Spanish fears and hopes

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"Spanish action on concrete emissions policy is probably the most advanced in Europe and emissions allowances are expected to be in force before the year is out," according to sources close to the national utility association, Asociación Española de la Industria Eléctrica. No official announcement has yet been made, but the government's climate change office -- set up in 2001 -- has been working over the past two years on a strategy for a fully fledged emission's trading market by 2005. The document has now been distributed for assessment among all sectors targeted for possible emissions rights allowances.

The main discussion is over how much of Spain's emissions will be eligible for allowances and what proportion will go to each of the sectors outlined in the European 2001 directive. The allowance is widely expected to be lower rather than higher as Spain is Europe's worst Kyoto performer, with a 30% increase in CO2 emissions instead of the 15% permitted from the base year of 1990.

The implications for wind are not immediately apparent as polluters will not be assigned emissions rights for buying power from clean energy sources, but only against their own direct emissions. Some possible negative effects on the industry are appearing though.

Spain's wind operators fear that the eventual internalisation of polluting costs, once emissions trading gets off the ground, will stoke up pressure against wind production subsidies. After all, the subsidy acts, in part, as compensation for not emitting any of the climate change gases. At the same time, Spain's massive amounts of large hydroelectric and nuclear generation would not internalise environmental damage costs, as neither emits CO2. These two sources would, therefore, gain a competitive advantage on wind if emissions trading led to a reduced wind tariff. On the brighter side, if electricity pool prices remain as the base of the wind power subsidy equation, wind could stand to gain as emissions trading pushes up the price of thermal generation together with the overall pool price and wind production earnings.

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