Opportunities within a Compliance Market

While emissions caps may lead to increased production costs for industrial installations that fall under compliance, emissions trading offers companies the ability to deploy new technologies when the MAC at their own facilities is below the market value of allowances. Where technology measures reduce the emissions level below the target for the facility, surplus allowances represent value to installations that fall short of their commitments.

Emissions trading can also offer provisions for companies to voluntarily enter facilities into the scheme referred to as 'opt-in' to undertake measures that reduce emissions and sell surplus allowances from the facility. The opt-in rule in the EU ETS allowed France and the Netherlands to include N2O emissions from fertilizers as of 2008 [23].

In order to adequately assess the economic drivers for implementing low carbon technologies, it is important to consider the price point for each abatement solution in the chemical industry. An analysis by McKinsey examined the MACs for a number of abatement solutions for the chemical industry ranging from CHP to carbon capture and storage (CCS) for ammonia production. The analysis concludes that while business and society view the cost of abatement differently, solutions such as fuel switching and catalyst optimization are immediately effective without carbon price signals. However, other solutions such as CCS examined in Chapter 11 require carbon prices as high as 100€ or more per tonne of CO2e to be feasible [2] .

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