Change in the air
If affected industries don't take matters into their own hands, they warn, and insist on a more active role in the plan's creation, the resulting scheme could seriously handicap the driving sectors of the economy.
Under the international Kyoto Protocol, the EU member states are committed to reduce emissions of greenhouse gases - of which by far the most significant is carbon dioxide - by a combined total of 8 percent between 2008 and 2012. To facilitate pan-EU reduction, the EU has issued directives to enable trading of such gases and 'clean air' between member country industries. EU directive (2003/87/EC) passed on October 13 last year requires member states to compile NAPs of emissions quotas for domestic installations producing significant greenhouse gas emissions. Those producing less than their quota will be able to sell their rights to emit the remainder of their allocated quota - 'clean air' - to other producers.
Sectors involved are the energy sector (installations using thermal power over 20 megawatts), oil refineries, coke ovens, the iron and steel industries, mineral industries (cement, glass, ceramics), and the pulp and paper sector. As companies that exceed their allocated emissions quotas will be liable for hefty fines (Initially €40/tonne CO2 (2005-07), rising to €100/tonne after 2007), the allocation plans have enormous financial significance for EU companies.
Sharp negotiation at Kyoto secured for this country a relatively meager reduction of 6 percent by 2012, as compared, for example, to Germany's 21 percent commitment. "The EU and particularly Germany," says Jochen Hauff, associate at management consultant company A.T. Kearney, "were so keen for Kyoto to be a success, that they were prepared to offer Central European countries such as Poland very comfortable terms, just to get them on board." Poland had already reduced its emissions by 30-40 percent before the year 2000, largely due to the decline in industry. Domestic Kyoto commitments have, therefore, been long since met.
However, the general understanding that Poland has so much 'clean air' to sell that no one needs to worry, may actually be far from the truth. The domestic surplus may also not be as bountiful as is widely believed, since domestic data is incomplete and may not be calculated entirely in accordance with EU requirements.
Nevertheless, the government of this country should, in theory, have little difficulty in allocating comfortable quotas to its affected industries, as compared with Germany for example, whose burdensome Kyoto commitment means that there simply won't be enough clean air to go round. In practice, though, whether or not domestic industries get what they need depends entirely on how the NAP is constructed, and what the government does with it thereafter. And many believe there's little cause for optimism in this respect.
"It's going to be a shambles," says Robert Adamczyk, associate director of environmental consultancy, Atkins Polska.
But the greatest problem hangs on the interpretation of the directive's term 'combustion plant.' In this country, this will probably be interpreted to mean not just boilers, but all heating units producing over 20 megawatts of thermal energy, says Bolesław Jankowski, vice president of energy systems research institution EnergSys which, together with international law firm Cameron McKenna, constitutes part of a consortium advising the government on the NAP and the legal implementation of the EU emissions trading directive.
This country's interpretation of the term 'combustion plant' will mean that not only big power plants but sectors as diverse as food and drink processors, car and white goods manufacturers, not to mention many others, will require emissions quotas - a fact that will come as a surprise to many of those affected.
"The government has no data on which companies produce more than 20 megawatts, so instead it's using the data that it does have, which is on firms which produce over 50 megawatts," says Waleria Skarzynska, advocate at international law firm, Clifford Chance. "And most of the firms which generate between 20 and 50 megawatts are unaware of their situation," she adds.
Such an outcome could have disastrous effects for the economy. Although the big power plants constitute the lion's share of the energy sector, their quota requirements are at least fairly static. Yet the needs of other businesses which, though much smaller, also involve the use of thermal energy, are growing fast and as a result of cost-efficiency drives, increasingly concentrating their production on fewer sites. There is therefore a danger that this government's allocation scheme for the energy industry will deny appropriate allocations - or indeed any allocations at all - to smaller, fast-growing industries which constitute the real drivers of the economy.
"A lot of firms which need allocations simply aren't going to get them," says Robert Adamczyk.
Stanisław Wajda, associate at Cameron McKenna, which is advising the government on the law and the NAP, rejects such criticisms, however.
"These pessimistic reports are disseminated by the people 'who always know better'. According to my knowledge, nothing has been decided that might be a basis for such opinions," he says.
