A recurring theme during this decade of climate action is that it is better to set your energy transformation in motion today than it is to wait until an unspecified tomorrow. “Regulatory uncertainty” is an often-cited reason for delaying the process, but one thing has always been certain – emissions regulations are only going to get stricter, so starting your decarbonization plan early is the best path forward.
The recent revisions to the EU Emissions Trading System (ETS) are case in point about the benefits of not delaying carbon action, as its system of Free Emissions Allowances (FEA) just got stricter. In October 2023, the European Commission decided that companies receiving FEAs for sites whose greenhouse gas emission levels are higher than the 80th percentile emission levels for the relevant product benchmarks must submit a highly detailed, site-specific Carbon Neutrality Plan (CNP) by May 2024, a very quick turnaround.
Notified companies will need to create a CNP for each facility that falls short of the product benchmark (bottom 20%) and submit it along with an allocation application for the period 2026-2030. Failure to deliver that CNP on time runs the risk of punishment in the form of a 20% reduction of the site’s free allocations – estimated to be worth €2 million per year for each factory in energy-intensive sectors, using an average EU ETS price of €80/tCO2.
With these potential consequences and given the amount of data collection and assessment such a plan will require, waiting for a good time to design and implement a decarbonization plan is no longer an option. The time to act is literally now. But there is no need to go it alone. ENGIE Impact has the tools to help develop a roadmap that is up to the task.
For companies that do not have a dedicated team to identify their carbon footprint, that knows the best solutions to improve it, and can project the long-term carbon impacts of those measures on their future operations, drafting a CNP within the allotted time will be challenging.
The EU has detailed guidelines for the content and format of climate-neutrality plans, as referred to in EU Directive 2003/87/EC of 13 October 2023. Since those guidelines for designing a plan to reduce Scope 1 emissions expect that companies will not only propose ameliorative measures for each underperforming site, but also link them to specific, measurable, achievable, relevant and time bound milestones and targets, one should already have advanced tools and a workable strategy at the ready.
The first ‘intermediate targets and milestones’ are set for 31 December 2025, and then for 31 December of each fifth year thereafter. “Targets” in this instance are not an expression of hope. Instead, they refer to quantitative indicators of progress towards the achievement of a measure or an investment to reach climate neutrality by 2050.
ENGIE Impact has a mature solution specifically for producing the kind of detailed, least-cost Net Zero roadmaps that companies will need to secure their free emissions allowances. Called “Net Zero Factory”, it is a three-step approach that includes an assessment of the site potential (feasibility study), scenario definition and comparison, and then modelling and developing a least-cost pathway across decarbonization levers.
This approach, conducted with in-house digital tools, specific on-site assessments and holistic analysis, can deliver key benefits for companies needing a quick solution for their Carbon Neutrality Plan. Performing a Net Zero Factory exercise will future-proof even the most challenging industrial installations, deliver cost-optimal emission reductions and help secure your Free Emissions Allowances.
Don't risk costly penalties and missed opportunities. Find an experienced partner to develop a robust and achievable Climate Neutrality Plan that secures your full share of free allowances and positions your business for success in the low-carbon future.
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