An assessment of the risk of carbon leakage for sectors under the EU ETS

An assessment of the risk of carbon leakage for sectors under the EU ETS

Contract value:£0 – £120,000. The EU ETS (EU Emissions Trading System) is Europe’s flagship policy for reducing greenhouse gas emissions by putting an EU-wide cap on emissions and creating a market for emissions.

Reference number: TRN 559/01/2013

Deadline date:22/02/2013

This deadline is for… 17.00

Contract value:£0 – £120,000

Location where the contract is to be carried out: London

Is this suitable for smaller suppliers? Yes

Is this contract suitable for a voluntary, community and social enterprise organisations? No

Name of the buying organisation: Department of Energy and Climate Change (DECC)

 

Description of the contract

The EU ETS (EU Emissions Trading System) is Europe’s flagship policy for reducing greenhouse gas emissions by putting an EU-wide cap on emissions and creating a market for emissions. The declining cap trajectory under the EU ETS will help reduce emissions in 2020 by 21% as compared to 2005 levels. The absence of global carbon markets creates a risk of carbon leakage, i.e. the prospect that firms may relocate investment or production from Europe to the rest of the world in order to avoid the costs of climate change policy. This may occur if they cannot pass on the costs to consumers without significant loss of market share, leading to an increase in overall emissions. To mitigate the risk of direct and indirect carbon leakage, the EU ETS Directive currently favours the free allocation of allowances to those sectors deemed at significant risk of carbon leakage. The Government supports this in the absence of an international climate agreement, which would create a level playing field for industry inside and outside the EU. We believe the proportionate free allocation of allowances gives relief to sectors at significant risk of carbon leakage, without raising barriers to international trade. Sectors at risk of carbon leakage are assessed against the criteria and thresholds in the EU ETS Directive (see below) and the last full assessment was agreed via the EU comitology procedure in 2009. ? the sum of direct and indirect costs of the EU ETS are greater than 5% of gross value added and the intensity of trade with non-EU countries is greater than 10%; or ? the sum of direct and indirect costs of the EU ETS are greater than 30% of gross value added; or ? the intensity of trade with non-EU countries is greater than 30% The EU ETS Directive allows for a review of sectors at risk every five years, with the possibility of adding sectors to the list on annual, ad hoc basis. The next substantive review of sectors will be in 2014. Under the current approach, about 170 sectors are deemed to be at risk of leakage, and DECC seeks to appraise whether this is an appropriate number. The European Commission will conduct a review of carbon leakage in 2014 which will revisit the list of sectors exposed to risk of leakage as well as some key assumptions used for determining whether key sectors are exposed to the risk of leakage, e.g. the assumed carbon price. This research will provide some useful evidence which DECC will be able to feed in to the 2014 review and thus influence the Commission’s approach on leakage to help adjust the list of leakage sectors. This project consists of five key elements: (i) An assessment of evidence to suggest that leakage has or has not occurred over Phase II of the EU ETS (ii) In-depth case studies to assess the risk of leakage for a specific set of sectors or sub-sectors (iii) An assessment of how the risk of leakage depends on the level of the carbon price and/or the tightness of the cap (iv) An assessment of the current approach for identifying sectors at risk of leakage and alternative approaches (v) An assessment of the merits of alternative approaches for mitigating the risk of leakage in light of evidence gathered

 

Classification of the contract

73000000 Research and development services and related consultancy services

 

Additional information

Contract type: Services – Unspecified

Is it a framework agreement? No

Is this contract related to a programme of funding? No

Contract will be awarded based on: Most economically advantageous tender in terms of: The criteria stated in the contract documents

Estimated length of contract: 11/03/2013 – 22/07/2013

 

Who to contact

Contact name Andrew Beacom

Organisation name DECC

Address First Floor Area A, , 3 Whitehall Place, LONDON, SW1A 2AW

Telephone 0300 068 6024

Extension number:

Fax

Web address

 

How to apply

Completed tender submission must be returned by post to DECC, address given at the top of this advertisement, by 22nd February 2013. We require 5 hard copies (one of which must be signed). Electronic versions of your bids are to be sent to Andrew Beacom (andrew.beacom@decc.gsi.gov.uk). Interviews, if deemed necessary, will be held in the week commencing 4th March 2013 (suppliers will be notified of this in the week commencing 25th February 2013). If successful and upon contract signature, the supplier is expected to attend a kick-off meeting taking place on 14th March 2013. Project completion is required by 19th July 2013.