- Allocation of allowances from 2013 on Read
- EU Single Registry Read
of the Emission Trading Scheme (ETS)
the Emission Trading Scheme Works? Read
- EU-ETS: Limits of the System. Read
- INFORSE-Europe Proposals to improve the EU-ETS
(November 2010). Read
- INFORSE-Europe Response on EU Consultation on Auctioning third
phase EU Allowances prior to 2013 ('early auctions') (February
- Directive 2008/101/EC to Include Airline
Emissions into the EU-ETS (November 2008). Read
- Directive 2009/29/EC to improve
and extend the greenhouse gas emission allowance trading system
(April 2009). Read
Link Directive (April
2003/87 on an EU Emissions Trading Scheme (July
of allowances from 2013 on:
the Commission proposed to reduce allowances in the coming auctions
for 2013. This will now be debated among
In March 2011 the Commission launched a roadmap for
a low-carbon economy, where is suggested to reduce allowances because
of the unexpected low prices on the allowance market. The proposal
was welcomed by most EU countries, but because of resistance from
Poland, there was a not unanimous agreement to take the proposal
forward when discussed in June 2011.
April 2011, the Commission adopted a decision about
how allowances should be allocated from 2013. Auctioning will
way of allocation, but still a number of free allowances will
to industry until 2020, notably to industrial sectors exposed to significant
competition outside the EU. The benchmarks are in most cases based on the
average emissions performance of the 10% most efficient installations
in each sector.
After collect the necessary data from installations (until Septembre 2011),
the EC will check the submissions and Member States will calculate the final
per installation (information expected during 2012).
The total amount of emission allowances agreed to be auctioned by the Member
States for the third phase (2013-2020) will be 120 millions.
On September 2011, the EC established the rules of allocation of
free emissions to airlines, stating that the aviation industry will
become part of the EU ETS from 2012.
Since 2005, the registries keep track of the ownership of allowances
issued under the EU ETS, ensuring its accurate accounting. The Directive
(2009/29/EC) provided for the centralisation of the EU ETS operations
into a single registry operated by the Commission.
The 20th of June 2012, the European Commission activated the single
registry, replacing the national registries. It covers all EU Member
States plus Norway, Iceland and Liechtenstein and records the national
plans with the allowances assigned to each Member State, the accounts
of the companies or physical persons who hold these allowances,
the transfers of allowances, the annual verified emmisions from
installations and the annual reconciliation (settle and fitting)
of allowances and verified emissions.
Accounts for aircraft operators are included since January 2012
as well as accounts for stationary installations.
To open an account and participate in the EU ETS the procedure will
be the same as before, a request must be sent to the national administrator.
The verification, recording and authorisation of transactions now
are held by the European Union Transaction Log (EUTL) replacing
the Community Independent Transaction Log (CITL).
of the Emission Trading Scheme (ETS)
the Emission Trading Scheme Works ?
aim of the EU-ETS Directives are to reduce greenhouse
gas emissions in
a cost-efficient way, with introduction of greenhouse gas
of major emitters and allow trading among them.
All greenhouse gas emitters in EU that are covered by the EU-ETS must
have enough greenhouse gas "allowances"
to be allowed to emit their greenhouse gases. The EU countries' governments
gas allowances to companies in their respective countries. These allowances
can be traded between companies if they choose to do so. Each year, companies
submit a number of allowances that corresponds to their actual emissions. If
they do not have enough allowances, they will have to pay a fine. The holding
and tracking of allowances are done through national electronic registers.
The sectors covered are energy, iron, cement, glass, ceramics, pulp,
Only larger installations are covered, e.g. combustion installations above
20 MW input.
The first phase of the scheme was 2005 - 2007, before
the Kyoto Protocol's commitment period. In this phase allowances
were given for free to participating installations and there was a low
level of penalty for non-compliance of 40 EUR/tons of CO2.
Due to large allowances given by countries, the market price of the allowances
fell to close to zero during the period.
The second period follows the Kyoto Protocol commitment period 2008 - 2012.