All member states have been taken by surprise by the fast pace of EU legislation, and even the best prepared will be pushed to come up with allocations systems which can anticipate the complex and varied requirements of affected industry within the six months provided for by EU directives. But western governments and industries have been intensively preparing for the onset of emissions trading since at least 2000, spending enormous amounts of money and attaching great importance to this issue that will significantly affect a wide range of companies. In this country, by contrast, "The government is coming to the issue too late, with no time, no funding, and almost no data," says Robert Adamczyk.
While in countries such as Great Britain and Germany, he adds, some of the best brains have been focused on researching this issue for years, in Poland, "The sums spent by the government on the allocation plan are comparable to the sums spent on consultations in the West by a couple of petrochemical plants."
The Slovakian government has also been very active in its engagement with the Commission and has set up information campaigns and widespread consultations with industry and company representatives, points out Camilla Taylor. In Poland, however, the government has done very little to educate either officals or the public.
"The directive requires that allocation plans be drafted on the basis of active communication between government and business," says Camilla Taylor, Associate of Vertis Environmental Finance, a leading CEE emissions trading financial advisory and transaction structuring firm. "It's very important for all companies affected to actively assess and to communicate their position to their respective governments," she adds.
In Western Europe, most affected groups have been actively assessing their needs and lobbying their governments for several years - to the extent that Acelor, the largest European Steel producer, has taken legal action against the directive in the European Court of Justice. In Poland, however, with the exception of the biggest and most powerful concerns, many businesses are largely passive and mostly ignorant in respect of the impending issue. This despite the fact that domestic emissions trade is valued at about three billion and that the vast sums at stake will soon have to be included in all asset and liability reports.
"None of our clients even ask us about the significance of EU directives," says Tomasz Chal, associate at international law firm White and Case, "which shows that we are in no way ready for the EU."
"The level of awareness is very low," concedes Krzysztof Gołyński, associate at international lawyers Linklaters, "While lobbying is almost non-existent, with the exception that is, of the largely state-owned power plants which, as we all know, have their own particular ways of influencing government opinions."
Camilla Taylor, however, is anxious to stress that in Poland there is still time for lobby groups to influence allocation before it's too late.
Under the international Kyoto Protocol, the EU member states are committed to reduce emissions of greenhouse gases - of which by far the most significant is carbon dioxide - by a combined total of 8 percent between 2008 and 2012. To facilitate pan-EU reduction, the EU has issued directives to enable trading of such gases and 'clean air' between member country industries. EU directive (2003/87/EC) passed on October 13 last year requires member states to compile NAPs of emissions quotas for domestic installations producing significant greenhouse gas emissions. Those producing less than their quota will be able to sell their rights to emit the remainder of their allocated quota - 'clean air' - to other producers.
Sectors involved are the energy sector (installations using thermal power over 20 megawatts), oil refineries, coke ovens, the iron and steel industries, mineral industries (cement, glass, ceramics), and the pulp and paper sector. As companies that exceed their allocated emissions quotas will be liable for hefty fines (Initially €40/tonne CO2 (2005-07), rising to €100/tonne after 2007), the allocation plans have enormous financial significance for EU companies.
Sharp negotiation at Kyoto secured for this country a relatively meager reduction of 6 percent by 2012, as compared, for example, to Germany's 21 percent commitment. "The EU and particularly Germany," says Jochen Hauff, associate at management consultant company A.T. Kearney, "were so keen for Kyoto to be a success, that they were prepared to offer Central European countries such as Poland very comfortable terms, just to get them on board." Poland had already reduced its emissions by 30-40 percent before the year 2000, largely due to the decline in industry. Domestic Kyoto commitments have, therefore, been long since met.
However, the general understanding that Poland has so much 'clean air' to sell that no one needs to worry, may actually be far from the truth. The domestic surplus may also not be as bountiful as is widely believed, since domestic data is incomplete and may not be calculated entirely in accordance with EU requirements.
Nevertheless, the government of this country should, in theory, have little difficulty in allocating comfortable quotas to its affected industries, as compared with Germany for example, whose burdensome Kyoto commitment means that there simply won't be enough clean air to go round. In practice, though, whether or not domestic industries get what they need depends entirely on how the NAP is constructed, and what the government does with it thereafter. And many believe there's little cause for optimism in this respect.
