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Determination of the total quantity of allowances to be allocated



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1.3 Determination of the total quantity of allowances to be allocated


1.3 What is the total quantity of allowances to be allocated (for free and by auctioning), and what is the proportion of overall emissions that these allowances represent in comparison with emissions from sources not covered by the emissions trading Directive? Does this proportion deviate from the current proportion of emissions from covered installations? If so, please give reasons for this deviation with reference to one or more criteria in Annex III to the Directive and/or to one or more other objective and transparent criteria.

The total quantity of allowances to be allocated in 2007 is 49,651 million tonnes СО2. Total national greenhouse gas emissions in 2007 are projected to be 80,763 million tonnes СО2 eqv with existing measures and policies. The allocation of allowances represents 61.5% of the overall emissions for 2007. It is expected that allowances for delayed installations, which succeed to register before the submission of BNAP to the EU, and allowances for installations, which will register later and for new entrants will be added to that quantity. Thus, the percentage could increase to 64-65%. In 2003, the emissions from installations covered by the Directive were 61% of overall national emissions. The increase in emissions will be a result of the restoration of the construction materials industry that started in 2003 and is constantly increasing by over 10% per year. As a result, a trend has been observed toward increase in emissions and carbon intensity of the GDP. In 2005, this trend continued because of the implementation of a range of infrastructure projects postponed for more than 15 years during the transition period. A two-figure growth of the production volume of cement, lime and other construction materials took place. Unsurprisingly, this growth has an impact on the volume of GHG emissions covered by the Scheme. In addition, at the end of 2006, under an agreement between the Bulgarian Government and the European Union, two nuclear power generation units with 880 MW total capacity and producing over 12% of the production of electric energy in the country, will be closed. The energy compensation will be on the account of combustion of lignite coals. An increase of GHG emissions is expected of 5 million tonnes (6%). In reality, the increase in emissions will be smaller, because in 2007 a rehabilitation of some capacities in the thermal power stations will be carried out and therefore, their specific emissions will be reduced. Also, after the closure of nuclear power capacities, the export of electric energy will considerably decrease.

The total quantity of allowances to be allocated to participants in the Scheme is calculated as the volumes of emissions at national and sector level determined through macroeconomic forecast and corrected with the calculative reserves, namely: at a national level – a new entrants, and a delayed installations reserve; in the “Energy activities” sector – a reserve for new co-generation, a reserve for compulsory measures, a reserve for standardisation of degrees/day of heating companies to compensate reduced consumption due to the higher than average temperature during the base years, and a reserve for cancellation of allowances for early credits and avoidance of indirect double counting.



Macroeconomic forecast for GHG emissions in the period 2005-2012 based on “business as usual” scenario

In determining the threshold emission limits/annum from participating installations, the projection for overall national GHG emissions comprising all anthropogenic sources of emissions plays a central role. In order to prepare a representative estimate, considerable amount of work was performed within the short deadlines set for developing the NAP. As of 23 January 2006, the team had in place a projection for GHG emissions, based on the forecast macroeconomic indicators of the country.

The methodology used for the forecast includes the following steps:

1. Macroeconomic forecast for the growth rate of GDP and GVA for the country and by sectors for both covered and non-covered by the Scheme economic sectors, including the following groups of industries:



  • Ferrous metallurgy

  • Cement production

  • Lime production

  • Glass production

  • Ceramics production

  • Cellulose and paper production.

2. Elaboration of a macroeconomic assessment of the relation of the GVA growth with the changes in the production volume in above groups of industries.

3. Preparation of a forecast for the combustion energy balance of the country, including:



  • A forecast for the final consumption of fuels and energy by sectors for both covered and non covered sectors, also by groups;

  • A plan for least cost development of the electric power industry;

  • A forecast for primary gross consumption of fuels and energy.

4. Preparation of a detailed projection for the GHG emissions with a level of detail corresponding to the level of detail in the forecasts under the above three points.

5. Assessment of the effect of adopted policies and measures to reduce CO2 emissions in not covered sectors.

The approach applied to the preparation of the above mentioned forecasts is “business as usual”. This approach does not take into account new measures, which are still not adopted as official state policy and are especially directed to the reduction of emissions, particularly when the purpose of this reduction is emission trading. This means, for example, that the assumption is that energy efficiency, renewable energy sources and co-generation will develop on the basis of the usual market mechanisms. The reduction of emissions will be stimulated through emission trading and the reserve for new entrants determined in the NAP.

