Climate Action

Annual emission allocations 2013-2020 and flexibilities

Policy

Under the Effort Sharing Decision, Member States are required to limit their greenhouse gas emissions between 2013 and 2020 by meeting binding annual limits which are set according to a linear path. The annual targets – known as annual emission allocations (AEAs) - follow a straight line between a defined starting point in 2013 and the target for 2020.

Member States which have taken on an emissions reduction target have to ensure that their emissions in 2013 do not exceed their average annual emissions for the period 2008-2010. Member States which are allowed to increase their emissions must ensure that their emissions in 2013 do not exceed a level defined by a linear path starting in 2009. This is based on the Member State's average annual emissions for the period 2008-2010 and ends with its 2020 target.

The AEAs for each Member State and year were approved by the EU Climate Change Committee in October 2012, adopted by the European Commission in March 2013 and adjusted in October 2013.

Flexibility in meeting targets

To increase the cost-effectiveness of their emissions path, Member States are allowed certain flexibility in meeting their AEAs.

  • Within the Member State itself
    • Overachievement in a given year can be carried over to subsequent years, up to 2020;
    • An emission allocation of up to 5% during 2013-2019 may be carried forward from the following year (Article 3.2 of the Decision).
  • Between Member States
    • During 2013-2019 Member States may transfer (for instance, by selling) part of their AEA for a given year to other Member States under certain conditions (Articles 3.4 and 3.5)
  • International credits representing investments in projects that have reduced emissions in developing countries (Clean Development Mechanism) or other industrialised countries (Joint Implementation) can be used under certain quantitative and qualitative conditions (Article 5). The Documentation section is regularly updated with lists of project credits eligible for compliance under the Effort Sharing Decision. The General positive list contains project credits that can be used by all Member States (Article 5(1)), whereas the Special positive list (Article 5(5)) contains project credits that can be used only additionally by the 12 Member States listed in Annex III.

Monitoring of results and corrective measures

A strong monitoring and compliance system has been put in place to monitor Member States' action and help them take corrective measures if they fail to meet their targets.

Member States have to report on their annual emissions; the use, geographical distribution and types of JI/CDM credits and qualitative criteria applied; projected progress towards meeting their emission limits in 2013-2020; and information on planned additional national policies and measures to meet commitments beyond those in the Decision.

If a Member State's emissions exceed its annual emission allocation even when the flexibilities are taken into account, they will need to take corrective measures.

Documentation

Key Documents

Eligibility of international project credits under the Effort Sharing Decision

2012 technical review of Member States' greenhouse gas emission inventories

Faq

Questions and Answers on annual emission allocations (October 2013)

Can Member States use the Clean Development Mechanism and Joint Implementation mechanism to meet their national targets under the Effort Sharing Decision?

The annual level of Clean Development Mechanism (CDM) and Joint Implementation (JI) mechanism credits any Member State can use in 2013-2020 is limited to 3% of its 2005 emissions.

However, the Effort Sharing Decision also allows certain Member States that have emission reduction targets, or which are allowed to increase emissions by up to 5% of 2005 levels, to use an additional 1% of credits. These credits can come only from CDM projects in least developed countries and small island developing states, and are not bankable or transferable. The Member States concerned are Austria, Finland, Denmark, Italy, Spain, Belgium, Luxembourg, Portugal, Ireland, Slovenia, Cyprus and Sweden.

Greater use of credits can increase the cost-effectiveness of reducing emissions. However, it also means that the emission reductions take place outside the EU, reducing the domestic benefits for the EU in terms of technological leadership and pollution reductions. The limits on credits aim to ensure that investments in cleaner technologies and renewable energy are triggered, thus putting Europe on the way to becoming a low carbon economy. From the same perspective, Member States are encouraged to use fewer credits than the maximum allowed.

Do Member States have any flexibility in meeting their annual targets under the Effort Sharing Decision?

To increase the cost-effectiveness of the emissions reduction path, several flexibility measures are provided. These include allowing Member States to bank and borrow emission budgets (5% max.) between years and to transfer (for example, by selling) over-achieved emission reductions to another Member State.

These flexibilities do not increase the total amount of greenhouse gas emissions in the EU; they only change the location of reductions and allow small changes in timing.

In addition, Member States may use Clean Development Mechanism credits and Joint Implementation mechanism credits from countries outside the EU (see point 5 above)

How do emissions need to evolve between 2013 and 2020?

The national targets under the Effort Sharing Decision (ESD) foresee a linear reduction or limitation path in 2013-2020 (as does the EU ETS). In the ESD, Member States take on binding annual emission limits – known as annual emission allocations (AEAs) - in accordance with the reduction path and they must report their emissions to the European Commission each year. This will ensure a gradual move towards the agreed 2020 targets is achieved in sectors where changes take time, such as buildings, infrastructure, and transport.

2013 – 2020 linear reduction path for Member States with negative ESD targets
2013 – 2020 linear reduction path for Member States with positive ESD targets

What sort of penalties can be imposed if national targets are not met?

The annual reports that Member States are required to make under the Effort Sharing Decision will cover not only their emissions but also the policies and measures they are undertaking and projections of their future progress. Together with the various flexibilities at their disposal, this should enable Member States to take timely action to ensure that they comply with their annual emission allocations.

If a Member State's report for a given year shows it is not in line with its annual limits, however, it will have to take corrective action.

