Emissions trading: Commission sets out guidance on national allocations for 2008-2012

The European Commission has published a Communication setting out guidance to help member states when they draw up national plans for allocating carbon dioxide emission allowances for 2008-2012 under the EU Emissions Trading Scheme (EU ETS). This second trading period is significant because it coincides with the five-year period in which the EU and member states must meet their targets for limiting or reducing emissions of greenhouse gases under the Kyoto Protocol on climate change. Member states need to ensure that their emissions strategies, in which allocations under the ETS are an important element, achieve their targets.

Standardised information

Experience with the first round of National Allocation Plans (NAPs), covering the 2005-2007 trading period, has shown that such plans need to be more transparent and easier to implement. Therefore, the Commission’s new guidance document proposes a set of standardised tables for presenting important information, such as projected emissions, assumptions regarding fuel prices and the reductions expected from other policies and measures.

Guidance on setting caps

Given that the 2008-2012 trading period under the European Trading Scheme coincides with the ‘commitment period’ for meeting emission targets under the Kyoto Protocol, the guidance document signals the Commission’s intention to look very closely at the overall policy mix – including use of the ETS – which member states propose in order to achieve their targets. It also offers a consistent methodology for Member States to set caps for their emissions.

Scope and definitions

Finally, the Commission addresses the types of combustion installations that should be covered including the situation of ‘small’ installations, i.e. those emitting relatively low amounts of CO2 per year.

In addition, an ongoing revision of the rules for monitoring and reporting of emissions will ease the administrative burden for small installations. The Commission envisages further help in its forthcoming review of the ETS.

Background

National allocation plans

Under the Emissions Trading Directive[1] which established the ETS, governments are required to draw up national allocation plans (NAPs) for each trading period. NAPs fix the total amount of CO2 that can be emitted by all the installations in their country covered by the scheme as well as the number of emission allowances allocated to each individual installation.

An installation that emits more CO2 than it has allowances for would need to buy additional allowances in the market, while one that emits less has the possibility to sell its surplus allowances.

The ETS, the world’s first and biggest international emissions trading scheme, began operating on 1 January 2005. Member states are required to notify their NAPs for 2008-2012 to the Commission by 30 June 2006. The Commission needs to approve the plans and has the power to require changes if it finds a plan incompatible with the agreed criteria. The new Communication responds to a Council request from December 2005 asking the Commission to do its utmost to provide early guidance on preparation of the NAPs
The new Communication builds on guidance provided by the Commission for the first round of NAPs. This was published as COM (2003) 830 final.

http://europa.eu.int/eur-lex/en/com/cnc/2003/com2003_0830en01.pdf

30 June 2006 is the deadline not only for member states to notify their NAPs for 2008-2012 to the Commission but also for the Commission to report to the Council and Parliament on experience to date with the ETS as a whole and to make proposals as appropriate. Preparations for the review are ongoing.
The guidance document can be found at:
http://www.europa.eu.int/comm/environment/climat/pdf/nap_2_guidance_en.pdf
Further information on Emissions Trading and climate change policy is available at:

http://www.europa.eu.int/comm/environment/climat/emission.htm