EU Decision on National Implementation Measures for EU ETS Phase 3 Provides for Degressive Correction Factor

On 5 September 2013 the EU Commission issued a decision concerning the Member States’ national implementation measures (NIMs) for phase 3 of the EU Emissions Trading System (EU ETS) spanning 2013 to 2020. It provides for a gradually falling correction factor that amounts to 5.73% in 2013 for the free allocation of emission allowances.

While emission allowances needed by companies covered by the EU emissions trading system (EU ETS) are generally auctioned, the manufacturing industry will continue to receive 80% of its allowances for free in 2013. This share will decrease in linear fashion each year to 30% in 2020.

Free allocation is carried out on the basis of benchmarks of greenhouse gas emissions performance that reflect the average performance of the 10 % best performing installations in the EU producing that product. Companies that do not reach the benchmarks will receive fewer allowances than they need, requiring them to reduce their emissions, or buy additional allowances or credits to cover their emissions, or combine these two options.

Transitional, harmonised EU-wide rules for free allocation are laid down in the European Commission’s 2011 “Benchmarking Decision“. In accordance therewith, all Member States and EEA-EFTA countries have carried out a preliminary calculation of the number of free allowances to be allocated to each installation in their territory and have notified these national implementation measures (NIMs) to the Commission.

In its decision on the NIMs, adopted on 5 September 2013, the Commission concluded that most NIMs submitted by Member States have been established in accordance with the rules (except for the NIMS of Germany and the Czech Republic), and provided guidance on how to ensure all NIMs fully comply.

As the preliminary allocation through the NIMs exceeded the maximum amount of allowances available in 2013, the Commission laid down a cross-sectoral correction factor as provided for in Article 10a.5 of the revised ETS Directive. The correction factor will be 5.73 % in 2013 and will thereafter increase gradually to 17.56% in 2020.

On the basis of the Commission decision, EU Member States and EEA-EFTA countries can take final allocation decisions and issue the allowances for 2013.

The decision has been criticised by VIK, the association that represents the interests of German industrial and commercial energy consumers. The Commission’s decision was “an attack” on the competitiveness and viability of the European industry, which was to a large extent located in Germany, VIK said.

Source: EU Commission; VIK

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2 Responses to “EU Decision on National Implementation Measures for EU ETS Phase 3 Provides for Degressive Correction Factor”

  • It is absurd for the VIK to describe this as “an attack”. The maximum volume of allowances has been specified within the Directive for many years, and industry always knew that a correction factor would be applied if their total applications for free allowances exceeded that legal maximum.

    In any case, even after the correction factor, Phase 3 allowances are still very generous to industry. The article fails to note that most manufacturing installations receive 100% of their benchmarked free allowances across Phase 3 because they have been defined as “carbon leakage” risks. It also fails to take note of the vast surpluses of carbon allowances that manufacturer’s have amassed over Phase 2.

    We find that manufacturers’ emissions would have to grow 50% by 2020 (comapared with 2012 levels) to exhaust all of these allowances (See

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