Free allowances to industrial installations participating in the EU ETS are distributed by Member States by the end of February each year. 2013 marks the first year that this process is governed by harmonised benchmark-based rules.
The ETS Directive mandates the European Commission to scrutinise and ensure the correct application of these rules by each Member State. To this end, Member States have drawn up national implementation measures (NIMs) which set out the amount of free allocation for each eligible installation operating on their territory for every year between 2013 and 2020.
Article 10(a)(5) of the ETS Directive contains a rule for the maximum amount of allowances that may be handed out for free each year. If the preliminary allocation through NIMs exceeds the maximum amount of allowances available, a 'cross-sectoral correction factor' will have to be applied. If this were to be the case, free allocation to all installations across the EU would be reduced by the same proportion to ensure equal treatment.
In close cooperation with Member States, the Commission has made considerable progress in scrutinising the NIMs and will in the coming weeks be able to determine whether a correction factor would need to be applied as of 2013. However, despite the good progress made, the process will not be concluded in time for installations to receive free allowances by the end of February. The Commission aims to conclude the overall process as soon as possible in order to provide industrial installations and all other market participants with certainty.
The Commission recalls that, in contrast to other years, allowances handed out this year may not be surrendered in respect of 2012 emissions.