At the various stages of the preparation of the forecast, the work has been performed by the AEAF, NSI and MEE, with the assistance of Bulgarian and Dutch consultants. Information from other ministries and agencies has been used as well, in order to cover all sectors of the industry, agriculture and forestry, transport, services, households, public sector and waste.



The forecast is based on the Government’s Programme for ensuring a rate of 5.5% GDP growth. The main macroeconomic indicators are presented in the Table below.

Table 5. Forecast for the GDP growth and production volume, billion leva

Year

2005

2006

2007

2008

2009

2010

2011

2012

GDP, prices as of 2003

38,511

40,629

43,026

45,565

48,117

50,643

53,302

56,020

Actual GDP growth, %

5,6

5,5

5,9

5,9

5,6

5,25

5,25

5,1

GVA, prices as of 2003

33,595

35,443

37,570

39,899

42,213

44,450

46,984

49,615

Including:

























services

19,993

21,093

22,358

23,744

25,121

26,453

27,961

29,527

industry

9,904

10,448

11,075

11,762

12,444

13,104

13,850

14,626

agriculture and forestry

3,699

3,902

4,136

4,393

4,648

4,894

5,173

5,463

Production volume, current prices

























Industrial enterprises

32,356

36,322

40,311

44,437

49,239

53,852

59,127

64,760

Construction enterprises

5,081

5,653

6,141

6,627

7,191

7,702

8,283

8,889

Primary energy

4,499

4,924

5,312

5,687

6,114

6,482

6,891

7,300

The National Electrical Company (NEK), pursuant to the Energy Act, has prepared a forecast for the consumption and production of electric energy until 2012. The expected average annual growth of gross energy consumption is about two times lower than the GDP growth (2.9% and 5.5%, respectively). Data is summarised in Table 6.



Table 6. Forecasted energy balance

Year

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Production of electric energy, GWh

42 701

42 546

41 620

44 259

40 770

40 400

40 980

42 680

46 090

48 630

47 310

Consumption in the country, GWh

36 406

37 057

35 741

36 617

36 770

37 410

38 310

39 130

40 530

42 060

43 140

Maximum load, MW

6 768

6 717

6 394

6 502

6 930

7 100

7 240

7 380

7 540

7 770

7 950

Export, GWh

6 295

5 489

5 879

7 642

4 000

2 990

2 670

3 550

5 560

6 570

4 170

NEK prepared also a plan for the functioning and development of the electric energy system. The plan envisages closing some of existing capacities and opening new capacities. The least cost plan allows determining the consumption of fuels for production of electric energy in the thermal power plants and co-generation plants. Projections for GHG emissions from TPP and co-generation have been prepared, based on the forecast for used fuels for production of electricity and heating:



Table 7. Projection for GHG emissions from TPP and cogeneration

 Year




2007

2008

2009

2010

2011

2012

Condensing plants

Gg.

22 326

22 415

24 028

27 580

30 252

29 086

Co-generation plants

Gg

9 123

9 210

9 299

9 494

7 884

8 002

The statistical analysis of production volumes by sectors is used to determine the following forecast changes in production volumes until 2012 of functioning plants in the sub-sectors with installations covered by the emission trading scheme:
Table 8. Index of production volumes of sectors participants in the scheme (except new entrants and sleeping installations), 2003 =1

Sector

2004

2005

2006

2007

2008

2009

2010

2011

2012

-heating – public sector

1,037

1,102

1,166

1,231

1,295

1,359

1,424

1,488

1,553

-heating for industrial purposes and other CP, incl.:

0,000

0,000

0,000

0,000

0,000

0,000

0,000

0,000

0,000

Production of chemical products and rubber

1,111

1,182

1,250

1,316

1,380

1,442

1,503

1,562

1,621

Production of food and beverages

1,058

1,119

1,179

1,238

1,297

1,356

1,415

1,473

1,531

Production of wood material and wood articles thereof (except for wooden furniture)

1,029

1,142

1,254

1,366

1,479

1,591

1,704

1,816

1,929

Production of textile and textile articles (except for apparel)