In this period at least 95% of the allowances are given for free,
countries can decide to auction up to 5% of the allowances. The penalty for
increased to 100 EUR/ton of CO2. Also from 2008, the
exchange of allowances between installations in two different Member States
rise to the adjustment - through the
national registries - by a corresponding number of tons of the total quantity
of emissions allowed for each Member State. This is according to the burden-sharing
agreed with the ratification of the Kyoto Protocol.
A third phase is agreed for 2013-2020 with allowances to be auctioned to
most power plants and to the part of the industry least vulnerable to international
competition. In this phase unused emissions from the second phase can be
carried over, a decision that is likely to lead to over allocation of allowances
during most of the third phase.
Limits of the System
EU Emission Trading Scheme is regarded as one of the cornerstones
of the EU
climate policy, but the first periods have shown a number of weaknesses
the need for better frameworks for the EU-ETS as part ofEU climate
of the main problems of the EU-ETS were and are:
- Large variations
in prices of allowances, reducing the incentives for long-term
investments to reduce emissions.
- Unjustified windfall profits for companies with large CO2 emissions
that receive free allowances and that can increase their product prices with
quota prices. Also nuclear power plants enjoy these windfall profits
- Reduced incentives to continue with reductions when allowances are sufficient
and prices are low. This is because a number of previous policies are abandoned
for the companies included in the EU-ETS, such as CO2-taxes.
- The uncertainty regarding future systems have given uncertainty for actors
if they should aim at low or high emissions.
- large influx of questionable allowances from the CDM (Clean Development Mechanism)
of the Kyoto Protocol.
Some of the problems will be solved in the third period, but with the
ETS allowances currently allocated until 2020,
allocated, if the EU countries shall reduce emissions in line with limiting global
warming to 2’C. The current reduction rate of 1.74% per year is too slow:
It will only result in phase-out of emissions by 2068, if continued.The carry
over of allowances from the second period and from CDM projects adds to the problem.
The current allocation is part of fulfilling EU's 20% reduction target 1990-2020.
If the target is increased to 30% and allowances reduced accordingly, it would
set EU on a more sustainable track, depending on the influx of CDM credits. Unfortunately,
in its current form the EU-ETS is not the cornerstone of the EU climate policies
it was meant to be.
Proposals to Improve the EU-ETS
the EU-ETS and achieve larger greenhouse gas reductions, INFORSE-Europe
proposes the following changes:
should be a minimum (floor) price
for allowances of 30 €/ton of CO2.
carried over from the second (2008-2012) period to the third
period must be limited, by degrading them by a factor 2-3 or more
more unused allowances in this period shall give only one allowance
in the next period).
- The industry sectors that receive free allowances should be reduced,
and instead of free allowances, companies should be offered
grants and loans for transition to low carbon technologies
- Much stricter rules than the current ones must be introduced
to limit the use of allowances from CDM projects in EU-ETS. Only
projects that are clearly contributing directly to poverty reduction
and basic needs of those that implement the measures should be eligible.
The use of external (CDM) credits should be limited to 10% of reductions
(for instance 10% of reductions is 2% of total
allowances if reductions are 20%)
- a windfall tax shall be introduced for nuclear power.
The tax shall be equal to the extra revenue that the nuclear power
plants will gain because of increased electricity prices caused
by the EU-ETS.
proposal ( pdf
file) (November 2010)
- INFORSE-Europe's Response on EU
Consultation on Auctioning third phase EU Allowances prior
to 2013 ('early auctions')
file 137 kB), (February
Background of the EU
Under the revised Emission Trading System (EU ETS) a significant
allowances will be auctioned rather than allocated free of charge. This will
apply as from the third trading period starting in 2013. The Commission recently
adopted an "Auctioning Regulation", which provides inter alia the
possibility to auction third phase allowances prior to 2013, so-called "early
Such auctions appear desirable in order to ensure a smooth transition of the
market from the second to the third trading period of the EU ETS. However,
what is the appropriate volume of EU allowances and timing for early auctions?
