Emissions Trading: European Commission Decides On Second Set Of National Allocation Plans For The 2008-2012 Trading Period

The European Commission today took decisions on two more national plans for allocating CO₂ emission allowances for the 2008-2012 trading period of the EU Emissions Trading Scheme (EU ETS). The Commission's decisions on the national allocation plans for Belgium and the Netherlands reaffirm its strong commitment to ensuring that the EU and Member States achieve their greenhouse gas emission targets under the Kyoto Protocol. The Commission accepted both national plans on condition that certain changes are made, including a reduction in the total number of emission allowances proposed. The cleared annual allocation for Belgium is 58.5 million tonnes of CO2 allowances and for the Netherlands 85.8 million tonnes. The two plans and the 10 decided on in November 2006 together account for half of all allowances allocated in the first trading period from 2005 to 2007. The Emissions Trading Scheme ensures that greenhouse gas emissions from the energy and industry sectors covered are cut at least cost to the economy, thus helping the EU and its Member States to meet their emission commitments under the Kyoto Protocol.

Environment Commissioner Stavros Dimas said: “Today’s decisions reinforce the strong signal we gave with the first set of decisions in November that Europe is fully committed to achieving its Kyoto targets and to making the Emissions Trading Scheme a successful weapon for fighting climate change that others can emulate. The Commission is assessing all national plans in a consistent way to ensure equal treatment of Member States and to create the necessary scarcity in the European carbon market. This is how we have assessed the plans decided today, and the same standards will be applied to all others. ”

Assessment of the NAPs

National allocation plans (NAPs) determine for each Member State the 'cap,' or limit, on the total amount of CO₂ that installations covered by the EU ETS can emit, and set out how many CO₂ emission allowances each plant will receive.

The Commission's task is to scrutinise Member States' proposed NAPs against 12 allocation criteria listed in the Emissions Trading Directive.^[1] The criteria seek, among other things, to ensure that plans are consistent with meeting the EU's and Member States' Kyoto commitments, with actual verified emissions reported in the Commission's annual progress reports and with technological potential to reduce emissions. Other criteria relate to non-discrimination, EU competition and state aid rules, and technical aspects. The Commission may accept a plan in part or in full.

As with the first assessments (see IP/06/1650), the Commission is requiring changes to the two plans where:

• the proposed total of allowances ('cap') for the 2008-2012 trading period is not consistent with meeting the Member State's Kyoto target,
• the proposed total of allowances is not consistent with expected emissions and the technological potential to reduce emissions, taking into account independently verified emissions in 2005, and anticipated changes in both economic growth and carbon intensity,
• the proposed limit on the use by companies of credits from emission-reduction projects in third countries carried out under the Kyoto Protocol's flexible mechanisms^[2] is not consistent with the rule that the use of these mechanisms should be supplementary to domestic action to address emissions.

Where modifications are required, the Commission has indicated in each case the steps to be taken by each Member State to make the plan acceptable to the Commission. Approval of the plan will become automatic once these changes have been made.

The Commission is proceeding with infringement procedures against Denmark and Hungary for not submitting their NAPs yet (see IP/06/1364 and IP/06/1763). The deadline was 30 June 2006.

See also :
http://ec.europa.eu/environment/climat/emission.htm

http://ec.europa.eu/environment/climat/2nd_phase_ep.htm

Annex

Information about individual decisions:

Belgium: Plan accepted with changes required.

1) The annual allocation may not exceed 58.5 million allowances.

2) More information needs to be provided on how new entrants will be treated.

3) Intended ex-post adjustments must be eliminated.

The Netherlands: Plan accepted with changes required.

1) The annual allocation may not exceed 85.8 million allowances.

2) The share of allowances obtained by cutting the allocation to the power generating sector may not be redistributed to other sectors based on electricity purchases.

3) The application of an energy efficiency factor, the use of historic emissions and any redistribution of allowances obtained by cutting the allocation to the power generating sector must sufficiently avoid an allocation beyond expected needs at installation level

4) Certain installations covered by all other plans must be added to the installation list.

5) Intended ex-post adjustments must be eliminated.

6) The overall maximum amount of Kyoto project credits (CERs and ERUs) which may be used by operators for compliance purposes may not exceed 10 %.

Summary information on the 12 plans assessed:

Approved allowances for 2005-2007, verified emissions in 2005,^[3] proposed caps for 2008-2012 and approved caps for 2008-2012

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^[1]. Directive 2003/87/EC, as amended by Directive 2004/101/EC.

^[2] These mechanisms are known as the Clean Development Mechanism (CDM), for projects carried out in developing countries, and Joint Implementation, for projects carried out in developed countries or economies in transition.

^[3] Additional installations and emissions included in the second trading period are not included in this table.