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Eight countries seek to give utilities free carbon emissions allowances

03 Oct 2011 16:17:09 | edcm

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Eight of the ten countries eligible to apply for free carbon emission allowances for electricity producers from 2013 to 2020 have submitted their requests to the European Commission, a spokesman confirmed on Monday.

Countries had to apply to use a derogation to full auctioning to the European Commission by last Friday, 30 September.

The eligible member states that have applied are Bulgaria, Cyprus, the Czech Republic, Estonia, Hungary, Lithuania, Poland and Romania.

Latvia and Malta were the only two eligible member states that chose not to ask for free allowances.

Country-specific estimates

Bulgaria was expected to apply for 58m EU allowances (EUAs), after a Ministry of Environment official confirmed the figure last month (see EDCM 26 September 2011).

The Czech Republic made a last minute decision to apply, with government sources saying the country would ask to hand out 108-110m EUAs for free (see EDCM 9 September 2011 and EDCM 1 September 2011).

Poland was expected to fight for up to 20m free carbon allowances per year in phase III, deputy prime minister Waldemar Pawlak said last month (see EDCM 20 September 2011).

The Commission will now proceed to check that the applications comply with conditions set out in the EU's emissions trading directive. For instance, the directive caps the maximum amount of free EUAs according to baseline emissions and sets out that the estimated market value of the free allowances have to be invested into green technologies.

The Commission will have six months to publish a final decision.

The remaining applicant countries, Cyprus, Estonia, Hungary, Lithuania and Romania has not disclosed how many free EUAs they would seek to hand out.

The Commission did not comment on exact figures it had received from companies in their derogation submissions, making it too soon to estimate the total amount of free allowances that the electricity sector would receive in these countries between 2013 to 2020.

No NIM news

September 30 was not only the deadline for the derogation applications from a few select countries, but also for all states falling under the EU emissions trading system to list exactly how many EUAs each industrial plant within their borders would get for free in phase III. The plans, known as national implementation measures (NIMs), are based on EU-wide benchmarks for industrial sectors.

The Commission did not respond to questions about how many states had met the deadline or give any details of the NIMs that may have been submitted. Sources have earlier said many are expected to be delayed.

The EU-wide benchmarks will replace the system of National Allocation Plans (NAPs) used in phases I and II, which left it up to national governments to calculate the allocation to plants under the European Commission's supervision.

But replacing the NAPs with NIMs left a lot of legwork to states. They have to apply the benchmarks to the production rates of plants in the baseline years to arrive at a final number of EUAs to be handed out free.

If the total free EUA allocation submitted to the Commission by member states is higher than the provisions agreed upon for the phase III cap, the Commission would have to revise each NIM list. Any delay in the NIMs could stop industrials from coming to market and start selling off their expected large phase II surplus. MLDB

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