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New decree needed for Italian new entrants compensation

08 Apr 2013 13:22:00 | edcm

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Italian new entrants forced to buy EU allowances (EUAs) on the market in phase II (2008-2012) of the EU emissions trading system (ETS) will be reimbursed using proceeds from only phase II auctions, according to a decree recently passed by the country. But first additional regulation on the matter has to be drafted by the economic development and other ministries.

The government published details of the long-awaited measure last week in the Italian state gazette. It is designed to raise some €500m compensation for new entrants including power plants and industrial installations, after they missed out on freely allocated allowances during phase II of the EU ETS .

Under EU rules, they were entitled to receive allowances for free but had to buy them from the market instead to comply with the ETS, as Italy's new entrant reserve (NER) was too short. The government approved the compensation measure after the Senate and the lower house gave the green light to a preliminary draft early this year (see EDCM 14 January 2013).

The decree follows up from another 2010 decree stating that Italy would reimburse companies forced to go to the market by cash.

The reimbursement procedure was to be decided by other subsequent legislative measures (see EDCM 5 May 2010).

The latest decree - according to which funding will come from 50% of phase III auction proceeds by 2015 - leaves the economic development ministry, together with the economy ministry and the environment ministry, in charge of drafting another piece of regulation with further details of the reimbursement procedure, also taking into account the actual proceeds from the emissions auctions.

The Italian development ministry is already preparing the decree, a political source said.

According to data from EEX, Italy plans to auction 87.9m phase III EUAs in 2013. Considering a spot price of €5.10/tonnes of CO2 equivalents, that would generate €448m, short of the needed sum. Silvia Molteni

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