Emissions Trading: European Commission Approves Italian Allocation Plan

The European Commission today accepted Italy’s plan for allocating CO₂ emission allowances to Italian companies for the 2005-2007 trading period, after the Italian authorities agreed to lower significantly the total number of allocation by 23 million tonnes of CO₂ annually or 9%. Italy will also have to notify further details of its allocations to specific installations and to abandon a provision to make a so-called ex-post adjustment to the plan. The Commission’s Decision clears the way for Italian companies to participate in the EU Emissions Trading Scheme, allowing for greenhouse gas emissions from Italy’s power sector and from energy-intensive industrial plants to be cut at least cost to the economy.

Environment Commissioner Stavros Dimas commented: “I am very glad that Italy has accepted our arguments and significantly cut the number of allowances they intended to grant. Apart from two outstanding aspects, this has made the plan consistent with the Emissions Trading Directive. It will especially benefit Italian companies because they will be able to participate fully in emissions trading once the Italian Government has proceeded to finalise the plan and issue the allowances."

The Italian allocation plan

The Italian allocation plan covers 1,240 installations, all of which qualify for trading. They will be allocated allowances to emit an annual average of 232.5 million tonnes of CO₂ for the 2005-2007 trading period. The Italian Government had first intended to allocate allowances for an average of 255.5 million tonnes per year, but accepted the Commission's argument that this amount would not have been in line with criteria laid down in the Emissions Trading Directive.^[1]

Besides reducing the number of allowances, the Italian Government has over the course of the Commission’s assessment also extended the scope of the installations covered, renounced two out of three provisions for making ex-post adjustments to the plan and substantiated its intention to purchase emission credits through the flexible mechanisms of the Kyoto Protocol to help Italy meet its greenhouse gas reduction target under the Protocol (a cut of 6.5% below the 1990 level to be achieved by 2012). Ex-post adjustments, which involve revising the number of allowances allocated to individual installations after a plan has been finalised, are not compatible with the directive and the Commission is asking Italy to drop the remaining provision for these in its plan.

A small share of the agreed number of emission allowances has not yet been allocated to individual installations and the Commission is seeking details of which installations will receive how many allowances.

Background

National allocation plans show how many CO₂ emission allowances Member States plan to allocate to eligible installations for the 2005-2007 trading period, and how many each plant will receive. The Commission's task is to scrutinise the plans against 11 allocation criteria laid down in the Directive. The criteria seek in particular to ensure consistency with the country's overall strategy to reach its Kyoto target, the potential, including the technological potential, for reducing emissions from activities covered by the scheme, non-discrimination, respect for EU competition and state aid rules, and certain technical aspects. The Commission may accept a plan in part or in full. The Commission has now assessed the plans of 24 Member States. Assessment of Greece’s plan will be concluded soon.

More information on climate change policy is available at:

http://europa.eu.int/comm/environment/climat/emission.htm,

and on national allocation plans at:

http://europa.eu.int/comm/environment/climat/emission_plans.htm