i
National Programme for Turkey 2013 –
Instrument for Pre-Accession Assistance
Technical Assistance for
Developed Analytical Basis for Formulating
Strategies and Actions towards
Low Carbon Development
Project Identification No:EuropeAid/136032/IH/SER/TR
Contract No: TR2013/0327.05.01-01/001
Activity 2.1 EU Emission Trading System Directive
Preliminary Regulatory Impact Assessment (Pre-RIA)
Ankara 2018
ii
Project Title: Technical Assistance for Developed Analytical Basis for Formulating Strategies and Actions
Towards Low Carbon Development
Service Contract No: TR2013/0327.05.01-01/001
Project ID No: EuropeAid/136032/IH/SER/TR
Project Value: € 3,865,010.00
Commencement Date: 29 May 2017
End Date / Duration: 29 May 2020 / 36 Months
Contracting Authority: Central Finance and Contracts Unit (CFCU), Ankara, Turkey
Contract Manager: Hacer BİLGE
Address: T.C. Başbakanlık Hazine Müsteşarlığı, E-Blok No:36 İnönü Bulvarı 06510 Emek/Ankara / TURKEY
Telephone: + 90 312 295 49 00
Fax: + 90 312286 70 72
E-mail: [email protected]
Beneficiary: Ministry of Environment and Urbanization Turkey
Address: Mustafa Kemal Mahallesi Eskişehir Devlet Yolu (Dumlupınar Bulvarı) 9. km. No: 278 Çankaya / Ankara
Telephone: + 90 312 410 10 00
Fax: + 90 312 474 03 35
Consultant: Hulla & Co Human Dynamics KG
Project Director: Rade Glomazic
Address: Kralja Milana 34, 1st Floor, 11000 Belgrade, Serbia
Telephone: + 381 11 785 06 30
Fax: + 381 11 264 30 99
E-mail: [email protected]
Project Team Leader: Mykola Raptsun
Address (Project Office): Mustafa Kemal Mahallesi, 2138. Sokak, No:5/3, Çankaya/Ankara
Telephone/Fax: +90 312 219 41 08
E-mail: [email protected]
This document has been produced with the financial assistance of the European Union and the Republic of Turkey.
Disclaimer: The contents of this publication are the sole responsibility of the Consortium led by Hulla & Co Human Dynamics KG and
can in no way to be taken to reflect the views of the European Union nor the Republic of Turkey.
iii
Table of Contents
Table of Contents ....................................................................................................... iii
List of Figures ............................................................................................................. iv
List of Tables .............................................................................................................. vi
List of Maps ............................................................................................................... vii
Abbreviations ........................................................................................................... viii
1. INTRODUCTION ................................................................................................. 1
1.1. Policy Framework ................................................................................................... 2
1.2. Scope and Objectives ............................................................................................. 6
1.3. The EU ETS Experience ......................................................................................... 9
2. OBJCTIVE and METHODOLOGY ..................................................................... 15
2.1. Objective of the Study ........................................................................................... 15
2.2. Methodology ......................................................................................................... 15
2.3. Consultation and Data Collection .......................................................................... 16
3. PROBLEM IDENTIFICATION and EXISTING STATUS .................................... 18
3.1. Problem Identification ........................................................................................... 18
3.2. Current Status in Turkey ....................................................................................... 18
4. POLICY AREAS and OPTIONS ........................................................................ 24
4.1. Policy Areas .......................................................................................................... 24
4.2. Policy Options ....................................................................................................... 24
5. ANNEXES ......................................................................................................... 29
Annex 1: Pre-RIA Preparatory Work ................................................................................ 29
Annex 2: EU Greenhouse Gas Emissions ....................................................................... 29
Annex 3: ETS Data Usage in National Inventory Submissions ........................................ 33
ANNEX 4: Annual UNFCCC and ETS Data Correlation Values ....................................... 34
Annex 5: Excluded Policy Areas ...................................................................................... 34
iv
List of Figures
Figure 1. Development of the EU Greenhouse Gas Emission Reduction Policies and
Related Legislation ..................................................................................................... 3
Figure 2. Development of the EU ETS Legislation in the EU and Turkey .................. 4
Figure 3. Change in Carbon Prices in the EU ETS, 2006-2016 ................................. 5
Figure 4. Sectors covered by the EU ETS and EU ESD ............................................ 7
Figure 5. Ratio of ETS and ESD Emissions to Total Emissions in the EU28 ............. 7
Figure 6. EU ETS Phases .......................................................................................... 9
Figure 7. Sectoral Distribution of EU ETS Businesses ............................................. 11
Figure 8. Sectoral Distribution of EU ETS Emissions ............................................... 11
Figure 9. Number of EU ETS Installations by Category and Sector ......................... 12
Figure 10. Category and Sector of Distribution of EU ETS Emissions ..................... 13
Figure 11. The Number of EU ETS Installations by Category and Country .............. 13
Figure 12. EU ETS Emissions of Installations by Category and Country Distribution of
(2016) ....................................................................................................................... 13
Figure 13. Total and Sectoral Changes in the EU ETS Emissions (Million tonnes CO2)
................................................................................................................................. 14
Figure 14. RIA Process ............................................................................................ 16
Figure 15. GHG Emissions by Sectors in Turkey (2015) .......................................... 19
Figure 16. Electricity Generation by Source in Turkey (2015) .................................. 19
Figure 17. Category Distribution of MRV Businesses in Turkey (2013).................... 20
Figure 18. Category Distribution of Total Emission of MRV Businesses in Turkey
(2013) ....................................................................................................................... 20
Figure 19. Sectoral ETS Emissions of EU ETS Countries* Based on National
Inventories and ETS Registries (2015) ..................................................................... 21
Figure 20. Sectoral Emissions for EU ETS Sectors in Turkey (2015) ...................... 22