1,081

1,173

1,265

1,357

1,449

1,540

1,632

1,724

1,816

Production and casting of non-ferrous metals

0,986

1,019

1,049

1,076

1,101

1,124

1,145

1,165

1,184

Production of machines, equipment and household appliances

1,053

1,106

1,155

1,200

1,241

1,281

1,317

1,352

1,385

Healthcare and social activities

1,037

1,102

1,166

1,231

1,295

1,359

1,424

1,488

1,553

Agriculture, hunting and related services

1,037

1,102

1,166

1,231

1,295

1,359

1,424

1,488

1,553

Distribution of natural gas

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

Refineries and oil products

1,060

1,124

1,191

1,262

1,338

1,419

1,504

1,594

1,689

Cement production

1,084

1,168

1,252

1,336

1,420

1,504

1,588

1,672

1,756

Lime production

1,084

1,168

1,252

1,336

1,420

1,504

1,588

1,672

1,756

Cellulose and paper production

1,143

1,285

1,428

1,570

1,713

1,855

1,998

2,140

2,283

Glass production

1,038

1,070

1,098

1,123

1,145

1,165

1,183

1,200

1,216

Ceramics production

1,027

1,057

1,083

1,107

1,129

1,149

1,167

1,185

1,201

Ferrous metallurgy

1,022

1,050

1,074

1,096

1,117

1,136

1,154

1,170

1,186

Based on those forecast indices and emissions from sectors covered by the Scheme for 2003, the projected emissions have been determined.



Table 9. Macroeconomic projection “business as usual” for anthropogenic GHG emissions, Gg.

 Year

2007

2008

2009

2010

2011

2012

Obligation under the Kyoto Protocol, Gg CO2 eqv.

-

127 283

127 283

127 283

127 283

127 283

Overall anthropogenic GHG emissions in the country, Gg CO2 eqv.

79 805,25

83 829,92

88 870,19

97 707,95

101 544,81

102 927,10

Overall GHG emissions of sectors not covered by the Scheme, Gg CO2 eqv

24 815,00

26 501,00

27 424,00

28 523,00

29 181,00

29 778,00

Overall GHG emissions of sectors covered by the Scheme, Gg CO2 eqv

54 990,25

57 328,92

61 446,19

69 184,95

72 363,81

73 149,10

Overall CO2 emissions of sectors covered by the Scheme, Gg CO2

50 413,42

52 544,80

56 302,00

63 366,83

66 205,67

66 934,66

Energy activities, including

 

 

 

 

 

 

-electric power

22 326,04

22 415,13

24 028,10

27 580,62

30 252,25

29 086,36

-combined production of heat and electric power

9 123,85

9 210,26

9 299,67

9 494,08

7 884,58

8 002,88

-heating – public sector

905,77

953,17

1 000,57

1 047,97

1 095,37

1 142,77

-heating for industrial purposes and other CP, incl.:

 

 

 

 

 

 

Production of chemical products and rubber

432,05

452,96

473,37

493,35

512,98

532,31

Production of food and beverages

601,31

630,16

658,91

687,39

715,96

744,34

Production of wood material and wood articles thereof (except for wooden furniture)

208,52

225,68

242,84

260,00

277,15

294,31

Production of textile and textile articles (except for apparel)

188,31

201,05

213,80

226,55

239,30

252,04

Production and casting of non-ferrous metals

156,68

160,29

163,63

166,74

169,65

172,39

Production of machines, equipment and household appliances

105,21

108,86

112,28

115,51

118,56

121,46

Healthcare and social activities

353,20

371,68

390,17

408,65

427,13

445,62

Agriculture, hunting and related services

219,18

230,65

242,12

253,59

265,06

276,53

Distribution of natural gas

219,00

219,00

219,00

219,00

219,00

219,00

Refineries and oil products

2 389,74

2 533,13

2 685,11

2 846,22

3 017,00

3 198,01

Cement production

4 588,08

4 933,63

5 376,48

7 139,70

7 359,82

7 579,94

Lime production

1 596,71

1 692,56

1 779,31

1 866,07

1 952,82

2 039,57

Cellulose and paper production

530,72

582,32

663,69

706,58

748,70

788,49

Glass production

371,94

375,68

379,81

383,57

387,04

388,42

Ceramics production

199,20

202,96

206,90

210,12

213,12

215,95

Ferrous metallurgy

5 897,92

6 045,62

6 166,23

6 261,12

6 350,20

6 434,28

Unknown new entrants

0,00

1 000,00

2 000,00

3 000,00

4 000,00

5 000,00



Corrections of the macroeconomic projection “business as usual” for compulsory measures that increase emissions and for reporting the amount of emission reductions under JI projects


