Filenews 22 September 2021 - by Chrysanthos Manolis
After yesterday's reports by Theodoulos Mesimeri, Senior Officer at the Ministry of Agriculture, to the Parliamentary Committee on Energy, it became clear that if for 2021 it seems to us (and is) a nightmare for electricity consumers due to the cost of purchasing greenhouse gas emission allowances, the burden will become greater in 2022 and the following years, if the predictions of technocrats in Cyprus and Europe are verified that the cost of auctioning the allowances will continue a its nomadic course, increasing the cost of electricity supply.
The burden of auctioning is much more onerous in countries such as Cyprus, which has a small and isolated electricity system, almost completely dependent on fossil fuels and without any interconnection with other networks.
Even if those who claim that the fees for the purchase of emission allowances will not approach €90-100 per tonne in the coming years, from €60 today and from €15-20 in 2020, the cost to electricity consumers from this special EU "tax" on conventional power generation will be very serious and will become more serious whenever it is in line with high fuel oil prices on international markets.
Things become even more worrying for the future of Cypriot households and the economy at large, if we take into account that one of the next moves of the EU, with implementation in 3-4 years, will provide for the burden of transport fuels and heating fuels with fees for the purchase of greenhouse gas emission allowances, which means a significant increase in retail fuel prices as well. this will gradually affect the cost of air tickets.
Skyrocketing costs and revenues
Mr. Mesimeri, informing the Energy Committee accordingly, said that almost €100 million will be collected from the auction of pollutant rights in 2021, while from 2012 to 2020 a total of €100 million had been collected. The large increase for 2021 is due to the termination of the right that the Republic of Cyprus had to provide free of charge to the EAC a part of its carbon dioxide emission allowances, but also to the sharp increase, this year, in the price per tonne of emissions. The rights that the Republic now has to auction are 1.8 million tonnes, but, as we have just said, there is a serious possibility that in 2022 the burden will far exceed €100 million that we will pay for 2021, as a further increase in the cost per emission allowance is expected.
Asked by "F" why the EU imposes increases in the price of electricity, through auctioned rights, burdening households and businesses and transferring revenues to state coffers, Mr. Mesimeri said that this is a conscious imposition of "taxation" on fossil fuels, to prevent states and businesses from using fossil fuels for power generation, to gradually reduce carbon dioxide emissions and to de-escalate the consequences of environmental damage and the climate crisis. It is obvious, however, that not all states are affected in the same way, as far as the economic aspect is concerned, since other members of the EU are more able to exploit various forms of renewable energy sources, overcoming, through electrical interconnections, the problem of the insufficient, for the time being, storage of energy from RES at advantageous prices.
The state is comfortable...
At a time when consumers (domestic, commercial, industrial) are groaning under the weight of the large increase in electricity charges (a similar phenomenon is currently observed throughout the EU), the state treasury, if it had a mouth, would smile broadly, as this is where the millions of rights auctioned for the benefit of democracy end up.
For the management of these revenues, the Law establishing a Greenhouse Gas Emission Allowance Trading Scheme of 2011 provides. According to article 21(4)(a) "the revenues arising from the auctioning of the rights shall be deposited with the Fixed Fund of the Republic".
The Minister of Finance then adopts proposals "equal to at least 50% of the receipts from the auctioning of allowances or an amount equal to the specific receipts, for one or more of the following purposes:
(i) The reduction of greenhouse gas emissions (...) and adaptation to climate change.
(ii) The development of renewable energy sources, as well as the development of other technologies that contribute to the transition towards a secure and sustainable low-carbon economy.
(iii) Measures aimed at avoiding deforestation and measures to increase afforestation and reforestation in developing countries that have ratified the future international agreement on climate change.
(iv) The isolation of CO2 from forests in the Union.
(v) The environmentally safe capture and geological storage of CO2, in particular from power plants.
(vi) Encouraging the shift towards low-emission public transport.
(vii) The funding of research and development in the field of energy efficiency and clean technologies.
(viii) Measures aimed at improving energy efficiency, district heating systems and insulation or providing financial support to address social issues concerning low- and middle-income households.
(ix) The coverage of the administrative costs for the management of the EU ETS (auctioning of allowances system).
(x) The financing of climate actions in vulnerable third countries.
(xi) Promoting skills creation and redeployment of the workforce as a contribution to a just transition to a low-carbon economy.
According to Article 21(c), "the Competent Authority shall inform the European Commission and the House of Representatives of the use made of the revenues and of the measures taken".
MONEY FOR SOCIAL MEASURES FROM THE AUCTION FUND
Mr. Mesimeri referred yesterday, before the Energy Committee, to paragraph (viii) of Article 21 of the Law on the Establishment of a Greenhouse Gas Emission Allowance Trading Scheme, which allows for the adoption of "measures aimed at improving energy efficiency, district heating systems and insulation or at providing financial support to address social issues concerning low- and middle-income households". MPs, party officials as well as executives of the EAC and the wider energy sector, as well as representatives of consumer associations, argue that the government should use the fund of revenues from greenhouse gas auctions to support, with social measures, vulnerable and small and medium-sized households that are being tested by the increases in electricity and the increases transferred to other key products. The position of many is that the recent 10% reduction in the bills of November 2021 to February 2022 should be financed by this fund and not by the reserves of EAC, which should result in infrastructure for network development and for greater penetration of electricity from RES.
