1

Risk and Chances for the Lime Industry through the European

Emissions Trading System

Dipl.-Ing. Andreas von Saldern,

ESolutions GmbH, Germany

2

Since 2005

CO2CO2CO2 CO2

CO2 CO2

EUAs

European Emissions Trading System

10.000 Installations

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The Europe-wide CO2–Emissions Trading System (ETS) exists since autumn 2004

•It includes installations of energy intensive industries like power stations, steelworks, cement, lime, bricks, ceramic…• Verified reports of CO2-emissions have to be generated, annually• An equivalent number of CO2-Emission Allowances have to be submitted to the authorities• Companies receive less CO2-Emisson Allowances than they need• Lacking CO2-Emission Allowances have to be bought, surpluses can be sold• Sales can be conducted between plant operators (OTC) or via Stock Exchange (e.g. Leipzig, London, Paris…)

4

Direct CO2–dependency in Germany

CO2–Emissions of different industries in relation to sales

0

5

10

15

20

lime power(coal)

cement power (gas) steel brick paper NF-metals ceramic glass chemistry refractory

kg

CO

2/€

re

ve

nu

e (

be

fore

em

iss

ion

tra

din

g)

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Trading Periods

• the first trading period lasted 3 years, from 2005-2007

• the second trading period lasts 5 years, from 2008-2012 and

• the third period will last 8 years, from 2013-2020. The basic rules have been fixed for the third period, some important details will be determinied in 2009 and 2010

Reduction Target by the end of 2020: Setting I: -21% compared to the emissions of 2005 Setting II: -30% if an ambitious Kioto II agreement will passed

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Allocated Emission Allowances in the European Emissions Trading System

2083

1525 (-30%)²

2179

1720 (-21%)1

0

500

1000

1500

2000

2500

2005 − 2007 2008 − 2012 2013 − 2020year

MtCO2/year

1st

Trading Period 2nd

Trading Period

1reduction based on 2005 emissions 2if Kioto II occurs

3rd

Trading Period

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CO2-prices for 1st and 2nd trading period differed significantly in 2007

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

Jan. 07 Apr. 07 Jul. 07 Okt. 07 Jan. 08 Apr. 08 Jul. 08 Sep. 08 Dez. 08

€/t CO2

Spot 2007 Dec08 FutureSource: ECX

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Forwarding production from 2008 in 2007 add 24 € profit / ton

emission factor 1,1 t CO2 / t lime

CO2 emissions 11.000 t CO2 / year

CO2 reduction 10%  

amount of CO2 reduction 1.100 t CO2 / Year

CO2 price 22 € / t CO2

value of CO2 reduction 24.200 € / year

percentage of revenue 40%  

production 10.000 t lime / year

price 60 € / t lime

revenue 600.000 € / year

profitability 10%

profit 60.000 € / year

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What does a 21% reduction requirement mean?

21 % per product at 0% annual growth

42 % per product at 2% annual growth

62% per product at 5% annual growth

since 2005

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Current number of installation covered through the European Emission Trading

SystemCountries Number of Installations

Austria 31

Belgium 294

Czech Republic 394

Denmark 374

Estonia 50

Finland 572

France 1004

Greece 141

Germany 1665

Italy 934

Ireland 106

Latvia 73

Lithuania 98

Luxembourg 14

Malta 2

Netherlands 341

Portugal 212

Romania 217

Slovenia 89

Spain 1006

Sweden 743

United Kingdom 925

EU (total) 9285

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Industries which have to comply with the European Emissions Trading System

Industries covered by the European Emissions Trading System (ETS)

Combustion Emissions from various industries especially utility services

Mineral Oil Refineries

Coke Ovens

Metal Ore Roasting and Sintering

Production of Pig Iron and Steel including Continous Casting

Production of Cement Clinker

Production of Lime

Production of Glass

Manufacture of Ceramic products

Pulp and Paper Production

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The prices for CO2-Emission Allowances are highly volatile

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

Jan. 08 Mrz. 08 Mai. 08 Jul. 08 Sep. 08 Nov. 08 Jan. 09

€/t CO2

Dec 09 Future Source: ECX

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Different price predictions of CO2-Emission Allowances

  Analysts predict a significant price increase  

    Phase II   Phase III  

    (2008-2012)   (2013-2020)  

Citibank   20-25 EUR/t   20-25 EUR/t (2013-15)  

        50 EUR/t (after 2015)  

Barclays Capital   9 EUR/t (2009)   EUAs: 45 EUR/t (2013-20)  

    20,50 EUR/t (2010-12)   CERs: 35 EUR/t (2013-20)  

Société Générale   17-20 EUR/t   23 EUR/t in 2013  

           

Deutsche Bank 

25-30 EUR/t (fundamental)

<10 EUR/t (temporary)  

Fundamental Price (incl. cost of carry of 4%) 48 EUR/t in 2020

 

           

Point Carbon   12-35 EUR/t (increasing)      

Daiwa House   13-16 EUR/t (increasing)      

Source: EET-Mac          

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“Process”-emissions can hardly be influenced

Lime production emits 1.0 to 1.9 t CO2/t lime

CO2-emissions which are caused by the lime production

70%

30%

0%

20%

40%

60%

80%

100%

CO2

fuel

dissociation

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The duties of enterprises which have to comply with the European Emissions

Trading System include:

• Monitor their CO2-emissions

• Compose an annual CO2-emissions report

• Let the report be verified through an external accredited verifier

• Submit an according number of CO2-Emission Allowances

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The cost for CO2-Emission Allowances can lead to losses

30

10

10 20

0

30

20

50 6040

Euro/ Product

Euro/tCO2

CO2-price

Con

trib

uti

on

to

pro

fit

EF= emissions factor in t CO2/product

-10

loss EF=0.8

EF=1.0

EF= 1.2

example:

Contribution to profit = 25 €

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Reducing production can become profitable

CO2 - price

€

30

20

10 20

10

40

30

50 6040

Contribution to profit per product

Profit by selling equivalent amount of CO2-Allowances

€/tCO2

Contr

ibu

tion t

o p

rofit

Break even

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What impact does a 10% CO2 reduction have ?

10% reduction of CO2 would lead to 40% increase of profit

• At a price of 22 € / t CO2 (average 2008)

• 1 t CO2 / t lime

• at10% profitability (profit / revenue)

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A holistic CO2-Management offers the best chances

permission allocation of

free EUAs

energy consumption

distribution / production /

planning

purchase of

fuels and commodities

CO2-controlling & risk management

CO2

monitoring & reporting

purchase & sell of CO2

allowances

consideration of CO2 allowances in balances & tax

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The CO2-Emissions Trading System offer new opportunities - Harvest them!

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Contacts:Dipl.-Ing. Andreas von Saldern

CEO / Accredited Environmental Verifier

Schoppastraße 2D-65719 Hofheim a. Ts., GermanyClose to Frankfurt AirportPhone: +49 (6192) 921 99 –

10Mobile: +49 (170) 911 84 23

E-Mail:saldern@esolutions.eu

Internet: www.esolutions.eu

Dr. oec. Susanne Achilles-Kuhnhardt Director Sales and Marketing

Reinhardtstraße 23 · D-10117 Berlin

Phone: +49 (30) 88 66 37 80Mobile: +49 (171) 33 55 377

E-Mail: susanne.kuhnhardt@esolutions.euInternet: www.esolutions.eu