Opt-Out Deadline—30 June 2004
European Union LCPD Compliance Options
National Emissions Reduction Plan (Cap-and-Trade Option)
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Purchase Allowances
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Install Controls
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20,000-hour Derogation
Emission Limit Value Approach (Rate Cap)
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Install Controls
- 20,000-hour Derogation
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 Postpone SO2 and NOx Controls
One of the greatest challenge facing owners of industrial and power plant boilers is the requirement to meet obligations under new environmental legislation. The EU’s Large Combustion Plant Directive (2001/80/EC) sets new limits for the emission of sulphur dioxide (SO2), nitrous oxides (NOx), and fine dust particles for all new plant builds 50MW or larger. New limits for "existing" plants, those 50MW or larger that were licensed before 1 July 1987, will be binding from 1 January 2008. As if this was not enough, all combustion units with an installed capacity greater than 20MW will also have to contend with the EU Emission Trading Scheme (ETS) as part of their commitment to achieve its Kyoto-inspired greenhouse gas (GHG) emission reduction targets. This CO2 emissions trading scheme will be operational from 1 January 2005.
As some of the largest emitters of CO2, SO2, and NOx, existing coal-fired power stations face an uphill struggle. The simple engineering approach option would be to install the required flue gas clean up or combustion alternatives. This, however, is not the right answer in most cases. Governments and generating companies should first embrace the flexible mechanisms built into the LCPD such as the cap-and-trade option and the 20,000-hour derogation.
(continued in full report)
Hence Value in Delaying
The solution is therefore to select a compliance option that delays the inevitable investment for as long as possible. The National Emissions Reduction Plan (NERP) approach permits this by allowing the participating installation to purchase allowances to cover their SO2 and NOx liabilities. The derogation permits this by allowing the participating installation a further 20,000 hours before having to bite the bullet.
The a priori case in favour of flexibility is strong. This is confirmed by our analysis using our Integrated Planning Model (IPM®), a tool also favoured by the U.S. Environmental Protection Agency. As the price of CO2 rises, the market for clean up equipment falls and the use of derogations rises. Our work with a variety of clients confirms the view that the longer-term viability of coal is not dependent on LCPD compliance but on compliance with CO2 reduction requirements. To meet CO2, SO2, and NOx challenges in the most cost-effective manner, we would urge plant owners to assess the combined impact of three major pollutants on their portfolios. This is the only way to avoid making unnecessary investments and the best way to protect shareholder value.
Download full report on EU LCPD Compliance Options.
For inquiries and brochures, contact us at energy@icfi.com or 1.703.934.3637.
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