The acknowledgment that developed nations are historically responsible for the increase in the Greenhouse Gas (GG) concentration and the active awareness that action in this domain was urgent led to the approval on December 11, 1997 of the Kyoto Protocol, where goals were established for the period between 2008 and 2012, taking as their reference point 1990 levels of emissions. The European Union, as a supra-national organization, committed itself to a global 8% reduction goal and Portugal set itself the cap of a 27% increase in its emissions.
Only after 7 years, on November 18, 2004, did the number of countries that ratified the Kyoto Agreement finally reach 55% of total emissions due to ratification by Russia. Ninety days later, the Kyoto Protocol correspondingly came into effect Ð on February 16, 2005 Ð it was settled that the countries that had ratified the document were now to accomplish the goals established.
With the purpose of making the 8% global reduction goal cost effective, the European Union, through Directive 2003/87/CE of October 13, 2003 (Directive Link) created the European Union Emissions Trading Scheme (EUETS). This directive was transposed into national law by Decree-Law No. 243 A/2004 of December 31, as amended by Decree-Law No. 72/2006 of March 24, which remains in effect.
Thus, companies involved in emissions trading thereby had to include a new variable in their production processes, carbon, now associated to a market value. Therefore, it is extremely important to the financial health of the company to ensure the appropriate management of this variable.
The monitoring and communication rules concerning the EUETS were defined, between 2005 and 2007, by Resolution 2004/156/CE and, from 2008, by Resolution 2007/589/CE, which is now in effect.
Between December 3 and 14, the COP 13 (Council of Parties) was held in Bali, which ended with the adoption of a roadmap setting out the course for the negotiation process, to be concluded in 2009, concerning a new agreement for Climate Change after 2012, when the Kyoto Protocol expires.
EUETS has a "Cap and Trade" functioning system, in which is settled, in the so-called National Allocation Plan (NAP), a global emissions amount for each member state and an allowance value for each participant installation. Over the course of the timeframe, installations may buy or sell their allowances (equivalent to a ton of CO2) according to the allowances allocated and the emissions actually emitted.
EUETS covers more than 12,000 installations in twenty-five member states and was launched on January 1, 2005.
1st Period: 2005-2007 (NAP I)
Global Amount for Portugal: 39,7 Mt of CO2/year
Number of installations: 245
2nd Period: 2008-2012 (NAP II)
Global Amount for Portugal: 34,8 Mt of CO2/year
Number of installations: 228
The thermo-electric sector represents almost half of the total allowance amount available for Portugal, followed by the cement and lime sector with 24% and refining accounting for 11%. The ceramics sector is attributed the lowest amount of allowances despite being the sector with the largest number of installations (75 in a total of 219), which is related to the fact that the majority are small-scale, having, therefore low CO2 emission levels.
"Indirect and technically related to the process" sources, for example, stove burners, heaters for baths, heaters for social areas, are not considered.
The National Allocation Plan was approved by Resolution of the Council of Minister and defined the maximum allowance ceiling assigned to the country as well as the reserve amount for new entrants. Subsequently, the annual assignment of allowances to each installation under EUETS was settled by Joint Order.
Therefore, by February 28 of each year throughout the period currently in effect, the APA deposits in the Portuguese Registry of Emission Allowances (PREA) account of each operator the respective assigned annual amount.
All EUETS installations must have a Title (TEGEE) defining installation emission sources, fuels and raw materials consumed, measurement equipment, the methodology levels in practice and emission control and monitoring procedures.
Each year, the installations must monitor their emissions and report on them (RGGE Ð Report on Greenhouse Gases Emission). The installations are annually subject to verification made by an entity approved by the Portuguese Agency for the Environment (PAE) for such purpose. During that verification process, the RGGE is assessed, as well as the compliance of the TEGEE's dispositions.
Through to March 31 of the year subsequent to the emissions made, the installations must submit the REGEE signed by the verifier, as well as a Declaration of Verification and the Verifier's Report by means of the Internet site (e-sipo) set up for submitting data and documents to the PAE.
Finally, until April 30 of each year, the installation must submit the allowances corresponding to the previous year's emissions (verified amount) through the PREA.
Operator obligations: legal compliance
Operator needs: allowance portfolio management, regular control of CO2 emissions (with short, medium and long term projections), reduction of CO2 emissions, incorporation of CO2 into new investment decision making.