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For industry and heating sectors, allowances will be allocated for free based on ambitious (greenhouse gas performance-based) benchmarks. Installations that meet the benchmarks (and thus are among the most efficient installations in the EU) will in principle receive all allowances they need. Installations that do not meet the benchmark will have a shortage of allowances and the option to either lower their emissions (e.g. through engaging in abatement) or to purchase additional allowances to cover their excess emissions.

In contrast to the most common allocation methods in force since 2005 and until 2012, this new system applying from 2013 onwards will no longer have the perverse effect of providing more free allocation to the highest emitting installations.

The benchmarks are also very important for the achievement of a low-carbon economy. They provide a strong signal for what is possible in terms of low-carbon production. The benchmarks are a milestone to show that the EU is pressing ahead with the implementation of its ambitious climate agenda and that it is serious in striving for a low-carbon economy.

What are benchmarks?

A benchmark does not represent an emission limit or even an emission reduction target but merely a threshold for the level of free allocation of an individual installation. The benchmarks are to be developed per product, to the extent feasible.

Generally speaking a product benchmark is based on a value reflecting the average greenhouse gas performance of the 10 % best performing installations in the EU producing that product. The benchmarks were established on the basis of the principle 'one product = one benchmark', which means that the benchmark methodology does not differentiate by technology or fuel used, nor the size of an installation or its geographical location.

Why free emission allowances?

If other developed countries and other major emitters of greenhouse gases do not take comparable action to reduce their emissions, certain energy-intensive sectors in the EU that are subject to international competition could be put at an economic disadvantage. Therefore, allocating emission allowances free of charge aims at limiting the costs for EU industries in relation to competitors outside of the EU.

At the same time, an absence of comparable action outside of the EU could lead to an increase in greenhouse gas emissions in third countries where industry is not subject to comparable carbon constraints. This would undermine the environmental integrity and benefit of actions by the EU.

To address these issues, industrial sectors that face international competition from industries outside the EU which are not subject to comparable climate legislation will receive a higher share of free allowances than those which are not at the risk of such so-called carbon leakage.

How to calculate free allowances in the 3rd trading period?

Based on the Commission decision determining transitional Union-wide rules for the harmonised free allocation of emission allowances for the 3rd trading period starting in 2013 (the so-called "Benchmarking Decision"), the Commission and Member States have worked together intensively to make sure the rules are applied in a harmonised way.

This work has on the one hand resulted in endorsing on 14 April 2011 by the Climate Change Committee the content of guidance documents and templates to facilitate the application of the harmonised allocation rules. On the other hand, the enhancement of harmonised application has been pursued by organising workshops for competent authorities in EU-27 during end March – end April 2011. During these workshops powerpoint presentations were given which explain in as simple possible wording how the rules should be applied and understood. Also concrete case studies were discussed and documented.

You can find the guidance documents and templates that were endorsed by the Climate Change Committee by clicking on the "Documentation" tab on top of this page. Also on the "Documentation" section, the powerpoint presentations of the workshops can be consulted.

Helpdesk for determining the amount of free allowances in EU ETS in phase 3 (2013-2020)

In order to further enhance a harmonised implementiation of the new allocation methodologies for Phase III of the EU ETS (from 2013 to 2020), the European Commission has, next to the publication of guidance documents and presentations (see "Documentation" section on top) also launched a helpdesk that is active since December 2010.

The aim of this helpdesk is to provide practical help to Member State Competent Authorities in preparing and implementing the Community-wide and fully harmonised Implementation Measures (CIMs). Since its start the helpdesk was dealing with questions from both Competent Authorities and operators.

As from the publication of the guidance documents and presentations in April 2011, the helpdesk is meant to deal only with questions from Member State Competent Authorities: operators are requested to address possible questions to their respective Competent Authorities.

The helpdesk will operate until the beginning of 2012. It is coordinated and maintained by Ecofys and Entec, and operates (in English language) as follows:

• Via telephone: +44 (0) 203 287 8903
  Tuesdays and Thursdays from 14.00 to 16.00 (Brussels time)
• Via e-mail

The helpdesk will provide information and advice on issues such as:

• The definition of incumbents and of sub-installations
• Allocation methods to be used for sub-installations: product benchmarks and fallback approaches
• Definition of and specific rules for new entrants
• Rules for significant capacity increases or reductions
• Determination of carbon leakage factors
• Issues that may need specific guidance such as cross-boundary heat flows

National Implementation Measures (NIMs)

In accordance with Article 11 of Directive 2003/87/EC, Member States shall submit to the Commission by 30 September 2011 a list of installations covered by the Directive in their territory and any free allocation to each of those installations. This submission is usually referred to as the NIM (National Implementation Measures). The free allocation should have been calculated in accordance with the rules referred to in the "Benchmarking Decision".

After submission, the Commission has the obligation to check each notification to ensure compliance with the legal rules (i.e. the "assessment process"). Only when all NIM have been submitted and assessed, final annual amounts of allowances to be allocated free of charge over the years 2013 to 2020 can be calculated for all incumbents installations.

Until now, thirteen Member States (Cyprus, Estonia, France, Ireland, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia, Sweden and the United Kingdom) have notified their NIM to the Commission. At the Environment Council of 10 October 2011 [84 KB], the Commission has also called upon Member States to take all possible action to shorten any delay.

Due to the delay of a number of Member States to submit the NIM, the Commission has opened files in the EU Pilot System (which is a procedural step before launching infringement proceedings), underlining the importance of avoiding further delay in notifying, and providing the concerned Member States with the opportunity to clarify the situation. The Member States have 10 weeks, which is the standard deadline for the procedure, i.e. until 1 March 2012, to reply to the Commission. Depending on the replies and the progress with the notifications, the Commission will consider possible further action.

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Responsible for this page is DG CLIMA, Unit B2, "BENCHMARKING". The team in charge can also be reached by email