Figure 21. Calculated ETS Emissions for Turkey (According to the European National
Greenhouse Gas Inventory and ETS Emissions) (2015) .......................................... 23
Figure 22. Data Indicators Prepared for the EU ETS Data ....................................... 26
Figure 23. Emissions of a Large Business in Turkey (ton CO2) ............................... 27
v
Figure 24. Emission Maximum Limits for the EU ETS .............................................. 36
vi
List of Tables
Table 1. Sectors, Greenhouse Gases and Activities Covered by the ETSD .............. 8
Table 2. Objectives, Limitations and Assumptions of the RIA Study ........................ 15
Table 3. ETS Data Usage in National Inventory Submission ................................... 33
Table 4. UNFCCC and ETS Data Annual Compatibility Values ............................... 34
vii
List of Maps
Map 1. Total number of EU ETS Installations by Country (2016*) ........................... 10
Map 2. Greenhouse Gas Emissions Per Capita in Europe (ton CO2e/year) ............. 30
Map 3. Total Greenhouse Gas Emissions in Europe (ton CO2e/year) ..................... 31
Map 4. Changes in Greenhouse Gas Emissions Per capita Between 1990-2015 in
Europe (%) ............................................................................................................... 32
Map 5. Changes in Total Greenhouse Gas Emissions Between 1990 and 2015 in
Europe, 1990-2015 (%) ............................................................................................ 33
viii
Abbreviations
CDM Clean Development Mechanism
CDP Carbon Disclosure Project
CITL Community Independent Transaction Log
CPI Consumer Price Index
CRF Common Reporting Format
EC European Commission
EEA European Environment Agency
ESD Effort Sharing Decision
ETS Emission Trading System
ETSD Emission Trading System Directive
EU European Union
Eurostat European Statistical Office
EUTL European Union Transaction Log
İSO Istanbul Chamber of Commerce
JI Joint Implementation
KP Kyoto Protocol
LCDP Technical Assistance for Developed Analytical Basis for Formulating
Strategies and Action towards Low Carbon Development Project
LULUCF Land Use, Land Use Change and Forestry
MBB Marmara Municipalities Union
MoEU Ministry of Environment and Urbanization
MRV Monitoring, Reporting and Verification
MSR Market Stability Reserve
NAP National Allocation Plan
NIR National Inventory Report
PA Paris Agreement
PMR Partnership for Market Readiness
ix
Pre-RIA Pre-Regulatory Impact Assessment
REC Regional Environmental Centre
REC
Turkey Regional Environmental Centre Turkey
RIA Regulatory Impact Assessment
SGETHY Greenhouse Gas Emissions Regulation
TBB Turkish Municipalities Union
TOBB Union of Chambers and Commodity Exchanges of Turkey
TURKSTAT Turkish Statistical Institution
UNFCCC United Nations Framework Convention on Climate Change
1
1. INTRODUCTION
This Preliminary Regulatory Impact Assessment (Pre-RIA) Report aims to inform
senior managers of the Ministry of Environment and Urbanization (MoEU) about the
EU Emission Trading System and gather views concerning the challenges and
opportunities identified in terms of the implementation of Directive 2003/87/EC of the
European Council of 13 October 2003 (EU Emission Trading System Directive, ETSD)
in Turkey.
The Pre-RIA provides possible policy areas and options for these identified
challenges. The final RIA Report will look into established policy options in detail
together with their social, environmental and economic dimensions.
This Report is based on a series of meetings, interviews and literature review
conducted in September-December 2017, in order to identify the main reasons related
to the implementation problems of the ETSD and study the cause and effect relations
between the challenges (see Annex 1).
The introduction chapter of the Report will provide a framework concerning the
European Union (EU) greenhouse gas emission reduction commitments and emission
trade. The goal of this chapter is to provide information about the objective and context
of the ETSD and its implementation in EU Member States. The second chapter sets
out the objective and methodology of the Pre-RIA study. The consultation process of
the study together with information concerning data collection and analysis is also
presented. The third chapter is an assessment of the current status in Turkey with
emphasis on the main problems and challenges related to emissions trading in the
country. The fourth chapter explains policy areas and options to be studied for the final
RIA.
The position set forth in this Report belongs to REC Turkey and experts working in this
context and may not reflect the views of the Working Group which also includes the
MoEU.
2
1.1. Policy Framework
The climate and energy policies of the EU are based on various policy and programs
which must be followed by all Member States. These are the 2020 Climate & Energy
Program, 2030 Climate and Energy Framework and 2050 Low Carbon Road Map
documents.
These programs also respond to the EU commitments (the Kyoto Protocol – KP and
Paris Agreement – PA) under the United Nations Framework Convention for Climate
Change (UNFCCC). Greenhouse gas emission reduction targets at EU level are
identified, monitored and reported in relation to these programs. The targets of the EU
climate and energy policies is to reach 8%, 20%, %40 and %80 emission reduction
levels by 2012, 2020, 2030 and 2050 respectively, compared to greenhouse gas
emission levels in 1990.
In order to achieve 2020 and 2030 targets the EU developed two major policy tools
concerning the combatting against climate change. These are the EU Effort Sharing
Decision (ESD) and the EU Emission Trading System Directive (ETSD) (see Figure1).
The EU ESD covers emissions related to most sectors not included in the EU ETS
established by the ETSD. The ESD also defines greenhouse gas emission levels for
sectors not included in the ETS for each Member States at EU level in terms of the
second commitment term of the KP (2013-2020). A 10% reduction target for 2020
based on 2005 levels is set at EU level and Member State contributions to this
reduction is meant to be distributed fairly. The ESD establishes a range for each
Member State annual emission permit based gross domestic product (GDP) per capita
between -20% and +20%. Until 2017 national allocations changed with various
different decisions1. In 2016 an Effort Sharing Regulation (ESR) was designed. This
Regulation is expected to be enforced in 2018, replacing the ESD. The ESR is
designed in response to commitments related to the Paris Agreement under the
UNFCCC and it looks to increase the 2021-2030 targets to 30%. In regard, it is
expected that national emission for ESR sectors will range from 40% to 0%.
Following the ratification of the Kyoto Protocol, the ETSD adopted and entered into
force in 2005. The ETSD designed as a 3-year pilot period for preparation to the first
commitment period of the Kyoto Protocol, that started by 2008. The basic aim of the
Directive is to provide a framework for the EU Emission Trading System (ETS)
designed to establish an economical and cost-effective solution while responding to
the EU’s international commitments.
1 The ESD, published for most sectors not included in the ETS, was renewed in 2013 with the addition of Crotaia to the Union.
