Climate Action

Timing of the distribution of free allowances in 2021

27/11/2020

Following inquiries from stakeholders on the timing of the distribution of free allowances in 2021, the Commission would like to clarify the process and envisaged timing.

The implementation of Phase IV of the ETS and the distribution of free allocation of emission allowances implies the adoption of a series of implementing and delegated acts.

All Member States had submitted, by 30 September 2019, the necessary data for calculating the level of allocation to be granted to each installation and for updating the benchmark values to be applied in the period 2021-2025. This concerns data submitted by the 11,000 installations under the ETS, representing around 7 million data points. The Commission is finalising the accuracy of this data in close contact with Member States.

A Commission Decision on the National Implementation Measures submitted by Member States can only be adopted once this process has been completed by the end of 2020.

The Commission will also update the benchmark values to be applied for calculating free allocation of allowances during the period 2021-2025. This Regulation is expected to be adopted in February 2021.

Following the adoption of this Regulation, Member States will send the data regarding the preliminary allocation of emission allowances for each installation to the Commission. The Commission will then evaluate whether a Cross Sectoral Correction Factor (CSCF) needs to be applied for the 2021-2025 allocation period, and will adopt a Commission Decision on the value of the CSCF based on that evaluation. Once the decision on CSCF is adopted, Member States will submit to the Commission the final annual amounts of free allowances to be granted to each installation.

The Commission expects to adopt its Decision on the National Allocation Tables establishing allowances to be transferred to each installation in the second quarter of 2021. The distribution of free allowances in 2021 will take place after this Decision is adopted.

It is important to note that free allocation for 2021 is only needed for April 2022, in accordance with Article 12 of the ETS Directive and that allowances issued in respect of 2021 cannot be used for compliance with the surrender obligation arising from 2020 emissions as a new ETS phase starts on the first of January 2021.