Looking back at the events of 2010
The year 2010 was a rollercoaster for emissions markets, the CDM in general and for nitric acid in particular! Last year started with the pessimistic sentiments stemming from the non-results of COP/CMP in Copenhagen. Meanwhile in the EU an increasingly loud claim to ban CERs from industrial gas projects was gaining grounds while in parallel the benchmarks for free allocation in the EU ETS for nitric acid plants (and other newly covered industry sectors) was under controversial discussion.
Finally, in the fourth quarter of 2010, the pieces of the puzzle all fell into place and at least in some respects a positive picture emerged for the nitric acid industry:
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The European Commission’s proposal to ban CERs from industrial gas projects was published at the end of November - it includes HFC and adipic acid, but not nitric acid projects, not least thanks to several months of intense lobbying work by N.serve, Johnson Matthey and their partners. CERs from nitric acid projects can continue to be used in the EU ETS also in the next EU-ETS trading phase which runs from 2013 to 2020.
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The Cancun Agreement reached in December brought international climate policy back on track and the long-term future for market mechanisms in particular brightened considerably.
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While enough challenges remain for the years to come, we conclude that N2O reductions from the nitric acid plants will remain a part of the most important emission trading markets are looking forward to important decisions that will be taken in the Kyoto policy process during 2011 & 2012.
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However, there are still audible voices calling for even stricter assessment of CDM and JI credits and further bans and restrictions may be looming around the corner for 2013.
NAIG
Based on the experiences from N.serve’s long and intense argument with the European Commission on N2O benchmark levels for the EU fertilizer industry and the ban of industrial gas project types from the CDM, N.serve decided to form the Nitric Acid Interest Group (NAIG): We are more than ever convinced that it is of utmost importance to protect the nitric acid industries’ interests in the emission markets and regulations by means of fostering efficient communication and a strong representation of the industry’s abatement efforts in the political arena of the EU and the UNFCCC. For more details on how to join and what benefits it brings to individual nitric acid plant operators please contact us at contact@nserve.net.
HFC and Adipic Acid N2O ban – how it all happened
On 25 November at 12:00 CET sharp, a long awaited proposal by the European Commission to ban certain types of CERs was published. With great relief and satisfaction we learned that the ban will only affect CERs from HFC-23 and adipic acid N2O projects for the next EU-ETS trading phase (2013 to 2020) – nitric acid N2O CERs will not be affected by this ban!
Industrial gas projects were criticized in general for lacking “environmental integrity”, for generating unreasonably high profits (so called “windfall profits”) and causing “carbon leakage” to occur, a shift of production to non-industrialised countries incentivized by CDM. In the heated discussion, nitric acid was simply lumped into the same group with adipic acid N2O and HFC-23 projects. It became almost certain that the European Commission, driven by these concerns would ban and exclude all industrial gas project CERs/ERUs, including nitric acid, from the next trading phase starting in 2013!
The whole team at N.serve, together with Johnson Matthey and some of our closest partners, worked extremely hard to dispel the myths and attack prejudices and make all relevant decision makers aware of the clear and decisive differences between nitric acid projects on the one hand and adipic acid N2O and HFC projects on the other. Our active input to the EC stakeholder process, the contacting the relevant ministries in all 27 EU Member State governments on these matters and the repeated appeals to the Climate Commissioner Connie Hedegaard and her staff finally led to the all-decisive invitation to Brussels where N.serve management was given the opportunity to voice its positive views on nitric acid in the holy halls of the Climate Commission, meeting with Mrs. Hedegaard’s right and left hand. As we later learned, our appeal was at the eleventh hour and swayed the opinion of the EC decision-makers in the right direction. We were not only heard but actually listened to!
Are nitric acid N2O CERs safe now?
For the time being CDM nitric acid projects registered with the UNFCCC before 31 December 2012 can generate CERs based on the existing rules and methodologies and continue to be used for compliance within the EU ETS between 2013 and 2020. This means that all approximately 100 nitric acid CDM and JI project CERs and ERUs will continue to be a valuable asset beyond 2012 and CDM projects can continue to generate profits from the abatement of N2O under the CDM!
The threat is not over… the forthcoming exclusion on HFC-23 and N2O adipic acid will drastically alter the market for CERs/ERUs. As a result of the ban of HFC and adipic acid projects, nitric acid projects will be among the biggest supplier of CERs in the 2013 to 2020 market phase. This will trigger attention by the NGO community and new criticism of commercial scale CDM projects will likely focus on nitric acid. It will be more important than ever to emphasise the success story and the positive aspects of nitric acid projects under the CDM!
This will be the main focus of NAIG in the coming years – the more voices speak in unison, the better they will be heard in the halls of Brussels and beyond. |
