Spotlight on lack of clarity concerning EU emissions trading after plant closures

Midlands workers affected by the impending closure of two major power plants in the region will have received little clarity from last week’s Oireachtas Joint Committee on Climate Action meeting in Leinster House.

At the meeting – which focused on the so-called ‘just transition’ plan – officials from Bord na Móna (BNM), ESB Networks, the Department of Communications, Climate Action and the Environment and the Department of Housing, Planning and Local Government were grilled on the recent decision to shutdown peat-fired electricity plants at Lough Ree in Lanesboro, Co. Longford and Shannonbridge, Co. Offaly at the end of 2020 – 10 years earlier than first promised.

Independent TD for Roscommon-Galway Michael Fitzmaurice challenged the representatives on their rationale behind the move and posed fresh questions on how the closure of the plants – which is expected to affect up to 4,000 jobs directly and indirectly – will impact on Ireland’s national carbon emissions targets for 2020 and 2030.

The deputy also asked about any potential carbon credit “windfall or savings” that could be made by ESB/BNM after exiting peat.

It is worth noting here that Germany – which has a population of almost 83 million people – recently decided to implement a 19-year transition period to stop all 84 of its coal-fired power plants.

While Ireland – with a population of almost five million people – has decided to cease burning peat at two of its three peat plants by the end of next year, without a definite, alternative employment plan for all people affected.

The third plant located in Edenderry, Co. Offaly – which co-fires on peat and biomass – has permission to continue operating until 2023, for now.

Below is a video of the exchanges on the matter that took place in the meeting.


It was evident from the deputy’s line of questioning that he believes there is a significant lack of general knowledge on how the European Union frames its plan to reduce carbon emissions – as it was highlighted at the meeting that there are two systems in place – a trading system and a non-trading system.

Two Systems

The meeting heard that emissions from electricity generation in all member states are specifically tied to the EU’s Emissions Trading System – they are known as ‘ETS emissions’.
Emissions generated outside electricity are called ‘non-ETS emissions’ (to be explained below).

The ETS operates on an EU-wide cap-and-trade system that involves 11,000 power stations and industrial plants across the bloc – including the ESB/BNM.

ETS emissions are responsible for around 45% of the EU’s greenhouse gas emissions – and they are falling as intended.

Within the cap, companies receive or buy emission allowances – commonly referred to as “carbon credits” – which they can trade with one another as needed.

In other words, if emissions are high for a specific electricity company in Germany for instance, they could buy carbon credits from an electricity company in Ireland, or vica versa.

The cap is reduced over time so that total emissions fall.

However, it was evident at the meeting that deputy Fitzmaurice is of the view that the Government is not effectively communicating this complex system back to the general public – particularly to the communities directly affected by the looming plant closures in the midlands.

As carbon credits are currently worth an estimated €26/t, deputy Fitzmaurice also queried whether trading in carbon could be a lucrative market for “big industrial conglomerates” under the ETS system.

ETS debacle

In response to Fitzmaurice’s questions on any potential carbon credit gains that could be made by ESB in light of its early exit from peat, Jim Dollard ESB generation and trading executive director didn’t give a definite answer.

Dollard said: “A number of years ago companies like ESB were given carbon allowances free, that stopped a number of years ago, say five or six years ago, I don’t know off the top of my head [directed to committee chairperson], I’m guessing.

“Now we sell electricity forward in the market, we have to buy carbon in the market ourselves, we don’t hold allowances, there will be no windfall gain to ESB whatsoever in terms of carbon,” said Dollard.

However, deputy Fitzmaurice pushed further on this asking: “What will the saving be? If you’re buying forward there has to be a saving.”

Dollard replied: “We will produce the electricity in other plants. We may not be buying carbon credits, but equally we won’t be selling.

“There will be no saving because effectively all the plants compete at a margin, so one plant is competing against another in the market, against a competitor, so I would expect no saving,” he said.

Further confusion

Meanwhile, there was a further lack of clarity when the discussion moved to what – if any – impact the closure of the peat plants will have on Ireland’s 2020 and 2030 carbon emission targets.

It is important to point out here that the national reduction targets relate to the non-ETS sectors – including: agriculture; transport; residential; and waste etc. – in other words they are not traded through the ETS system outlined above.

At the meeting Fitzmaurice stated the following to a department official: “Bord na Móna and the ESB closing those two plants will not reduce Ireland’s emissions because they are trading under the ETS system in Europe.

“The closing of the plants will not change agricultural emissions, will not change transport emissions, and it will not change energy emissions when we add up our emissions in this country,” he said.

Brian Carroll assistant secretary at the Department of Communications responded to the deputy’s statement, however his reply too was also quite vague.

“The closing of the peat plants on an economy-wide basis will reduce our emissions – the estimate is 1.25 million tonnes of carbon will be saved each year and emissions will reduce by nine million tonnes cumulatively up to 2027.

However, there is a distinction to be drawn on how EU targets are framed.

“In terms of the EU regime it is divided into two sectors. The ETS, which is a cap-and-trade system and this is where electricity falls; the non-ETS covers other sectors.

“It [the closure of the plants] has a bearing on the decarbonisation of our energy system, but it obviously doesn’t have a bearing on our agricultural targets.

“The ETS is an EU-wide policy mechanism to reduce emissions in large industry and electricity generation. In terms of the overall the EU has a target to reduce emissions in the ETS system,” he said.

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