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EnBW Management Board to take legal action on German and European level

EnBW criticises massive competitive distortion due to emission rights trading
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Karlsruhe. EnBW Energie Baden-Württemberg AG intends to take steps to push for alternations to the legislation on emission rights trading adopted by Germany's Bundestag parliament last week. EnBW AG believes that, in their current form, the German Emission Rights Trading Act (TEHG) and the Allocation Act (ZuG) will lead to serious distortions in competition between the energy supply companies to the disadvantage of EnBW. According to an external expert opinion, this competitive disadvantage relative to the competitors who stand to profit most from emission rights trading could amount in total to around one billion euros.

According to EnBW CEO Prof. Dr. Utz Claassen, the company "is forced on legal, financial and social grounds to take action against this legislation". Claassen says that "we have no alternative; we must take steps to ward off potential harm to the company" in order to protect jobs, to secure the future of Baden-Württemberg as an "energy region", and to safeguard the interests of shareholders. EnBW is concerned that the legislation will result in a situation where the company might not be able to build any new power stations in Baden-Württemberg in the foreseeable future due to the fact that it will be at a serious disadvantage compared to specific competitors.

The main disadvantages from the point of view of EnBW are the inadequate provisions for the procurement of replacement energy following the shutdown of nuclear power stations and the drastic unequal treatment when it comes to the construction of new power plants within the context of the new "transfer regulations".

In the area of nuclear energy, the allocation legislation contains an allocation of only 0.5 million t CO2 per year for the replacement procurement of energy for the power plant in Obrigheim until such time as a new power station is built. According to the calculations of EnBW, however, the company would need certificates worth 2.2 million t CO2 per year. EnBW believes that the nuclear power station in Obrigheim is being treated differently and is being put at a disadvantage compared to all other power stations that are to be closed down within the framework of the "consensus on nuclear energy", as the far shorter lead time up to shutdown of the Obrigheim plant means that there is no de facto option for the timely construction of a new power station. The shutdown of other nuclear power stations in Baden-Württemberg (Neckarwestheim 1 – in 2009; Philippsburg 1 – in 2012), will also create an ever-increasing competitive disadvantage for EnBW within the context of the transfer regulations, as EnBW has a far higher percentage of nuclear energy in its generating portfolio than its competitors. Claassen: "In reality, these regulations amount to a de facto retroactive punishment for the operation of nuclear power stations. This cannot be allowed to happen, however, as the agreement on the exit from nuclear energy generation explicitly rules out the possibility of a discrimination of nuclear energy".

The differing treatment of replacement plants for existing power stations and so-called newcomer plants – including in particular the replacement plants for shutdown nuclear power stations – will generate an even more serious competitive disadvantage for EnBW. The "2007 Allocation Act", for example, stipulates that the replacement plant for a lignite power station will profit from the "transfer regulations" for a period of four years. According to these regulations, the pollution rights of an old plant can be transferred to a replacement plant, which generally gives out fewer emissions, for four years. The resulting "overallocation" of emission certificates – the idea of which is to promote investment – actually leads to substantial competitive distortion without any ecological benefits. Over the longer term, this would mean that an energy supplier with extremely high CO2 emissions would receive up to 55% more emission certificates every year: the resulting competitive disadvantage for EnBW could be as high as 220 million euros per power station based on a certificate price of 10 euros per ton of CO2.

This was the finding of an independent energy expert opinion supplied by a highly reputed consulting company. The figures show that EnBW can expect to suffer cumulative competitive disadvantages as high as almost one billion euros over the four trading periods.

The Management Board of EnBW has requested an international law firm to make representations to the European Commission in Brussels to prevent notification of the Allocation Act in its current form. Rejection of notification would force the German government to modify the allocation mechanism contained in the legislation. If the EU Commission allows passage of the legislation without action, EnBW will file an action with the European Court of Justice due to violation of European state aid and competition law. As the preferential treatment of individual companies in terms of the free distribution of emission certificates resulting from the transfer regulations is funded by the state, the allocation has the character of state aid. Moreover, EnBW is of the opinion that the transfer regulations represent an inadmissible intervention by the state in the competitive arena. EnBW's legal standpoint is supported by a legal expert opinion from a further reputed law firm.

Moreover, the legal expert opinions suggest that the transfer regulations also violate the basic principles of German constitutional law. EnBW is therefore preparing to file corresponding actions with the relevant German courts.

EnBW emphasises its commitment to the paramount importance of effective global climate protection. CEO Prof. Dr. Utz Claassen: "We are totally in favour of climate protection and the idea of emission trading as a market economy mechanism for long-term optimisation at the interface of economy and ecology. This makes it all the more important, however, that emission trading must not become a "quasi-command economy" investment steering instrument. We generally oppose the cementing of existing pollution structures and are in favour of effective climate protection."

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EnBW Energie Baden-Württemberg AG
Durlacher Allee 93
76131 Karlsruhe
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