"It's going to be a shambles," says Robert Adamczyk, associate director of environmental consultancy, Atkins Polska.
But the greatest problem hangs on the interpretation of the directive's term 'combustion plant.' In this country, this will probably be interpreted to mean not just boilers, but all heating units producing over 20 megawatts of thermal energy, says Bolesław Jankowski, vice president of energy systems research institution EnergSys which, together with international law firm Cameron McKenna, constitutes part of a consortium advising the government on the NAP and the legal implementation of the EU emissions trading directive.
This country's interpretation of the term 'combustion plant' will mean that not only big power plants but sectors as diverse as food and drink processors, car and white goods manufacturers, not to mention many others, will require emissions quotas - a fact that will come as a surprise to many of those affected.
"The government has no data on which companies produce more than 20 megawatts, so instead it's using the data that it does have, which is on firms which produce over 50 megawatts," says Waleria Skarzynska, advocate at international law firm, Clifford Chance. "And most of the firms which generate between 20 and 50 megawatts are unaware of their situation," she adds.
Such an outcome could have disastrous effects for the economy. Although the big power plants constitute the lion's share of the energy sector, their quota requirements are at least fairly static. Yet the needs of other businesses which, though much smaller, also involve the use of thermal energy, are growing fast and as a result of cost-efficiency drives, increasingly concentrating their production on fewer sites. There is therefore a danger that this government's allocation scheme for the energy industry will deny appropriate allocations - or indeed any allocations at all - to smaller, fast-growing industries which constitute the real drivers of the economy.
"A lot of firms which need allocations simply aren't going to get them," says Robert Adamczyk.
Stanisław Wajda, associate at Cameron McKenna, which is advising the government on the law and the NAP, rejects such criticisms, however.
"These pessimistic reports are disseminated by the people 'who always know better'. According to my knowledge, nothing has been decided that might be a basis for such opinions," he says.
All member states have been taken by surprise by the fast pace of EU legislation, and even the best prepared will be pushed to come up with allocations systems which can anticipate the complex and varied requirements of affected industry within the six months provided for by EU directives. But western governments and industries have been intensively preparing for the onset of emissions trading since at least 2000, spending enormous amounts of money and attaching great importance to this issue that will significantly affect a wide range of companies. In this country, by contrast, "The government is coming to the issue too late, with no time, no funding, and almost no data," says Robert Adamczyk.
While in countries such as Great Britain and Germany, he adds, some of the best brains have been focused on researching this issue for years, in Poland, "The sums spent by the government on the allocation plan are comparable to the sums spent on consultations in the West by a couple of petrochemical plants."
The Slovakian government has also been very active in its engagement with the Commission and has set up information campaigns and widespread consultations with industry and company representatives, points out Camilla Taylor. In Poland, however, the government has done very little to educate either officals or the public.
"The directive requires that allocation plans be drafted on the basis of active communication between government and business," says Camilla Taylor, Associate of Vertis Environmental Finance, a leading CEE emissions trading financial advisory and transaction structuring firm. "It's very important for all companies affected to actively assess and to communicate their position to their respective governments," she adds.
In Western Europe, most affected groups have been actively assessing their needs and lobbying their governments for several years - to the extent that Acelor, the largest European Steel producer, has taken legal action against the directive in the European Court of Justice. In Poland, however, with the exception of the biggest and most powerful concerns, many businesses are largely passive and mostly ignorant in respect of the impending issue. This despite the fact that domestic emissions trade is valued at about three billion and that the vast sums at stake will soon have to be included in all asset and liability reports.
"None of our clients even ask us about the significance of EU directives," says Tomasz Chal, associate at international law firm White and Case, "which shows that we are in no way ready for the EU."
"The level of awareness is very low," concedes Krzysztof Gołyński, associate at international lawyers Linklaters, "While lobbying is almost non-existent, with the exception that is, of the largely state-owned power plants which, as we all know, have their own particular ways of influencing government opinions."
Camilla Taylor, however, is anxious to stress that in Poland there is still time for lobby groups to influence allocation before it's too late.
