So for the beginning of the first trading period 2005 as specific reduction targets, RWE and E.ON have obtained such credits for the right to emit up to 90 million tonnes of CO2 per year (Fichtner, 2004). Granted that RWE will emit 113 million tonnes of CO2 just like in 2003 (RWE, 2005a), then it has to buy such credits from other facilities like E.ON. If at the same time E.ON will emit 76 million tonnes of CO2 (Datamonitor, 2003), then the company has on the one hand the possibility to sell its 14 million credits through bilateral trades.
Summary of Chapters
1 Introduction: This chapter provides an overview of global climate change, the rise in Earth's average surface temperature, and the role of industrialization in greenhouse gas emissions leading to the Kyoto Protocol.
2 The Kyoto Protocol: This section details the mechanisms established to reduce greenhouse gas emissions by 5 percent, including Joint Implementation, Clean Development Mechanism, and International Emission Trading.
3 The European Climate Change Programme: This chapter discusses the launch of the ECCP in 2000 and the subsequent implementation of the Emission Trading Scheme (ETS) to facilitate carbon dioxide emission reductions in the EU.
4 Emission trading in Germany: the case of RWE and E.ON: This chapter examines the specific German legislative framework and provides a comparative analysis of how RWE and E.ON manage their carbon allowances and trading activities.
5 Conclusion: The final chapter summarizes that while emission trading is a vital policy instrument, it serves as an initial step and requires support from other measures to achieve a transition away from fossil fuels.
Keywords
Emission Trading, Kyoto Protocol, RWE, E.ON, Carbon Dioxide, Greenhouse Gases, European Climate Change Programme, ECCP, National Allocation Plan, NAP, DEHSt, Sustainability, Fossil Fuels, Joint Implementation, Clean Development Mechanism
Frequently Asked Questions
What is the primary focus of this research paper?
The paper focuses on the analysis of emission trading systems with a specific emphasis on how major German power producers, namely RWE and E.ON, navigate these regulations.
What are the core topics covered in the work?
The work covers global warming causes, the Kyoto Protocol, the European Climate Change Programme (ECCP), and the operational implementation of the Emission Trading Scheme (ETS) in Germany.
What is the main research objective?
The objective is to evaluate how emission trading influences the strategies of companies with high carbon footprints and whether these systems encourage a shift toward sustainable energy production.
Which scientific methodology is applied?
The study utilizes a descriptive and analytical approach, examining existing international frameworks, EU directives, and specific case data from German energy companies to assess the efficiency of carbon trading.
What themes are explored in the main body?
The main body examines flexible mechanisms under Kyoto, the implementation of the National Allocation Plan (NAP), the administrative role of the DEHSt, and practical trading examples between RWE and E.ON.
Which keywords best describe this research?
Key terms include emission trading, carbon dioxide reduction, Kyoto Protocol, energy sector, RWE, E.ON, and sustainable development.
How does the DEHSt support the emissions trading process?
The DEHSt manages institutional tasks such as the allocation of allowances, the operation of the national registry system, and the monitoring of emission reports to ensure compliance.
Why are RWE and E.ON particularly affected by these regulations?
As the primary electricity producers in the German market with a heavy reliance on coal-fired power stations, these companies face the most significant impact from carbon emission limits and associated penalties.
- Quote paper
- Yilmaz Seker (Author), 2005, Emissions Trading, Munich, GRIN Verlag, https://www.grin.com/document/135456