3
Figure 1. Development of the EU Greenhouse Gas Emission Reduction Policies and Related
Legislation
Under the ETSD, Member States distribute their national emission allowances
identified by the European Council (EC), in other words their “quota”, to installations
in their own context. At the end of each year emissions and allowances must be
balanced. Installations with less emissions than their allowance are able to generate
extra income by selling their rights to the “market”; while, installations with higher
emissions then their allowance are able to buy extra rights from the “market” to cover
their gap. Thus, installations with fewer emissions are rewarded and the ones with
higher emissions are sanctioned. In addition, pro-active installations that reduce their
emissions before their ETSD responsibilities are given extra allowances, which
encourage reduction measures, in order to prevent unfair situations.
4
Figure 2. Development of the EU ETS Legislation in the EU and Turkey
The Directive was amended 7 times, fundamentally in 2004, 2008 and 2009 (see
Figure 2). The most important changes can be summarized as: monitoring, reporting
and verification requirements for GHG emissions in order to facilitate the
implementation of the ETSD; the first Commission decision for creating a monitoring
and reporting manual in 2004, this decision was repealed in 2007 with new decision;
in 2012, the 2007 decision was repealed and a new Regulation2 was published in 2012
and another Regulation in 2013, concerning monitoring and reporting mechanisms. At
the moment, the 2012 and 2013 Regulations are still in force.
During the two-year pilot of the transition phase for the ETSD in 2005-2008, emission
allowances were distributed to installations free of charge. At the end of the phase, the
carbon price was reduced to 0 €/ton (see Figure 3). The price keeping a low level after
slightly rising following 2013 pushed the EU to take measures, so the Market Stability
Reserve3 (MSR) decision was published in 2015 (see Figure 2).
2 In the EU, Directives are legislative tools which must be transposed by Member States, whereas, transposition of Regulations
are not mandatory.
3 The MSR Decision foresees two measures for regulating the carbon price. As a short term measure, the
Commission postponed the auctioning of 900 million allowances until 2020. The auction volume is reduced by 400
million allowances in 2014, 300 million in 2015 and 200 million in 2016. In the long term a market stability reserve
will start operating in January 2019 and the 900 million allowances that were back-loaded in 2014-2016 will be
transferred to the reserve rather than auctioned in 2019-2020. The reserve will: address the current surplus of
5
Figure 3. Change in Carbon Prices in the EU ETS, 2006-2016
Turkey aims to become a member of the European Union. Thus, the Acquis
Communautaire of the Union must be transposed to national legislation and
harmonized4. While membership negotiations for Turkey is ongoing, once membership
is enforced, Turkey will also need for similar policies, objectives and measures
concerning ESD targets which are mandatory for all Member States.
Turkey, in addition to harmonizing the EU environment and climate acquis, also has
responsibilities under the UNFCCC in terms of climate change reduction policies5.
Together with the MoEU, other central and local government authorities continue to
allowances and improve the system's resilience to major shocks by adjusting the supply of allowances to be
auctioned.
4 The EU environmental acquis consists of many legislative tools concerning many different tools such as directives and
regulations. EU Directives are legislative tools which must be transposed to national legislations of Member States. While they
identify targets for countries, they also provide certain flexibilities as well. On the other hand, EU Regulations are published
related to issues which must be equally implemented in all Member States. Therefore, EU Regulations do not need to be
transposed; they enter into force in all Member States automatically once they are approved. However, candidate countries
may need to transpose EU Regulations previous to their membership. The REACH Regulation concerning chemicals
(EC/1907/2006) is an example of a transposed Regulation for Turkey.
5 Turkey has submitted its intended nationally determined contribution (INDC) to the UNFCCC Secretariat on September 20,
2015, as a result its commitment to article 2 of the Convention.
6
work in relation to the UNFCCC and Kyoto Protocol requirements alongside with
national policies like the National Action Plan for Climate Change.
In regard, the Monitoring of Greenhouse Gas Emissions Regulation was enforced in
2012 (see Figure 2). The By-law aims to transpose the ETSD categories and activities
to Turkey and monitor, report and verify greenhouse gas emissions resulting from
these activities. In 2014 the first by-law was repealed and a new regulation was
published and enforced. This by-law was amended in 2016 and 2017. In order to
facilitate the implementation of the By-law, a Communiqué to Monitor and Report
Greenhouse Gas Emissions was enforced in 2014 and another Communiqué to the
Certification of Institutions to Verify the Reports and Reporting of Greenhouse Gas
Emissions was enforced in 2015, establishing the current legislation for monitoring,
reporting and verification (MRV) (see Figure 2).
1.2. Scope and Objectives
The ETSD covers high emission sectors like aviation, energy and industrial processes
responsible for 40% of the total emissions6 in the EU (see Figure 4). The ESD covers
most sectors not included in the ETS like waste, buildings, agriculture and
transportation which are responsible for 55% of the emissions7.
6 These are average figures.
7
Figure 4. Sectors covered by the EU ETS and EU ESD
Together, the ETS and ESD legislations cover almost all of the total emissions in the
EU28 since 2005. The expansion of the ETS has increased this figure to 98% in 2016,
from the 91% in 2005 (see Figure 5).
Figure 5. Ratio of ETS and ESD Emissions to Total Emissions in the EU28
The ETSD covers not only 28 Member States, but also Iceland, Lichtenstein, and
Norway. Aviation, energy and industrial activity related emissions listed in Annex I and
GHG in Annex II are covered by the Directive. Greenhouse gases (CO2, PFC, N2O),
resulting from activities, are covered by the Directive account for almost 40% of
emissions in the EU. Subsectors and greenhouse gas emitting activities covered by
the Directive are listed in Table 1.
8
Table 1. Sectors, Greenhouse Gases and Activities Covered by the ETSD
Sector Gas Activity
Aviation CO2 Civil aviation
Fuel combustion CO2 Electricity and heat production by fuel combustion
Refinery CO2 Petrol refineries
Iron-steel, coke, metal
ore
CO2 Coke production, metal ore roasting or sintering, pig iron or
steel production
Other metal
(Aluminium included)
CO2 Iron metal production/processing, aluminium production,
non-iron metal production
PFC Aluminium
Cement and lime CO2 Cement, lime production
Other non-metal
minerals
CO2 Glass, ceramic, mineral wool production, plaster/sheetrock
production/processing
Pulp and paper CO2 Pulp, paper, carton production
Chemicals CO2 Acid and charged organic chemical production
N2O Nitric, adipic and glyoxylic acid and glyoxal production
Other CO2 Capturing, removing and storage of greenhouse gases
resulting from activities covered by the Directive
The ETSD was planned as a first “learning” phase in 2005-2008 and a second phase
for 2008-2013. GHGs, sectors and countries, penalties, registry systems and
allocation methods covered by the Directive differ with respect to phases (see Figure
6). The cap on emissions was based on National Allocation Plans (NAPs) prepared by
Member States.
