Emissions Trading
There is a limit to the amount of trading
that can occur between the relative target section and the
absolute target section. The flow of trading from relative
to absolute can not exceed the flow of trading from absolute
to relative. Therefore, there is no limit on trading for an
absolute target site, as long as there are emissions to trade.
Below is an example of how a site can
either buy to meet it milestone target, or sell on surplus
emissions under an output target:
A firm has an energy efficiency target
of 10 kWh per unit of output. At the milestone review point,
it has only achieved 12 kWh per unit of output. In order to
still qualify for the reduced rate of the levy it can try
and buy carbon credits to bridge the gap of 2 kWh per unit
of output. Assume the firm’s level of output for the two previous
years is 100 units. These 2kWh of SEC are equal to 200kWh
of absolute energy (2*100 units of output). The 200kWh of
absolute energy are equal to 500 tonnes of carbon (assumes
a conversion factor of 2.5). The firm needs to buy 500 carbon
credits in order to still qualify for the reduced rate of
the levy.
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