ERM Lahmeyer International

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Pilot project Simulation of CO2 Emission
Trading Joint project of Hesse State
Environment Ministry Deutsche
Ausgleichsbank Executed by ERM-Lahmeyer
International GmbH, 500 PPM Inc EUtech GbR A
Presentation to delegates of COP 6 at the ISI
side event The Hague, Netherlands, Nov 15th 2000
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Basic Information about the German State of Hesse

• Population (1996) 6.03 Million
• Gross Domestic Product 305.6 bn DM (150 bn Euro)
• CO2 Emissions 60.6 Million tons
• Industry focus Services and export-oriented
  manufacturing sectors including chemicals,
  electronics and car manufacturing

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Project Goals
Capacity building for the participation in the
CO2 market
Simulate Industry -
Internal learning processes
structures - Praxis
orientated conclusions
Government - Internal
learning processes
structures - Praxis
orientated conclusions
Participate Industry -
CO2 optimised decisions on invest-
ment and production -
Profit optimised CO2 market
particip. Government
- Efficient market supervision
- Reduction of economic
climate change costs
Educate Industry - Creating
conscience - Involvement in
business process - Adaptation
of information flows
Government - Emission inventories
-Allocation mechan. - Regulations
for prod. and transactions
Status-quo Industry - Voluntary agreements -
Energy saving programs Government -
Eco-Tax - Funding programs - Information on
climate change
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Participating Companies
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Key Issues for Participating Companies

• Are there minimum size requirements?
• Can companies be too small to participate in ET?
• What are the system boundaries for ET?
• Do companies, emission sources or relevant
  business activities participate?
• How are indirect emissions (heat and electricity)
  accounted for?
• How are existing agreements for climate
  protection converted to ET?
• Can grand-fathering based allocation solve this?
• Is relative absolute participation in the same
  system possible?

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Accounting of indirect emissions (electricity and
heat)

• 18 TWh, (4 of the German electricity demand)
  economically available potential for electricity
  savings
• Potential 10 Mio. tons of CO2 reduction
  (Federal Ministry for Economy)
• 6 of the German emission goal (21 reduction
  compared to 1990)
• Additional and not yet economically available
  saving potentials of electricity and heat
• New economic incentive on the consumer side,
  especially valid for SME

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Why emphasis on small and medium sized
enterprises ?

• The DtA plans to fund the participation of SME in
  emissions trading
• Funding programs based on emissions trading to
  reduce energy consumption
• Development of a trading platform for
  standardised energy efficiency projects
• Economic chances in the emissions trading market
  should be also available for SME
• SME should be able to participate voluntary in an
  emissions trading market
• More participants in the market improve the
  market efficiency (lower costs for the climate
  protection)