Speculation triggers CO ₂ rights by 37% and feeds more rises in electricity

The sharp rise in prices in the wholesale electricity market has as one of the main causes the escalation of carbon dioxide (_CO2) emission rights that generating companies have to buy in order to burn gas, fuel or coal and produce electricity. The rights market, like the electricity pool, adjusts to the game of supply and demand, but also carries a strong speculative load. The average price of a ton of _CO2 in the last five sessions stands at 33.87 euros, which is 37% more than the average price of 2020. The rises put pressure on the electricity bill in the middle of the cold wave.

Greenhouse gas emission rights trading is regulated by Law 1/2005, of 9 March. It was launched on 1 January 2005, as a key measure to encourage the reduction of _CO2 emissions in the industrial and electricity generation sectors, in line with EU plans. Currently, this scheme affects almost 1,100 installations and 45% of total national emissions of all greenhouse gases. Its filming has shown that it has holes that have led in the past to fictitious operations of sale of rights between EU companies -also Spanish- with non-EU companies.

The Government knows the problem. Last December it approved a decree to regulate the adjustments of the free allocation of emission rights in the period 2021-2030. The standard establishes the rules and administrative procedures so that each year the approved rights for each installation are checked and adjusted. It is about aligning the allocations with the real activity because the mismatches, more or less interested, end up turning off consumers.

Activity level

Thus, when the average level of activity of an installation during the last two years increases or decreases more than 15% of its reference level (period 2014-2018) the allocation that had initially been approved for that installation will be adjusted, upwards or downwards, as appropriate, and in proportion to the change in the level of activity.

In the current period, 2013-2020, changes in allocation only occur when activity falls by at least 50%. Therefore, the free allocation model of allowances will be more dynamic in 2021-2030, with more frequent changes in allocation as activity rises or falls, according to industry requests. The idea is to cut off speculation, forcing the return of assigned excesses and cutting off transfers of rights between agents without due transparency.

For industry, the price of _CO2, the allocation of allowances and the destination of taxes levied by the state on emissions is a crucial issue. In practice, _CO2 has become the great hope of large energy-consuming companies to reduce what they pay for electricity and keep their bills afloat.

Hundreds of millions

The hundreds of millions of aids that came to charge the large consumer companies for agreeing to disconnect from the network if necessary -interruptibility- no longer flow and the Statute of the Electrointensive Consumer designed by the Government has not met their expectations. Therefore, they are pushing to amend the Climate Change bill that Congress is processing – article 26.4 – so that it includes that 25% of the collection for emission rights, 1,300 million in 2019, are destined to compensate the industry.

In its current wording, the bill does not insure aid. The rule only states that “revenues from auctions of emission rights – _CO2– will be used for the fulfillment of the objectives in terms of climate change and energy transition”. And it details the distribution: 450 million at least to finance the costs of the electricity system related to the promotion of renewables “being able to allocate 30% of the total amount” to measures with social impact caused by the energy transition “.

Source: La Información