The macroeconomic forecast “business as usual” does not take into account the impact of non economic factors on GHG emissions. Those factors results from the official Government policy and have a direct effect on covered installations. The factors are considered through corrections of the forecast.

The correction for compulsory measures which increase emissions is applied with the purpose to issue additional allowances to installations which for the period 2007–2012 will introduce compulsory measures that will increase emissions – for example, desulphurization installations that use lime or limestone.

The volume of the correction for each year “j” is defined on the basis of planned reduction of emissions of pollutants (mainly SO2) under the international obligations of the country and is equal to the volume of emissions that will be generated as a result of the application of the measures. These emissions increase the emissions in rows 1, 3 and 4 in Table 11.



Correction for reporting the volume of emission reductions (including early credits) under approved and supported JI projects Vcr (credits)

The assigned amount units for the country reflect the admissible emissions of the country under the Kyoto Protocol. “Joint Implementation” projects, within which early credits have been approved, should be considered in the determination of the change in admissible emissions for the country. Emission reductions which have been approved or supported for transfer to other countries in the framework of JI projects as early credits, reduce the volume of AAUs for the period 2008-2012. Emission reduction units as a result of already approved and supported JI projects are accounted in the projections for GHG emissions, therefore, they also should be considered here as a reduction of assigned amount units, following the guidelines of the European Commission according to which those allowances should not be reallocated for a second time.



The annual correction is equal to one fifth of the sum of already approved and planned for approval early credits of all JI projects. It is accepted that the correction for early credits will be expressed as a correction of the obligation under the Kyoto Protocol.

Table 10. Correction of the macroeconomic projection



Year

2007

2008

2009

2010

2011

2012

1.

Compulsory measures, Gg CO2 eqv.

330,53

475,82

512,08

560,99

729,91

899,81

2.

Approved early credits JI, Gg CO2 eqv




624,50

624,50

624,50

624,50

624,50

3.

Supported early credits JI, Gg CO2 eqv




256,19

256,19

256,19

256,19

256,19

4.

Approved emission reductions JI, Gg CO2 eqv




1 616,57

1 616,57

1 616,57

1 616,57

1 616,57

5.

Supported emission reductions JI, Gg CO2 eqv




703,60

703,60

703,60

703,60

703,60

6.

Total correction credits JI, Gg CO2 eqv




3 200,87

3 200,87

3 200,87

3 200,87

3 200,87

The correction for compulsory measures (Table 3, p.1.2) affects figures in Table 9 as an increase in emissions for the period 2007 – 2012, and the correction for approved JI projects – as a reduction of the obligations under the Kyoto Protocol. Thus, the corrected projection for GHG emissions is calculated (Table 11):



Table 11. Corrected macroeconomic projections for anthropogenic emissions of greenhouse gases with accounting compulsory measures and early credits



Year

2007

2008

2009

2010

2011

2012

 

Corrected obligation under the Kyoto Protocol, Gg CO2 eqv.

- *

124 082

124 082

124 082

124 082

124 082

1

Overall anthropogenic GHG emissions in the country, Gg CO2 eqv.

80 136

84 306

89 382

98 269

102 275

103 827

2

Overall GHG emissions from sectors not covered by the Scheme, Gg CO2 eqv

24 815

26 501

27 424

28 523

29 181

29 778

3

Overall GHG emissions from sectors covered by the Scheme, Gg CO2 eqv

55 321

57 805

61 958

69 746

73 094

74 049

4

Overall emissions of CO2 from sectors, covered by the Scheme, Gg CO2

50 744

53 021

56 814

63 928

66 936

67 834

5

Free quantity of emission rights, Gg CO2




39 776

34 700

25 813

21 807

20 255

* In 2007, the country does not have obligation under the Kyoto Protocol, because the First period of fulfilment of obligations starts in 2008.

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