Italy’s industrial downsize could cut 28m free EUAs
Silvia Molteni
21-Jan-2015
Free allocation to Italian industrial installations could decline by 28m EU allowances (EUAs) in the period to 2020 as firms will produce less or carry out capacity reductions, an ICIS calculation based on information by Italian environment ministry showed.
The annual amount of free EUAs that manufacturers included in the EU emissions trading system receive was calculated at the start of phase III in country-specific National Allocation Tables (NAT).
Under EU rules, this volume gets slashed if the production or activity level of an installation declines to less than 50% of its historic level (so-called partial cessation) on which the free allocation was based, or in case of a significant capacity reduction, which occurs when the capacity of an installation is reduced by at least 10%. The adjustment takes place from the year following the activity decline.
The Italian Environment ministry this week put under public consultation a NAT revision that includes a recalculation of free allocation volumes for installations falling under those two categories in 2013.
The plan shows that the new allocation proposed by the ministry for 62 installations would total 129.9m EUAs. ICIS calculated that in the original plan, allocation for those installations stood at 157.9m.
The document also proposes an overall 3.6m free EUAs to 32 new entrants included in the EU ETS as of 2013.
Installations
The installations that would be most affected by the free allocation cut are refineries and steel and cement plants (see table). The Gela refinery, operated by energy company Eni, tops the list, losing 7.7m EUAs. It will now receive 3.1m EUAs.
Cement maker Italcementi will lose allocation at three plants – Rezzato, Colleferro and Castrovillari. The firm has been hit by the economic downturn, as the Italian cement market continues to present surplus production capacity as demand has fallen. In mid 2012, Italcementi was operating 17 plants in Italy. It has since sold one and downgraded five to grinding centres. The remaining run depending on demand.
According to EU data, in 2013 around 1,000 EU installations had their free allocation cut by a combined total of 35m EUAs due to reduced production levels or capacity reductions (see EDCM 7 July 2014). An update was scheduled for the end of 2014, but hasn’t been published yet.
Free allocation
After the consultation closes on 26 January, Italy will have to notify the commission of the NAT adjustments.
The free EUAs will be handed out after the commission approves the changes.
If no changes happen, a country can allocate EUAs directly. NATs can be revised upwards if production levels return to normal. Silvia Molteni
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