9
Figure 6. EU ETS Phases7
+: country/system/greenhouse gases/sectors added to the scope
The main difference regarding the emission cap between the first two phases after the
2013 period is that there is general EU level limit. This cap is decreased by 1.74%
every year until the beginning of the fourth phase and will decrease by 2.2% every
year during the fourth phase. Hence the emission allowances of countries and
installations will also decrease in regard the ETSD. On the other hand, the auction
ratios of emission allowances for sectors will also decrease compared to the first two
phases. The 2005 GHG emission level reduction targets of sectors covered by the
ETSD was 21% for the third phase (EU 2020 Climate Package), this has been
increased to 43% for the fourth phase (EU 2030 Climate and Energy Package) (see
Figure 6).
1.3. The EU ETS Experience
According to Eurostat 2015 data, Europe’s average GHG emission is 8.75 tonnes
CO2e/year per capita (see EK 2 Map 2). During the same year, GHG emissions per
capita in Turkey were 6.26 tonnes CO2e/year. The per capita greenhouse gas
emission rates for the EU28 decreased by 27% between 1990 and 2015 (see ANNEX
2 Map 4). In the same period, per capita emissions in Turkey increased by 62% and
7 Information concerning the fourth phase has been gathered from the draft document. It has not reached its official final
version yet.
10
with this rate Turkey has the highest increase among the 3 countries that increased
their GHG emissions per capita. The EU28 decreased its total emissions by 22% in
the same period, while Turkey increased by 127% (see ANNEX 2 Map 5). While
Germany is the leading country in terms of total GHG emissions with 926 million
tonnes CO2e; Turkey takes 3rd place with 486 million tonnes8 CO2e (see ANNEX 2
Map 3).
According to the EEA 2016 data, there are 12,495 registered installations in Europe
to the ETS which are responsible for 45% of the CO2, PFC and N2O emissions (1.812
Mt CO2). The distribution of these installations in Europe is provided in Map 1.
Germany with the highest total greenhouse gas emissions has 2,068 businesses
registered to the ETS. These installations constitute 17% of the total number and they
are responsible for 25% of the total ETS emissions. Germany is followed by France
(1.306), Italy (1.220), UK (1.055) and Spain (1.018) in terms of number of installations.
Map 1. Total number of EU ETS Installations by Country (2016*)
Among the 12,495 installations and operators, 818 are aircraft operators and 11,420
are stationary installations from energy and industry sectors (see Figure 7). While 58%
of the installations are from the energy sector, 33% are from industrial processes.
Among the 33% most are related to non-metal mineral processing businesses.
8 Excluding LULUCF, including civil aviation
Total number
of EU ETS
Installations by
Country
(2016*)
11
Figure 7. Sectoral Distribution of EU ETS Businesses
The energy sector installations which are 58% of the total are responsible for 65% of
the total CO2, PFC and N2O emissions. Among the remaining 35%, 3% is from the
aviation sector and the rest is from industrial processing installations (see Figure 8).
Figure 8. Sectoral Distribution of EU ETS Emissions9
Europe classifies installations based on their annual emissions as zero, mini, small,
medium and large;
9 CO2, PFC and N2O
12
i. installations with an annual 0 emission are classified as Zero; ii. 0 to 25 kt CO2 equivalent are classified as Mini; iii. 25 to 50 kt CO2 equivalent are classified as Small; iv. 50 to 500 kt CO2 equivalent are classified as Medium; v. 500 kt CO2 equivalent or more are classified as Large.
Figure 9. Number of EU ETS Installations by Category and Sector
According to this classification, 8% of installations are considered Large and 74% are
Mini and Medium. Among the 74%, 58% are from energy and 34% from industrial
processes. As displayed in Figure 10, Large installations consisting of 8% the total are
responsible for 80% of the emissions. Medium size installations are responsible for
15% of the emissions. The energy sector makes up both the largest number of
installations and highest amount of emissions in each category; while aviation is the
smallest sector (see Figure 9 and Figure 10). installations in the Zero category are
only 2% of the total number.
13
Figure 10. Category and Sector of Distribution of EU ETS Emissions
Distribution of installations according to category in Europe by number and emissions
is provided in Figure 11 and Figure 12. With no exception, as in ETS countries in
general, although Large installations are fewer in number, they are responsible for
almost all of the ETS emissions.
Figure 11. The Number of EU ETS
Installations by Category and Country
Figure 12. EU ETS Emissions of Installations
by Category and Country Distribution of
(2016)
REC Turkey, 2017. Source: EEA
14
The ETSD, from its enforcement in 2005 to 2016, decreased emissions by 8%, from
2.01 billion tonnes CO2e to 1.81 billion tonnes CO2e (see Figure 13). This decrease is
19% in the energy sector, while only 4% in industrial processes. The rapid decrease
in total emissions during the 2008-2009 period is correlated with the economic crisis
of the time. Although the ETS experienced an increase during its first phase in 2005-
2008, as the system slowly strengthened, a regular decrease has been observed.
Figure 13. Total and Sectoral Changes in the EU ETS Emissions (Million tonnes CO2)
15
2. OBJCTIVE and METHODOLOGY
2.1. Objective of the Study
The overall policy objective of an ex-ante RIA is to identify and assess policies that
may be problematic after implementation and thereby provide decision makers
recommendations based on data and analysis in order to facilitate a better economic,
environmental and social harmonization of the regulation.
The main objectives of this RIA study (see Section 1.2 Scope and Objective) is to
support a full harmonization with an effective greenhouse gas reduction strategy in
line with the objectives of the directive.
