From the start of the third phase of the EU Emissions Trading System (2013-20) the power sector will in general have to buy all its allowances. However, until 2019 ten Member States1 may choose to allocate a limited number of allowances for free to power stations instead of selling them. Today's Commission Decision sets out the rules Member States would have to follow if they opt to give away allowances for free, and is accompanied by a Communication with additional guidance on how any applications received will be assessed.
The Decision lays down the rules for allocating free emission allowances to eligible power installations. It was approved unanimously by Member States at the November 2010 meeting of the EU Climate Change Committee, in which all Member States are represented, and was formally adopted by the Commission today.
The Communication sets out the elements that the Commission has to assess when receiving an application for free allocation to the power sector. It also provides clarification on different elements of the legal provisions.
Application deadline
Any of the 10 Member States that wish to allocate free allowances to power stations must submit an application to the Commission by 30 September 2011.
The Commission has to assess any application and may reject it or any part thereof within 6 months. Since an application would represent a deviation from the general rule that from 2013 the power sector must buy all its allowances, either at auction or on the secondary market, the Commission has to ensure that such an exemption would not undermine the overall objectives of the Emissions Trading Directive or be incompatible with EU state aid or internal market rules.
Lower auction revenues
Under the terms of the revised Emissions Trading Directive2, allowances allocated for free to power generators would be taken from the number of allowances the Member State concerned receives for auctioning. Thus, any free allocation will decrease the national auctioning revenues but will not affect the overall number of allowances issued, nor will it affect allocations or auctioning revenues in other Member States.
Background
The Decision and Communication form part of the implementation of the revised Emissions Trading Directive, adopted in 2009 as one element of the 'climate and energy' package of legislation.
Further information
Questions and answers on the Commission's proposal: MEMO/11/201
For more information on the European Emissions Trading System, see
http://ec.europa.eu/clima/policies/ets/index_en.htm
For more information on auctioning allowances, see
http://ec.europa.eu/clima/policies/ets/auctioning_en.htm
For more information on optional derogation, see
http://ec.europa.eu/clima/policies/ets/auctioning_derogation_en.htm
Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland and Romania.
2 Directive 2009/29/EC
