Q

Figure 2

Finland: domestic electricity production (1990-2009)

Figure 2

Finland: domestic electricity production (1990-2009)

Source: IEA statistics, 2010.

Note: Total domestic supply = electricity output + net imports.

Source: IEA statistics, 2010.

Note: Total domestic supply = electricity output + net imports.

To conclude observations on exports from Russia, Norway continuously imports electricity from Russia, although at a very low level - the electricity transmission line with Russia has a capacity limited to 30 megawatts (MW) (Norwegian Energy Regulator, 2010).

Ukraine is another relatively important exporter of electricity to the European Union. Hungary has imported increasing amounts of electricity from Ukraine since 2000, with a peak in 2005 (Figure 3); such imports are, however, at a much lower level than in 1990. Romania also increased imports from Ukraine in 2005. Poland has been a stable importer from Ukraine since 1993, although of less than 1 TWh annually. Ukraine also imports electricity from the

Slovak Republic. As is the case with Russia and Finland, the growing imports of Hungary started much earlier than the introduction of the EU ETS, making it difficult to attribute this evolution to the carbon cost applied to Hungarian power generators.

At this early stage and in the absence of a longer electricity-trading comparison period, it is difficult to estimate how the introduction of the EU ETS affected the changes observed in electricity imports to the European Union from countries without CO2 constraints on their powergeneration emissions. First observations do not support the existence of carbon leakage in the electricity sector.

Figure 3

Ukraine net electricity trade with countries subject to the EU ETS (1990-2008)

Figure 3

Ukraine net electricity trade with countries subject to the EU ETS (1990-2008)

Hungary

Romania Poland

Slovak Republic

Source: IEA statistics, 2010.

Source: IEA statistics, 2010.

Hungary

Romania Poland

Slovak Republic

How CO2-intensive is imported electricity?

Trade flows are only one factor in the quantification of carbon leakage. It is equally important to assess the CO2 content of the imported electricity that may substitute for domestic production. Carbon leakage implies that CO2 emissions are moved from the constrained region to another region; however, if Italy, for instance, were to increase its imports from Switzerland following the introduction of a cap on Italy's emissions, the near-zero CO2 content of 56 Switzerland's electricity would make such an exchange free of carbon leakage. Only when the substituted electricity is CO2-intensive does leakage occur. The following example illustrates this phenomenon:

F Country A emits one million tonnes (t) of CO2 in the generation of each terawatt hour.

F Country B, not subject to a CO2 constraint, emits 500 000 tCO2 in the generation of one terawatt hour.

F Country A reduces its power-generation emissions by 3 megatonnes (Mt) of CO2. It does so partly through the import of 1 TWh of electricity from Country B, which emits 500 000 tCO2 more than it would otherwise.

F The observed leakage rate is equal to the ratio of emissions elsewhere to the originally planned emission reductions (500 000 tCO2 divided by 3 MtCO2, or 17%).

Figure 4 displays the CO2 intensities of electricity generated in countries that import electricity from both Russia (left) and Ukraine (right), and the imported/exported volumes in 2008. The dotted line in each figure indicates the average CO2 intensity of the electricity generated in these two countries.

The comparison between Estonia and Finland shows that the latter would record a higher leakage rate resulting from Russian imports, as its CO2 emissions intensity is somewhat lower than Russia's. The contrast with Estonia would be less dramatic, as its power sector is very CO2-emissions intensive, with almost one tonne of CO2 emitted per MWh, against 300 kgCO2 for Russia.

Turning to electricity trade with Ukraine and leaving carbon leakage aside for a moment, the Slovak Republic's exports result in a net improvement in the CO2 picture, as the emissions intensity of its power generation is considerably lower than that of Ukraine (169 kgCO2 against 385 kgCO2).

In this preliminary exploration, some specific features of electricity trade could not be taken into account, namely the variation in CO2 emissions of electricity production depending on time of day and season. The above figures are based on the average performance of each country's power sector in a given year, whereas electricity transmission may take place at times when CO2 emissions are significantly higher or lower than average. If the risk of carbon leakage was serious, a more detailed analysis of the actual CO2 content of electricity trade would be needed to obtain precise figures for displaced CO2 emissions.

Figure 4

Ukraine and Russia: net electricity trade with neighbouring countries Ukraine

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