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European Commission to be late with free carbon emission allowance allocation

28 Jan 2013 15:13:18 | edcm

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Industrial installations within the EU Emissions Trading System (ETS) will not receive their share of free EU allowances (EUAs) for Phase III by the end of February as expected, the European Commission said late on Friday in a statement.

The Commission admitted earlier this month that it did not know when it would have finished scrutinising the so-called national implementation measures (NIMs) submitted by member states a prerequisite step for the distribution of free permits (see EDCM 18 January 2013).

A NIM is a preliminary calculation of how many EUAs industrial plants in all countries falling under the EU ETS would receive for free in every year of Phase III (2013-2020). Plans were to be submitted by member states by September 2011, but only a handful met the deadline, with the last - Italy - only submitting in July 2012 (see EDCM 31 July 2012).

"The [scrutiny] process will not be concluded in time for installations to receive free allowances by the end of February," the Commission said. "The Commission aims to conclude the overall process as soon as possible to provide industrial installations and all other market participants with certainty."

The delay is likely to see industrial companies hold on to their EUA surpluses for now, analysts said, as the final amount of free permits might change after the Commission scrutinises the NIMs.

The distribution of free EUAs from 2013 onwards is governed by harmonised benchmark-based rules. If the NIMs' preliminary calculation exceeds the maximum amount of allowances available, the Commission will have to apply a "cross-sectoral correction factor", under which free EUAs to all installations would be reduced by the same proportion.

"The Commission has made considerable progress in scrutinising the NIMs, and will be able to determine in coming weeks whether a correction factor will need to be applied as of 2013," the statement said.

Free EUAs handed out in 2013, however, cannot be surrendered to cover 2012 emissions. SM

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