The Commission invites all interested parties
to express their reasoned and substantiated views on the appropriate
volume and timing of these early auctions.
Public Consultation (period
06/12/2010 - 07/02/2011)
the development at Climate Action
Network's site at www.climnet.org/EUenergy/NAPs.htm.
Commission's site http://ec.europa.eu/environment/climat/emission.htm
(2009/29/EC) of 23/4 2009 to amend the 2003 Directive
(2003/87/EC) to improve and extend the greenhouse gas
emission allowance trading system (until 2020).
23 April 2009, the EU countries and Parliament agreed a directive
to amend the 2003 Directive on the Emission Trading Scheme and extend
it with a third period 2013-2020. The directive gives the
- The total amount of allowances circulating in 2012 will be then cut
by 1,74% annually (in line with a 20% EU greenhouse gas reduction target
- Extending the scope of the ETS: new sectors and gases are covered
like chemical industry emitting N2O from production
of adipic acid and nitric acid, petrochemicals, ammonia, aluminum and
- National Action Plans will be replaced by a common auctioning system
and common allocation, including some free allocations. Full auctioning
will be the rule from 2013 for the power sector, except for Poland and
some other Central European countries that got an exception. Energy-intensive
industries exposed to international competition can
receive their allowances free of charge, but the fraction of free allowances
will gradually be decreased.
- the revenues of auctioning will go
to the EU country budgets, with a proportionally larger share going to countries
that have had large reductions in the past, mainly Central European countries,
and a small part going to support carbon capture and storage as well as renewable
- CDM will continue to be eligible, but if the Kyoto Protocol is not
continued, EU will continue CDM credit systems with developing countries
on a bilateral basis.
The Directive will regulate EU-ETS from 1/1 2013.
Read the Directive
on the EU
the consolidated text of EU-ETS dir. 2003/87/EC including amendments
with dir. 2009/29/EC
and other amendments
from 2009 and earlier, on the EU
to Include Airline Emissions into the EU-ETS
November 19, 2008, a directive (2008/101/EC) was agreed
between the European Parliament and the European Council on airline
This directive includes aviation in the EU-ETS in
2012. Emissions from plane will be reduced by 3% in 2012 (compared
level) and by 5% in 2013. 85% of the emission
certificates will be allocated for free whereas the 15% remaining will
Read the Directive
on the EU
Directive: Directive 2004/101/EC
13, 2004: The Directive was formally approved by the EU countries,
following a compromise suggested by the Parliament.
gives some qualitative limitations to the use of external credits in the
EU-ETS, in particular:
- only Joint
Implementation and CDM quotas are accepted, not "hot air" from
industrialized countries with lower emissions than their targets;
- sinks are
not allowed (but this can be reviewed);
- hydropower above
20 MW must respect guidelines of the World Commission on Dams.
NGOs have been criticizing
the Parliament's compromise, and are urging the countries to agree
to a strict and harmonized cap on the use of Kyoto project emission
quotas in the EU's internal emissions trading system.
The directive was proposed in July 2003 by the Commission
the directive at the EU
Read also Climate
Action Networks overview at www.climnet.org/EUenergy/Linking.htm
Fund Proposals Regarding the Link Directive
its proposal, it was a general fear from environmental NGOs, such as
the WWF, that loopholes such as cheap emission allowances of doubtful
origin easily could undermine the effectiveness of the emissions-trading
(the hot air problem), if they are allowed to enter the system via
the "link" directive or otherwise. The experience has shown
that these are in fact serious problems, threatening to undermine the
effectiveness of the EU-ETS, Read for instance http://www.sandbag.org.uk/
2003/87 on an EU Emissions Trading Scheme
Directive entered into force on October 23, 2003, as dir. 2003/87/EC
after approval by EU countries and Parliament
Directive was proposed by the EU Commission in October 2001 as COM/2001/581.
Read more about the Directive at: http://ec.europa.eu/clima/policies/ets/index_en.htm
by Climate Action Network at http://www.climnet.org/EUenergy/ET.html.
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