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CO2 on the agenda

THE SLOVAK cabinet adopted an allocation scheme governing emissions allowances, but left open the question of how the proceeds earned by auctioning greenhouse gas emissions quotas will be spent, raising concerns that instead of going toward environmental protection they may instead be used to patch holes in the state budget.

THE SLOVAK cabinet adopted an allocation scheme governing emissions allowances, but left open the question of how the proceeds earned by auctioning greenhouse gas emissions quotas will be spent, raising concerns that instead of going toward environmental protection they may instead be used to patch holes in the state budget.

A cabinet discussion on September 28 about the legislation on auctioning greenhouse gas emissions quotas came to a halt when the Environment and Finance Ministries were unable to agree upon how to use the forecast proceeds.

On November 7 the cabinet adopted a revision to the existing law to comply with EU legislation, leaving it up to the ministers of finance and environment to decide jointly each year how the proceeds will be used.

Greenpeace Slovakia and employers have criticised the adopted revision. The environmental activists fears that the proceeds might be used for non-environmental projects, or perhaps even funnelled by the Environment Ministry back into carbon emitting industries.

From 2013 onwards the system for allocating greenhouse gas emissions allowances will significantly change in European Union countries, to reflect new EU-wide harmonised rules.

Under this new system the majority of allowances under the EU Emissions Trading System (ETS) will no longer be allocated for free. Based on the new EU rules some companies, especially those in the energy sector, will purchase EU emission allowances (EUA), and manufacturing companies should receive a portion of them free of charge while purchasing another portion. Slovakia is adopting the change through a revision to the law on the auctioning of greenhouse gas emissions quotas. Parliament will deal with the draft revision in a fasttracked legislative proceeding so that it will become effective as of January 1, 2013.

The Environment Ministry estimates that the sale of emissions allowances would fetch €105 million annually. Slovakia was allocated 32.2 million EUA for 2013, of which companies should buy approximately one half, the TASR newswire wrote on November 7.

The current price for an EUA is about €7 per tonne, but the Environment Ministry warned that it does not know whether the price on the market will increase or decrease. The EC’s ambition is to reduce the amount of quotas from the market to increase their prices and thus motivate companies to invest in new technologies and reduce the volume of greenhouse emissions, Environment Minister Peter Žiga explained as quoted by the SITA newswire.

One half of the proceeds will be allocated for infrastructure projects exceeding €200,000. But the EC will first have to greenlight this state support. Žiga estimates that this may happen during the second half of 2013.

The Environment Ministry plans to use another 10 percent for financial assistance of companies endangered by the risk of carbon leakage, which may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries which have more relaxed regulations on greenhouse gas emissions. Žiga estimates there are five or six such companies in Slovakia.

Green projects like insulation for buildings, research and development and making energy-saving upgrades to facilities, will be supported by 20 percent of the proceeds. The remaining 20 percent will be used to mitigate the negative impacts of climate change, for example by antiflood measures.

Environmental activists criticise government's approach “Greenpeace views the adopted revision critically especially because of two reasons,” Lucia Szabová, spokesperson for Greenpeace in Slovakia told The Slovak Spectator. “The law enables each year an agreement between the ministries of finance and environment over where the proceeds from the sale of allowances will flow…. We see here a threat that these finances will be used for consolidation of the state budget, which was also indicated by previous statements of the Finance Ministry.”

She explained that they had expected to find out how the two ministries, after one month of discussion, agreed upon the distribution of the proceeds. Instead they were told that the ministries would only agree that for each year they would reach a new agreement.

“The usage of proceeds from the sale of allowances for other purposes is at odds with the logic of the trade of the allowances itself, i.e., the goal to reduce CO2 emissions,” said Szabová. Greenpeace’s second reservation is the fear that a large portion of the proceeds would flow back to emissions generating companies. Greenpeace views this as unfair towards Slovak citizens, arguing that these companies received free emissions allowances in the past and thus had time to get ready to pay for them.

“This is why we think that proceeds from the sale of emission allowances should flow especially into energy-saving projects and projects for renewable sources for households and public buildings, a field that certainly does not receive as much attention as the [carbon emitting] industry,” said Szabová. “The scheme for the distribution of proceeds counts on support for such projects, but only to a small extent and a huge emphasis is still put on directing funds into industry and even into supporting the coal industry, which we consider to be a completely incorrect step.”

The National Union of Employers (RÚZ) perceives the revision as problematic and harmful to industry.

“The primary goal of the EU legislation is to force companies to invest into environmentally-friendly technologies,"

RÚZ secretary Martin Hošták told The Slovak Spectator, adding that the legislation states that revenues generated from auctions be used for this purpose. "These revenues originate 100 percent from industry and thus they should be exclusively used for the industry for installation of new ecological technologies and protection of competitiveness.... Thus the state should not finance its other needs from these revenues.”

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