These objectives established under the below listed operational objectives. In order to
harmonize the by-law in context with identified problem, the below mentioned
objectives, limitations and assumptions should be considered:
Table 2. Objectives, Limitations and Assumptions of the RIA Study
Objectives Limitations Assumptions
1. Harmonization of the Emission Trading
System System
Directive (ETSD) to Turkey
2. Reducing GHG emissions for Turkey
1. Staying in line with the responsibilities of the EU Directive while implementing the by-law
2. Creating the least possible economic, environmental and social costs for the country while transposing legislation for the harmonization
1. GHG emissions of Turkey increasing in line with the Intended Nationally Determined Contribution submitted to the UNFCCC
2. Effective enforcement of the MRV system established by the MoEU
2.2. Methodology
RIA is an evidence-based process used in developing policies and making regulatory
decisions. This process consists of understanding underlying problems of a given
issue, identifying possible options and evaluating these problems in structured
manner. Impact of possible options are systematically analysed and compared. This
approach, while supporting a transparent policy understanding, also allows important
pieces of information to be shared between the government and stakeholders. It is
important to make key decisions based on cost-benefit analysis of the options.
In order to support RIA study with data; and to receive opinions and to collect data for
policy options, following activities will be carried out under the four stages of the
process (see Figure 14):
▪ Literature and international good examples review
▪ Working group meeting
16
▪ Preparation of a Pre-RIA report in order to confirm the validity of the options
▪ Survey amongst stakeholders regarding problems and solutions
▪ Interviews with national and international institutions
▪ National and local consultation meetings
▪ Site visits
Figure 14. RIA Process
The close cooperation of the MoEU and ownership from stakeholders to be achieved
with the active engagement of institutions like TBB, MMU, TOBB and ISO to the
process will facilitate the consultation process of REC Turkey and make it more
effective.
2.3. Consultation and Data Collection
Within the scope of RIA, a comprehensive consultation process will be implemented
in order to inform relevant stakeholders about the Decision, to verify identified
problems and policy areas and especially to collect data. The consultation process is
mainly cover meetings and interviews with public institutions and related sector
representatives mostly from the Ankara and Istanbul provinces. Close cooperation
with the MoEU during the consultation process will provide important benefit and
support effective implementation of the study.
The consultation process consists of the following steps:
▪ Increasing awareness among stakeholders concerning the Decision and RIA
▪ Data and information collection from stakeholders
▪ Assessment of positive and negative impacts of the Directive
17
▪ Economic, environmental and social assessment of policies in order to make
the harmonization more cost effective
▪ Verification of findings by stakeholders
The consultation process will be realised in parallel with desk- studies. The Ankara
and Istanbul provinces for the National Consultation Process and Mersin and Izmir
provinces for the Local Consultation Process have been designed by REC Turkey and
the MoEU together, due to the existence of carbon dense industrial facilities in these
regions. REC Turkey will collect views and recommendations from the stakeholders
through a series of interviews, focus group meetings and a survey.
18
3. PROBLEM IDENTIFICATION and EXISTING STATUS
3.1. Problem Identification
As a result of the Brief Screening10 process, the Working Group identified
harmonization and implementation of the ETSD with the lowest possible
environmental, social and economic cost as the main problem.
The main challenges to be expected during the harmonization and implementation are
listed as follows:
1. Fair Allocation of Emission Allowances
2. Increasing Costs due to Mitigation 3. Transparency 4. Deterioration of Market Competition 5. Auditing, Sanction and Penalties 6. Carbon Leakage
3.2. Current Status in Turkey
This section provides data concerning the current status in Turkey related to the
ETSD.
According to Eurostat 2015 data, total emissions for Turkey is 486.2 million tons
including indirect CO2 emissions and 475.1 million tonnes CO2e excluding indirect
carbon emissions. According to Turkstat data, the energy sector is responsible for 72%
of the 475.1 million tons; while Industrial Process (%13), Agriculture (%12) and Waste
(%4) make the remaining 28% (see Figure 15). 68% of the generated energy is based
on combustion of fossil fuels (see Figure 16).
10
Quick Scanning is the first step of a RIA consisting of a series of Working Group meetings identifying problems and policy
area and options for these problems, literature review and country comparisons.
19
Figure 15. GHG Emissions by Sectors in
Turkey (2015)
Figure 16. Electricity Generation by Source
in Turkey (2015)
The “By-law on Monitoring of Greenhouse Gas Emissions”, dated 17.05.2014 and
numbered 29003 was prepared based on the Greenhouse Gas Monitoring and
Reporting Mechanisms Regulation related to the Directive 2003/87/EC of the
European Council of 13 October 2003. Activities listed in the By-law are in compliance
with the activities listed in Annex I of the ETSD11. Like the EU, following this
Regulation, the Greenhouse Gas Emission Monitoring and Reporting Communiqué
was published in 2014 and the Verification of Greenhouse Gas Emission Reports and
Accreditation of Verifying Institutions Communiqué in 2015. According to the MRV
legislation, annual emissions of installations in Turkey are divided into three
categories.
i. Category A, annual emissions 50 kt CO2 equivalent or less ii. Category B, 50 – 500 kt CO2 equivalent iii. Category C, 500 kt CO2 equivalent or more
In addition, installations with an annual emission equivalent or less than 25 kt/year
CO2 or installations that have not exceeded this amount for 5 years are categorized
as low emission installations.
Installations included in the monitoring system were 577 in 2013 and therefore, Turkey
ranked 9th among the ETSD countries (first 8 countries of the list in same year were
Germany, France, Italy, Spain, England, Poland, Sweden and Finland).
In context of the By-law, category C installations make up 17% of the total (see. Figure
17) and they are responsible for 89% of the total emissions (see Figure 18). Similarly,
category A installations are responsible for 2% of the emissions (see Figure 18) and
11
Excluding aviation, carbon capture and storage
20
make up 56% of the installations. Just like the installations included in the ETSD,
higher amount of installations that have higher number of installations, are responsible
for lesser amount of the emissions.
The total amount of emissions from these installations subject to MRV by-law in 2013
was 256 Mt CO2e and they make up (459 Mt CO2e12) 55.7% of the total greenhouse
GHG in Turkey10.
Figure 17. Category Distribution of MRV
Businesses in Turkey (2013)
Figure 18. Category Distribution of Total
Emission of MRV Businesses in Turkey
(2013)
In context of this study, verified ETS emissions for Turkey were calculated in relation
to the EU ETS emissions and the national GHG inventory submitted under the
UNFCCC. Although there are differences in sectoral definitions between the ETS and
the sectoral categories submitted to the UNFCCC13, the Union Report prepared by the
EEA in 2016, for the UNFCCC, expresses that most Member States use their ETS
data to prepare their national inventories (see Annex 4). This shows that the system
used by countries for national inventories and ETS are more or less the same and
although related data does not provide a complete picture for these countries, it at
least provides an overview.
