60 5.4 Exemptions for heat from CHP District Heating Planning provisions which enforce ınandatory connection to District Heating, known for exaınple froın Denınark or Gerınany, can coınpensate its potential coınpetitive disadvantage on the heat market coınpared to sınall boilers. Yet, such regulatory ıneasures do not exist in ali countries. CO2 emissions froın heat produced in District Heating systems should therefore be partly or entirely exempted from the need to hold allowances. Altematively, allowances to emissions corresponding to the production ofthis heat could be allocated for free (ZEW/Öko-Jnstitut (2002) and Ministeriuın für Uınwelt, Nanır und Forsten des Landes Schleswig-Holstein (2002)). This measure should help District Heating stay competitive vis-a-vis individual heating systems. The incentive to convert froııı heatonly systems to CHP would not be lost, because this conversion would lead to additional income from the sales ofthe generated electricity and offreed allowances. 6. POTENTIAL REGULATORY MECHANISMS There are two levels where the ınechanisms discussed above should be established: 1 . The proposed European eınissions trading Directive should possibly be amended with requirements for the treatment of CHP during the Eıııissions Tradiııg Scheınes' pilot phase. 2. Member States should devise regulations and procedures in those areas which the Directive leaves to their discretion. Major chaııges to the emissioııs tradiııg Directive are uıılikely giveıı the advaııced stage of decision-making. Yet, it would offer the chance ofa coherent approach and could ensure that negative impacts on CHP at Member State level are avoided. The Europeaıı Parliament's proposed amendment that Meıııber States should "ensure that indirect mechanisms to reduce CO,, such as combiııed heat and power generatioıı, receive consideratioıı in natioııal allocatioıı plaııs" goes in the saıne direction. Taking the right measures at natioııal level, within iııdividual Member States, is likely to be the most iınportaııt way to make sure the eınissions trading treats CHP fairly during the pilot period. National governıııents aııd CHP stakeholders, such as ııatioııal associations for cogeııeratioıı, will have a key respoıısibility in taking the right steps. 6.1 Regulatory mechanisms at European level 6.1.1 Amendments to the Emissions Trading Directive O Amendıneııt 97 of Parliaınent introduces a ııew paragraph la into Article 4 ofthe Directive stating that "using the Europeaıı Guidance on the Carbon Equivaleııce, which shall be prepared by the Comınission prior to the scheıne's entry into force, Member States shall take account of the corresponding carbon value of savings achieved through coıııbiııed heat and power generation investıneııts ( . . .) to operators". This ameııdınent seems to reflect ideas suggested in section 5.3, i.e. a method to determine and take into account CO2 savings froııı CHP. it could be coıııpleıneııted with a requiremeııt that the carbon value of savings from CHP should be calculated on the hasis ofthe methodology to deterıniııe the effıciency of CHP installatioııs in the Cogeııeratioıı Directive. O Annex ili ofthe proposed Directive, settiııg the criteria for national allocatioıı plans, could be aınended in a nuıııber of ways, including - a requirement that greenhouse gas emissioııs savings from CHP installations, coınpared with the separate production of heat and electricity, should be taken into account when deterınining emissions froın a specific site. - The explicit opportunity that, in order to encourage cogeneration, the plan may restrict the allocation ofallowances to the useful output of heat and/or electricity geııerating iııstallations. - An opportuııity to exempt heat output of existing or new District Heating installations from the need to hold greenhouse gas emissions allowances. 6.1.2 Amendments to the proposed Cogeneration Directive O The Preaınble could be aınended with a new recital stating that a coherent approach to determine the efficiency of CHP is required for the Directives on cogeneration and eınissions trading. This point could equally be ınade in the existing Recital 1 1 . O Article 5 ("Effıciency Criteria") could be aınended by a paragraph stating that the methodology to deterınine tlıe efficiency gain from CHP should be used to calculate the carbon savings from CHP under tlıe provisions set out in the Emissions Trading Directive 6.1.3 CHP as part ofa Project-based Mechanism O The creation ofa flexible project-based ınechanism to complement the Emissions Trading Scheme is currently under consideration. Similar to the UN's flexible mechanisms it could allow those subject to the emissions trading regime to realise their CO2 reductions through third-party projects. l f such a mechanisın is established, CHP should become part of it. This could broaden the scope of potential investors into a variety of CHP projects. For instance, electricity coınpanies could have ıııore incentives to becoıne energy service companies (ESCOs) realising small-scale and micro-CHP projects in households and SMEs. Again, this would require creating a methodology to determine the CO2 savings which such CHP projects realise. ECOGENERA TION WORLD
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