EU Emissions Trading Scheme – New System to allocate free Allowances from 2013 onwards

1. EU Emissions Trading Scheme–New System to allocate free Allowances from 2013 onwards IFIEC Energy Forum Brussels, 9 June 2011 Hans BergmanDG Climate Action/ B2European Commission 1

2. Harmonised allocation rules: Art. 10a ETS-Directive Fully harmonised allocation rules for all ETS installations across the EU & EEA In principle no free allocation for electricity production Free allocation for industrial activities and heat production/ consumption Maximum amount of free allocation determined by cap and historical share of industrial emissions 2

3. Harmonised allocation rules: Art. 10a ETS-Directive Free allocation based on benchmarks, determined by average performance of 10% most efficient installations Allocation for ‘carbon leakage‘ sectors: 100% of the benchmark level Free allocation for other sectors: 80% of the benchmark level in 2013, to 30% in 2020 and 0% in 2027 Carbon leakage list. Updated once. To be revised as from 2015 3

4. Commission Decision of 27/4/2011 Implements Article 10a of the ETS Directive Comitology measure Preparation since 2008 (studies, discussions with Member States experts) Intensive stakeholder consultations and MS discussions Positive vote in Climate Change Committee on 15/12/2010 Passed scrutiny in European Parliament Adopted by European Commission on 27/4/2011 Published in the OJ on 17/5/2011 4

5. Commission Decision of 27/4/2011 Determines the allocation rules 52 product benchmarks Allocation rules for non-benchmarked products: 3 generic fall-back approaches Allocation formula: Allocation = Benchmark x historical activity level x correction Special rules for significant capacity changes Rules for new entrants and closures 5

6. Cross-boundary heat flows Introduction of new principle: Allocation in principle to heat consumer and not to the emitter… …if possible (allocation to heat producer if consumer is not within the ETS) Allocation via product benchmark or heat benchmark approach Best possible option to prevent ‘carbon leakage’: The heat consumer is facing international competition Consistent with benchmarking approach 6

7. The ‘road’ to allocation Operators apply for free allocation by providing Verified data (data collection template) Information on the way the data has been obtained (methodology report) Member States prepare National Implementation Measures (‘NIMs’) Commission evaluates NIMs and ensures they are in accordance with the rules Commission determines the need for a cross-sectoral correction factor Member States determine final allocation 7

8. Documents related to national implementation Decision on NIMs Commission NIMsMethodology report NIMs list Member States Instal-lation data Methodology report Verification report Verifiers Operators 8

9. National implementation: Next steps Member States’ activities: • Creation of legal basis for data collection/ national implementation of Commission Decision (national choice) • Assessment of data and Methodology Reports submitted by operators • Determination of the preliminary amounts of free allocation • Public consultation (national choice) • Preparation and submission of ‘NIMs lists’ and accompanying ‘NIMs Methodology Reports’ • Deadline for submission: 30 September 2011 • Calculation of final amounts of free allocation after acceptance of NIMs list by the European Commissions and publication of the cross-sector correction factors

10. National implementation: Next steps Operators’ activities: • Preparation of data collection: Division of installation into sub-installations • Data collection using data collection template (national or common template) • Preparation of Methodology Report • Preparation of verification of data and Methodology Report • Submission of application for free allocation to Competent Authority (prior to national deadline)

11. National implementation: Next steps Commission’s activities from October 2011: • Completeness checks of NIMs lists and NIMs Methodology Reports • Conformity checks of NIMs lists and NIMs Methodology Reports (correct application of rules, plausibility checks, etc.) • Conformity checks of individual allocation decisions based on data submitted by operators • Decisions on NIMs • Calculation of the cross-sector correction factors 2013 - 2020

12. Support for the national implementation 8 guidance documents (after discussion & endorsement by Member States on 14/4/2011): explanation and interpretation of the allocation rules Data collection template and of template for additional information to be provided by operators (Methodology report) Workshops for Member States‘ experts Publication of additional material (case studies, presentations, FAQs, etc.) ‚Helpdesk‘ for specific questions on the allocation rules 12

13. Guidance documents General Guidance Document Allocation methodologies Data collection Verification Carbon leakage Cross-boundary heat flows New entrants and closures (not yet finalised) Waste gases Sector specific guidance …available at DG CLIMA’s website: http://ec.europa.eu/clima/documentation/ets/benchmarking_en.htm 13

14. National implementation (‘NIMs process’) Fall-back allocation: allocation 14

15. Thank you for your attention Any comments, questions?