A comparison of annual data for 2005-2015 between EEA and Eurostat concerning
ETS related sector, with the exemption of aviation, two sectors display a more than
90% similarity (see EK 3). The aviation sector seems to be losing similarity since 2012.
12
This figure is a result of the old calculation method of the Turstat in 2013. According to the new calculation, the figure is
442,2 Mt CO2e.
13 For example, industrial processes activities are included without distinction in the national inventory while only the ones
which have a total thermal input exceeding 20 MW are included in the ETS. Similarly, while fuel combustion emissions are
categorized according to use in the national inventory, this distinction does not exist in the ETS
21
The similarities between national inventory and ETS data for ETSD countries are in
Figure 19.
Figure 19. Sectoral ETS Emissions of EU ETS Countries* Based on National Inventories and
ETS Registries (2015)
This similarity was used for the calculation of verified ETS emissions for Turkey. For
example, for 2013, the verified emissions for the Energy, Industrial Processes and
Aviation sectors submitted to the UNFCCC is expected to be 198,053 kt CO2e and
Energy to be responsible for 65%.
22
Figure 20. Sectoral Emissions for EU ETS Sectors in Turkey (2015)
Looking at the national greenhouse gas inventory for Turkey 2015, the same sectors
are responsible for 56% of total emissions and 66% of this rate is resulted from the by
the energy sector (see Figure 20).
Calculations made with modelling and the data directly taken from the national GHG
inventory for Turkey seem to be quite similar. The ETS emissions for 31 countries
covered by the ETSD and the ETS emissions for Turkey calculated according to the
national GHG inventory are show in Figure 21.
23
Figure 21. Calculated ETS Emissions for Turkey (According to the European National
Greenhouse Gas Inventory and ETS Emissions) (2015)
24
4. POLICY AREAS and OPTIONS
4.1. Policy Areas
There are certain areas Turkey has to make decisions in concerning the harmonization
and implementation of the ETSD. The Working Group considered different options in
terms of harmonizing and implementing the Directive in line with objectives, limitations
and assumptions listed in the previous chapter and identified 4 priority policy areas
(see EK 5). Decisions related to these policy areas will allow Turkey to establish its
own emission trade system and implement it successfully.
The identified policy areas are as follows:
- Policy Area 1: Determination of Sectors and Installations Subject to ETS
- Policy Area 2: Determination of Sanctions - Policy Area 3: Public Access to GHG Data - Policy Area 4: Support to Electricity Generators
4.2. Policy Options
A total of 11 options were evaluated for the above listed 4 policy areas. Each option
will be analysed at related to policy areas in terms of the possible benefit and cost they
may bare and recommendations for optimum options will be provided at the end of the
study.
Policy Area 1: Determination of Sectors and Installations Subject to ETS
During the transposition of the ETSD to national legislation in Turkey, gases, sectors
and therefore installations to be covered by need to be identified. The existing MRV
legislation in Turkey identifies businesses to be included in the MRV. Regarding
compliance to ETS, the existing MRV does not include all the sectors as listed in the
fourth phase of the ETS. Turkey, in addition to the MRV, should cover all sectors in
the ETSD, including aviation (Option 1.1). According to Article 24 of ETSD, countries
may chose to exclude certain high emitters (Option 1.2). According to Article 27,
countries have also right to exclude low emitters as well. The last option could be
excluding these sectors (Option 1.3).
▪ Option 1.0: Current Status (MRV scope)
▪ Option 1.1: Scope of EU ETS (MRV Scope + Aviation + CCS)
▪ Option 1.2: Expanded Scope (Additional Sectors and Activities)
▪ Option 1.3: Reduced Scope (Exclusion of low emitters)
Policy Area 2: Determination of Sanctions
In order for the ETSD to function properly, especially the penalty aspect of the reward
and penalty system that is heart of the system needs to be implemented clearly. In the
25
current situation in Turkey, environmental penalties are issued according to the
Environment Law. The most important problem that penalties may create is that
installations may go bankrupt or they may create carbon leakages. Since the
Environment Law is not compatible with the ETSD, Turkey will need to include penalty
articles to the new legislation.
According to article 16 of the ETSD, operators whom has not surrendered allowances
must be fined 100 € per ton (increased by CIP annually) of the excess amount (3rd
paragraph) and ““publication of the names”” fine that are in breach of requirements to
surrender sufficient allowances (2nd paragraph) is also foreseen (Option 2.1).
Other than above mentioned fines, Member states have a right to add additional
sanctions for non-compliance with the Directive are given to the initiative of each
country. Turkey may also choose to impose additional sanctions (Option 2.2). For
example, Sweden issues fines to operators that do not surrender enough emission
allowances based on their emissions according to the difference between their verified
emissions and surrendered allowances, together with a delay penalty14. On the other
hand, they also issue a 20,000 SEK (around 2,151 €) fine for late, incomplete or
unverified annual emission reports15. In Norway, related authorities are given power
to issue fines according to the Norwegian Pollution Law17.
Options to be evaluated in this regard are as follows:
▪ Option 2.0 Current Status (Environmental Law Provisions)
▪ Option 2.1 Implementation of the penal sanction stated in the Directive
▪ Option 2.2 Additional penal sanctions to the ones in the Directive
Policy Area 3: Free Access to Data
The ETSD Article 16 obliges-publication of the names as one of the non-compliance
penalties which is supposed to create a public pressure on non-complying operators
through exposure. The information in the EU ETS must openly be shared with the
public (see Figure 22). However, this approach is debatable in Turkey.).
14
Environment and Climate Regional Accession Network (ECRAN), Handbook on the Implementation of EU Climate Change
Legislation, 2015-2016
15 Ecofys, Fourth ETS MRAV Compliance Review, 2015
26
Figure 22. Data Indicators Prepared for the EU ETS Data
Source: Sandbag16
This approach is highly important for operators to comply with the legislation and it
also increases effectiveness. For example, during a CEO Perception Study conducted
by REC Turkey in 2016, 92% of the 54 leading companies replying to the survey
believed that climate change was an important aspect in terms of reputation
management for businesses17.
At the moment MRV data in Turkey is not open to public access. However, there are
operators that share their emissions and climate change strategies through
Sustainability Reports. In Turkey, 56% of 54 large companies prepare these Reports19.
