Factor

The free allocation process for the next EU ETS period (2021-2030) is gradually becoming known

19 July 2018 | Markets

On January 1st, 2021, phase IV of the implementation of the European Union Emissions Trading Scheme (EU ETS) will begin and drafts of the free allocation regulations are already available, detailing the allocation methodology for the next period, as well as the deadlines to be met.

The amendment of Directive 2003/87/EC (EU ETS regulatory basis) by Directive 2018/410 of 14 March 2018 was the first milestone in the adoption of the new regulations for this period 2021-2030. Subsequently, in May, the preliminary list of the sectors that are to be considered exposed to a risk of carbon leakage during the period 2021-2030 was published. At the moment, work is being done on the development of the free allocation regulations, and there is a very advanced drafting of the same.

In accordance with the latest draft of the European Commission's Delegate Regulation determining the Union's transitional rules for the harmonization of the free allocation of emission allowances, new figures, and concepts such as the Monitoring Methodology Plan are emerging on the scene.

Broadly speaking, an allocation process is proposed in which the installations will have to present in the second quarter of 2019 (April-June) a monitoring plan of the key variables for the free allocation (division into sub-installation, calculation of production, determination of measurable and non-measurable heat) and a verified report of their activity in terms of activity level, emissions, energy flows, etc. for the period 2014-2018. This information, once approved by the competent authority, will be forwarded to the European Commission, scheduled for September 2019.

In the first half of 2020, the European Commission will adopt the benchmarks that will apply for the calculation of the free allocation to each installation. Combining the information reported for each of the installations by the Member States with the new benchmarks, the allocations will be approved by the European Commission during the first quarter of 2021.

Therefore, depending on what is included in this draft regulation (which is expected to be approved in October of this year), the allocation process will be more complex for the installations concerned in terms of the amount of effort involved, and will be fraught with enormous uncertainty, as the number of allowances requested by each installation will not be known until the end of the process.

 

From Factor CO2, we will keep you informed of all the new developments that are known in this regard. However, if you would like more information, please do not hesitate to contact us:

Iria Flavia Peñalva - ipenalva@iamfactor.com

 

 

 

Source: Factor