Press releases

Benchmarking study for free emission allowances made public

Published: 06/11/2009

Utrecht, 6 November 2009 - In 2013, the EU will change the rules for the free distribution of allowances within the EU Emissions Trading Scheme. This week, Ecofys delivered a report to the European Commission on a new allocation methodology, which is based on benchmarking. The associated study will be an important technical input for the European Commission when it prepares a proposal for assigning free allowances for EU ETS installations.

The new benchmarks define reference levels for allocating allowances: a certain level of emissions per unit of production. The EU Directive describes the average performance of the 10% most efficient installations in the Community in 2007-2008 as the starting point for setting these benchmarks. The Ecofys study proposes 42 product benchmarks for 13 industrial sectors within the EU-ETS. If a benchmark is not available for a particular product group, other approaches are proposed, such as a benchmark for heat production.

The study applies a ‘one product, one benchmark’ principle so, for example no corrections are proposed for differences in fuel mixes at different installations or for different technologies producing the same product. Companies that perform worse (per unit of product) than the benchmark will be required to buy extra allowances, while installations with emissions that are lower than the benchmark will receive allowances in excess of their emissions.

“This methodology applies in principle to installations of all sizes as long as they are covered by the EU ETS,” says Maarten Neelis, Ecofys project manager for the study. “I’m convinced that this study has provided a solid basis for the upcoming political discussions about defining an EU-wide allocation plan.”

Today Member States and stakeholders will be informed about the benchmark study. “A lot needs to be done in the coming months,” according to Maarten Neelis. “For instance, the benchmark values which are currently included in our study need to be refined to reflect a more complete set of data.”

The European Commission aims to propose a complete free allocation plan by the summer of 2010.

This study is a continuation of an earlier (2008) Ecofys study on the guiding principles for a benchmarking methodology. The study that was finalised this week was conducted together with the Fraunhofer Institute for System and Innovation Research and the Öko-Institut in Germany. Both studies were commissioned and financed by the European Commission.

Note to the editor

The EU Emissions Trading Scheme (EU-ETS) was designed to encourage industry to reduce greenhouse gas emissions in a flexible and cost-efficient way. The system, which covers some 12,000 industrial installations, started in 2005. It is currently in the second trading period (2008-2012).

Within the system, each installation in the EU must submit a number of allowances that correspond to the total volume of greenhouse gas emissions in a particular year. Up until 2012, a large proportion of the allowances in the EU-ETS will be allocated free of charge, on the basis of national plans which were based on historic emissions.

During the third trading period (from 2013 to 2020), allocation will be harmonized across the EU. Industrial companies will receive some allowances free of charge , but will be obliged to buy further allowances at auctions or on the carbon market. In 2013, the free allocation will cover 80% of the benchmark level, falling to 30% in 2020. Activities that are likely to lead to ‘carbon leakage’ receive 100% of the benchmark free of charge. Electricity production installations will not receive any free allowances. They will have to buy all allowances from national auctions or on the carbon market.

In principle, all of the rules relating to carbon leakage and free allocation will be re-assessed after the Copenhagen Climate Summit in December 2009. A global agreement on climate change policies may affect these arrangements.

About Ecofys –
Ecofys is a leading knowledge and innovation company that operates in the field of renewable energy, energy efficiency and climate change. We deliver research and service solutions from product development to implementation management. Our clients are energy companies, financial institutions and corporate businesses, governments and local authorities, international institutions, project developers, housing associations, building companies and energy consumers around the world.

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