16
Sandbag, Climate Campaign CIC, EU ETS Dashboard 0.1, 2016
17 REC Türkiye, İklim Değişikliği CEO Algı Araştırması: Türk İş Dünyası Liderlerinin İklim Değişikliğine Yanıtı, 2016
27
One large company
publishing annual
Sustainability Reports
regularly began providing
emission information for its
operations in Turkey in 2016,
dating back to 2012 (see
Figure 23). According to the
Report, in 2016 emissions
related to the operations in
Turkey decreased by 56%
compared to 2010 and by
37% compared to 2012 (see Figure 23). Indirect emissions also decreased
significantly. This kind of transparent sharing will set examples among businesses in
relation to competiveness. “Setting an example for competitors” is perceived as highly
important by 49 of the 54 large businesses in the private sector in terms of managing
climate change19.
According to the 2017 study of the Carbon Disclosure Project (CDP), businesses
willing to share information increased by 3 folds between 2011 and 2017 (calculated
according to the number of businesses responding to the CDP19). Furthermore, 43 of
the 50 businesses, gave 75-100% complete answers21.
The impact of the global focal issue “transparency” on businesses concerning sharing
their data like emission allowances, verified emissions and purchased allowances in
accordance with the transposition of the EU ETS to national legislation will be
assessed under this policy area.
▪ Option 3.0 Current Status (Not publicly available)
▪ Option 3.1 Data is open to public
Policy Area 4: Support to Electricity Producers
One of the most important challenges of ETS is installations moving their operations
abroad due to legislation in their countries (carbon leak). While generation installations
carry this risk, the same is not valid for electricity production operators. Generating
electricity abroad and bringing it back would be much more costly for them.
18
Arçelik, Sustainability Report, 2016
19 Carbon Disclosure Project (CDP), Climate Change Report 2017 Turkey Edition, 2017
Figure 23. Emissions of a Large Business in Turkey (ton
CO2)
REC Turkey 2017, Source: Sustainability Report. 18
28
The ETSD does not provide the free of allocation to electricity production sector
although it is available to sectors that are exposed to a significant risk of carbon
leakage. However, article 10c of the ETSD, does allow Member States to provide
electricity operators with free of charge allocation if they reduce their emissions
through infrastructure retrofitting and upgrading (Option 4.1). Considering that the
electricity sector is responsible for most of the GHG in Turkey (72%), the option 4.2 is
one of the important solutions to be evaluated by Turkey.
Options to be evaluated in this regard are as follows:
▪ Option 4.0 Current Status (No allocation of free allowances to electricity
generators for infrastructure modernization)
▪ Option 4.2 Allocation of free allowances to electricity generators for
infrastructure modernization
29
5. ANNEXES
Annex 1: Pre-RIA Preparatory Work
Interviews were conducted with national institutions/organisations listed below in order
to share information about the study with relevant stakeholders.
▪ Electricity Producers Association (EÜD)
▪ Ministry of Energy and Natural Resources, Renewable Energy General
Directorate
▪ Ministry of Energy and Natural Resources, Electricity Production Corp. (EÜAŞ)
▪ Partnership for Market Readiness Project (PMR) Turkey team
▪ Turkish Cement Producers Union (TÇMB)
▪ Turkish Steel Producers Association (TÇÜD)
▪ Turkish Union of Chamber and Commodity Exchanges (TOBB)
▪ Turkish Industry and Business Association (TÜSİAD)
In order to make official contact with international institutions listed below, RIA experts
attended the COP23 of the UNFCCC in context of the project.
▪ Centre for Energy and Environmental Policy Research (CEEPR),
Massachusetts Institute of Technology (MIT)
▪ Harvard Environmental Economics Program, Harvard Kennedy School
Annex 2: EU Greenhouse Gas Emissions
Map 2 indicated GHG emissions per capita. Luxembourg has the highest greenhouse
gas emission with 20.75 tonnes CO2e/year. This is followed by Iceland with 15.84
tonnes CO2e/year, Estonia with 13.78 tonnes CO2e/year and Ireland with 13.49 tonnes
CO2e/year. Lichtenstein has the lowest emissions with 5.37 tonnes CO2e/year.
Croatia, Sweden and Latvia follow with 5.65 tonnes CO2e/year, 5.73 tonnes CO2e/year
and 5.87 tonnes CO2e/year respectively.
30
Map 2. Greenhouse Gas Emissions Per Capita in Europe (ton CO2e/year)
The total greenhouse gas emission of Europe is shown on Map 3. Germany by far has
the highest emissions with 926 milli7on tonnes CO2e. This is followed by England,
Turkey and France with 537, 486 and 475 million tonnes CO2e respectively.
Lichtenstein has the lowest per capita emission with 0.2 million tonnes CO2e. Malta
follows with a total emission of 3 million tonnes CO2e. Iceland is the second lowest
emitting country per capita and the third lowest in total emissions with 5 million tonnes
CO2e.
31
Map 3. Total Greenhouse Gas Emissions in Europe (ton CO2e/year)
Map 4 and Map 5 show the GHG reduction performance for European countries since
1990. Although Estonia is one of the four highest per capita emitting countries, their
figures have reduced by 47% during 1990-2015 (see Map 4). Lithuania, Slovakia and
Romania have reduced their per capita emissions by respectively 47%, 46% and 44%
and are among the 7 countries to have reductions more than 40%. Germany and
England who are leading in terms of total emissions are also included in this category
with a reduction of 43% and 42% respectively. Latvia is among the four lowest per
capita emitting countries and they have reduced per capita emissions by 41% during
1990 to 2015 (see Map 4).
As shown on Map 4, Turkey (62%), Portugal (14%) and Iceland (7%) are the only three
countries that increased their per capita emissions. Map 5 displays that these three
countries also increased their total emissions by 127%, 18% and 39% respectively.
Other countries that increased their total GHG emissions Cyprus (44%), Spain (19%),
Ireland (9%), Norway (6%) and Austria (%2) (see Map 5).
32
Map 4. Changes in Greenhouse Gas Emissions Per capita Between 1990-2015 in Europe (%)
The total emissions of the EU28 have decreased by an average of 22%. The most
important contribution to this decrease is made by Lithuania (58%), Latvia (56%),
Estonia (55%) and Romania (52%), who decreased their total greenhouse gas
emissions, by more than 50% (see Map 5).