Any shortfall in emission reductions will have to be achieved in the next year, multiplied by a factor of 1.08 as a penalty. On top of this, Member States will have to submit a corrective action plan to the Commission detailing, among other things, how and when they intend to get back on track towards meeting their 2020 targets. The Commission and the EU Climate Change Committee (comprising the Member States) can comment and give recommendations on the plans. In addition, there is a temporary suspension of the Member State's eligibility to transfer any AEAs and JI/CDM rights to another Member State.

The Commission can also launch an infringement procedure against the Member State concerned.

The combination of the mechanism for corrective action and the potential use of the infringement procedure strengthens the credibility of the EU's mitigation measures under the Effort Sharing Decision. It also gives greater certainty to Member States which achieve greater emission reductions than required and would like to sell their surplus emission allocations to another Member State.

The Decision determining Member States' annual emission allocations has two tables with AEAs for the period 2013-2020. Why is that?

This is because the 'global warming potential' (GWP) values for certain greenhouse gases that Member States use in their emissions reporting will change for the reporting year 2013 onwards. Greenhouse gas emissions are reported with two years delay, which means Member States will report on their emissions for the year 2013 in 2015. As the new GWP values did not yet apply when the Decision entered into force, the AEAs have been calculated by applying both the current GWP values and the future ones to ensure legal certainty and consistency between reported emissions and AEAs throughout the ESD commitment period. The new GWP values are taken from the Fourth Assessment Report of the Intergovernmental Panel on Climate Change.

Why have the annual emission allocations been adjusted?

Pursuant to Article 10 of the Effort Sharing Decision (ESD), the AEAs shall be adjusted if there is a change in the coverage of the EU ETS that affects the ESD. A general adjustment of Member States' AEAs was published by the Commission in October 2013 due to the extension of the EU ETS scope for the 2013-2020 period. As a result of activities included in the ETS that were previously covered by the Effort Sharing Decision, the AEAs were reduced by a quantity corresponding to the amount of ETS allowances issued to that Member State as a result of the scope extension.

In some cases, the AEAs also had to be adjusted because a Member State unilaterally (in addition to the general ETS scope change mentioned above) included an activity in the EU ETS that was not previously covered by the system, or because a Member State excluded certain small installations from the ETS from 1 January 2013.

Will the annual emission allocations change during the commitment period?

Member States' annual emission allocations (AEAs) may change after 2013 for two reasons:

  1. If a Member State excludes from or includes in the EU ETS any further installations or activities for the period 2013-2020;
  2. As a result of new guidelines for national greenhouse gas inventories that will be applied from 2015 onwards. Under Article 27(2) of the Monitoring Mechanism Regulation (which sets EU rules for reporting and monitoring of Member States' greenhouse gas emissions), a revision of Member States' AEAs might happen in 2016 if the new guidelines result in changes exceeding 1% of Member States' total emissions. Any such revisions would only affect AEAs for the period 2017-2020.

Questions and answers on eligibility of international project credits under the Effort Sharing Decision (September 2016)

Can Member States use international project credits for compliance with the Effort Sharing Decision (ESD)?

Yes, subject to the quantitative and qualitative restrictions defined in Article 5 of the Effort Sharing Decision.

What are the quantitative restrictions on use of international project credits for compliance with the ESD?

Each Member State can annually use for compliance with ESD international project credits up to a limit which was calculated as 3 % of their 2005 ESD emissions. Unused parts of this annual entitlement may be transferred to other Member States or carried over to subsequent years.

12 Member States listed in Annex III of the ESD can annually use for compliance additional international project credits up to Limit which was calculated as 1 % of their 2005 ESD emissions. This additional entitlement is available when the first one has been exhausted. Contrary to the annual entitlement of 3%, unused parts of this additional entitlement may be neither transferred to other Member States, nor carried over to subsequent years.

What are the qualitative restrictions on use of international project credits for compliance with the ESD?

Each Member State can use for compliance with ESD any project credits meeting the conditions established by ESD Article 5(1). A list of eligible project credits is regularly updated at the Documentation section under 'ESD General positive list'. The list contains several thousand items which are essentially:

  • all CDM and JI projects registered before 1 January 2013,
  • and all CDM projects in the Least Developed Countries registered after 1 January 2013,
  • and those credits from afforestation and reforestation projects (tCERs and lCERs) which have not yet expired.

In addition, the 12 Member States listed in Annex III of the ESD can use for compliance any project credits meeting the conditions established by ESD Article 5(5). The list of such project credits is much shorter, as it contains only projects in the Least Developed Countries and the Small Island Developing States. See 'ESD Special positive list' at the Documentation section.

How are the quantitative and qualitative restrictions tracked and controlled?

Quantitative restrictions are applied through automatic checks in the Union registry, where both entitlements (3 % and if applicable an additional 1 %) are set for each year. For the 12 Member States listed in Annex III of the ESD the additional entitlement of 1 % becomes available when the entitlement of 3 % has been exhausted.

Qualitative restrictions are tracked and controlled through the introduction of automatic checks in the Union registry, based on lists of project credits established in accordance with ESD Article 5(1) and ESD Article 5(5). A project credit not included in one of these lists is considered not eligible for the ESD compliance.

Are the lists of project credits eligible for compliance with ESD identical with the lists of project credits eligible for compliance with EU ETS?

No. The legislators have defined slightly different criteria for eligibility of international project credits for compliance with ESD and EU ETS.