The European Commission today starts publishing regular information on the status of free allocation of emission allowances by Member States for phase three of the EU ETS.
The information is shown in two tables:
Free allocation to industry and heat production:
The basis for handing out free allowances in phase three is the national implementation measures (NIMs), adopted by the Commission on 5 September 2013, and the figures for the cross-sectoral correction factor, which was included in that same decision.
Based on the NIMs, which had to be updated with the cross-sectoral correction factor, each Member State has to prepare a base national allocation table (NAT) and submit it to the European Commission. The NAT serves as a basis for free allocation for the period 2013 to 2020.
Before free allowances can be handed out, each Member States must, every year, check and submit any changes to the base NAT to reflect reduced production or reduced capacity of installations in the preceding calendar year.
For the allocation year 2013 the Member States therefore have to submit both the base NAT (which will need to be submitted only once), and the relevant changes to this table based on data collected on production levels and capacity changes in 2012. Member States may submit the changes for 2013 allocation either simultaneously with or after the base NAT.
Once the European Commission has received and agreed to all the documents for a specific Member State, a Commission decision is taken for that Member State (the NAT Decision), which allows the Member State to submit this information to the ETS registry and proceed to allocate allowances.
At the time of adopting the NIMs decision the Commission estimated that the process to allocate allowances for the year 2013 would take up to three months. Though many Member States have submitted draft NATs or are in the process of doing so, it now appears likely that the process will take longer to complete in most Member States. The Commission is pro-actively supporting Member States in their tasks, and underlining the importance of a speedy finalisation of the process.
Free allocation to power generators:
In addition, eight Member States have made use of the derogation from full auctioning for the modernisation of the power sector and are allowed to allocate free allowances on this basis for a transitional period ending in 2019.
Before such allocations can take place, Member States must submit a corresponding NAT. According to the national rules for the implementation of the derogation, this may in some cases require reporting on whether investments set out in a national plan and justifying the allocation have actually been carried out.
Market participants will be informed on the likely allocation under this derogation as information from Member States becomes available.