33
Map 5. Changes in Total Greenhouse Gas Emissions Between 1990 and 2015 in Europe,
1990-2015 (%)
Annex 3: ETS Data Usage in National Inventory Submissions
Table 3. ETS Data Usage in National Inventory Submission
Member State Use of ETS Data
Use of Emission
Use of Activity
Use of Emission
Factor
Use for Quality Control
Austria Used
Belgium Used
Bulgaria Used
Croatia Used
Cyprus Used
Czechia Used
Denmark Used
Estonia Used
France Used
Finland Used
Germany Used
Greece Used
Hungary Used
Ireland Used
Italy Used
Latvia Used
Lithuania Used
Changes in Total
Greenhouse Gas
Emissions Between
1990 and 2015 in
Europe, 1990-2015 (%)
34
Luxemburg Used
Malta Used
Netherlands Used
Poland Used
Portugal Used
Romenia Used
Slovakia Used
Slovenia Used
Spain Used
Sweden Used
United Kingdom Used
ANNEX 4: Annual UNFCCC and ETS Data Correlation Values
Related ETS sector 2005-2015 annual data from the EEA and Eurostat are compared by
year and the correlation (R) and determination (R2) values between them are calculated
(see Table 3).
Table 4. UNFCCC and ETS Data Annual Compatibility Values
Annex 5: Excluded Policy Areas
In scope of the RIA, policy areas necessary for Turkey to harmonize and implement
the EU acquis were reviewed. In other words, transposition of the EU ETS system to
Turkey was examined instead of establishing a new ETS system for Turkey.
Therefore, policy areas and options were selected from areas to be harmonized by
Turkey in context of the Directive.
Policy areas listed below that required for the establishment of an ETS system were
removed from this RIA study since the methodology is explicit in the Directive. These
policy areas will be studied by the PMR project (see EK 6).
Policy Area: Identification of a National Cap
35
The harmonization of the ETSD to national legislation requires an identification of a
cap emissions allowances to be allocated to installations. ETSD sectors must have
allowances. There are different methodologies;
Bottom to top approach: Calculation of a cap for installations by adding the allocated
allowances.
Top to bottom approach: Identification of a cap by the central government and
allocation of allowance accordingly.
Combined approach: While the analysis for the allowances to be allocated to
businesses establishes a hinge for the cap, the identified allowance are also arranged
to comply with reduction targets.
During the 1st and 2nd phases of the EU ETS, Member States informed the EC
concerning their allocated emission allowances through their National Allocation Plans
(NAP) and therefore, the calculation was made with the bottom to top approach.
However, during the 3rd and 4th phases, since the system had developed, the top to
bottom approach was used to set a EU wide cap for industrial installations and Member
States were asked to allocate their permits in line with this cap. Emission reduction for
ETS sectors at the EU level were identified during the 3rd and 4th phases of the cap as
an annual 1.74% and %2.2 respectively (see Figure 24). A fixed cap was set for the
aviation sector (210 MtCO2e/year for the 3rd phase).
36
Figure 24. Emission Maximum Limits for the EU ETS
Policy Area: Free Allocation Method
Instead of requesting payment from ETSD sectors concerning their GHG emissions
as they entered their data in the system to begin with, the EU allocated free emissions
allowances. The objective was to facilitate the transition to the ETS and prevent carbon
leakages.
There were several methods for the identification of free emission allowances to be
given to businesses. During the first phase of the ETSD, free allowances were
allocated based on historical emissions in a reference periods (grandfathering) and in
the second phase, distributions began to be made based on emission intensity at
product level (benchmarking).
For example, during the 2005-2008 periods, Germany declared that it is not eligible
for benchmarking according to its NAP. While Romania did not use benchmarking in
both plan periods (2005-2008 and 2008-2013), Slovenia used grandfathering for its
energy sector for the first 3 years of its 2nd period and used benchmarking during 2011-
2012 with a ratio of 30% and 50% respectively.20
20
Climate Action Network Europe (CAN-E), Dünya Doğayı Koruma Vakfı (WWF), Assessment of Key National Allocation
Plans for phase II of the EU Emissions Trading Scheme, February, 2007
37
Policy Area: Pilot Period
The EU identified the first three years of the ETS as a pilot period (2005-2008) in order
to prevent carbon leakages from ETSD sectors and provide a “transition phase”. Free
emission allocations were high during this pilot phase and since an unexpected
economic crisis was experienced during 2008-2009, the distributed allowances for
installations surplused. The system was reviewed and amended as a result of these
experiences.
Annex 6: PMR Project21
Launched by the World Bank in 2011, the Partnership for Market Readiness (PMR) is
a technical assistance program aiming at supporting developing countries which have
significant importance in the global fight against climate change in their efforts to
reduce greenhouse gas emission, through effective use of market-based instruments.
Capacity building, awareness raising and training activities in respect to the carbon
pricing mechanisms are being carried out in coordination with all relevant stakeholders
throughout the program. Turkey became one of the 17 implementing countries in 2013.
Under the scope of PMR Project, pilot implementation of the MRV Regulation in
installations strengthened the capacity building process of both private and public
institutions, through trainings. This included development and testing of tools and
electronic templates for data collection and emission calculation, and preparation of
monitoring plans and emission reports of installations, in coordination with
international and national experts. The MRV Regulation was implemented in a holistic
manner, as the emission reports were verified under the Project.
Project Components:
I. Implementation of the Regulation on preparation of monitoring plans and emission reports for electricity, cement and refinery sector installations volunteering within the scope of MRV pilot programme
II. Analytical Report 1: Roadmap for the Consideration of Establishment and Operation of a Greenhouse Gas Emissions Trading System in Turkey
III. Analytical Report 2: Assessment of Market Based Emission Reduction Policy Options for Turkey
IV. Analytical Report 3: Modelling Fiscal, Economic and Sectoral Impacts of Carbon Pricing in Turkey
V. Synthesis Report
21
PMR Turkey, 2017, http://pmrturkiye.org/kurumsal/pmrturkiye/
38
Annex 7: Follow Up
▪ Data collection and analysis
▪ Consultation process
• Focus group meetings
• Interviews
• Questionnaire Study
• Reporting of the consultation process
This publication is prepared with financial contribution of the European Union and the
Republic of Turkey. Only the consortium led by the Hulla & Co Human Dynamics KG is
solely responsible for the contents of this publication, and such contents do not reflect
the opinions and the attitude of the European Union nor the Republic of Turkey.
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