Report on Possible Improvements on Management of Revenues from Auctioning of EU ETS Allowances and Use of Flexibility Mechanisms in Romania

This report is on possible improvements
on management of revenues from auctioning of European Union
Emissions Trading System (EU ETS) allowances and use of
flexibility mechanisms in Romania. The principal objective
of this report is to propose improvements on management of
revenue from the auctioning of EU ETS allowances, as well as
describe possible use of flexibility mechanisms in Romania,
in order to mobilize and enable both public and private
actors to reduce greenhouse gas (GHG) emissions from
economic activities in non EU ETS sectors in line with EU
targets. The report focuses on possible actions in the
timeframe 2016-2020, aligned with EU ETS phase and EU target
for 2020 and 2030. The report is positioned amid the wider
context of a vision for Romania to become a climate
resilient, low-carbon economy, which has mainstreamed its
climate policies and actions into smart, green, and
inclusive growth, described in the National Climate Change
and Low Carbon Green Growth Strategy for Romania 2016-2030
and 2015-2020 Climate Action Plan prepared by the World Bank
for Romania. The report found that until now, there had been
no clear and effective procedure for the administration of
ETS auctioning revenue, and no selection and prioritization
criteria. The lack of selection and prioritization criteria
and guidance for using ETS auctioning revenue to finance GHG
emission reduction projects allowed for the selection of
projects without proper assessment in terms of their
reduction of GHG emissions, as well as cost effectiveness
and other important factors. In order to maximize the
environmental, social, and economic impact of possible
sectoral climate investment programs, and based on
international experience, the World Bank’s expert team
proposes to use the following criteria for prioritizing and
selecting non-EU ETS sectoral programs to be financed with
EU ETS auctioning revenue: (i) cost efficiency of Emissions
Reduction; (ii) leverage of public money to private finance;
(iii) possibility for rapid development and scale up; (iv)
lack of other financing mechanisms; and (v)support for job
creation. Based on these criteria, the report recommends
supporting the following climate investment programs for the
years 2016-2020:(a) replacing household light bulbs, air
conditioning units, individual heating systems,
refrigerators, and washing machines with more performant
ones; (b) upgrading household buildings insulation; (iii)
implementing local, small- and household-scale renewable
energy production; and (iv) forestry and biomass production,
and land use improvements. It was concluded that the
proposed improvements on managing revenue from the
auctioning of EU ETS allowances laid out in this report
could be used by the Ministry of Environment, Waters and
Forests, as a responsible body for climate policy, for
internal discussions with other Romanian ministries and
agencies to reach consensus on the next steps.