Commission Decision of 27 April 2011 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (notified under document C(2011) 2772) (2011/278/EU) (repealed)

CHAPTER I U.K. GENERAL PROVISIONS

Article 1 U.K. Subject matter

This Decision lays down transitional Union-wide rules for the harmonised free allocation of emission allowances under Directive 2003/87/EC from 2013 onwards.

Article 2 U.K. Scope

This Decision shall apply to the free allocation of emission allowances under Chapter III (stationary installations) of Directive 2003/87/EC in trading periods from 2013 with the exception of transitional free allocation of emission allowances for the modernisation of electricity generation pursuant to Article 10c of Directive 2003/87/EC.

Article 3 U.K. Definitions

For the purposes of this Decision, the following definitions shall apply:

(a)

‘incumbent installation’ means any installation carrying out one or more activities listed in Annex I to Directive 2003/87/EC or an activity included in the Union scheme for the first time in accordance with Article 24 of that Directive which:

(i)

obtained a greenhouse gas emission permit before 30 June 2011; or

(ii)

is in fact operating, obtained all relevant environmental permits, including a permit provided for in Directive 2008/1/EC where applicable, by 30 June 2011 and fulfilled by 30 June 2011 all other criteria defined in the national legal order of the Member State concerned on the basis of which the installation would have been entitled to receive the greenhouse gas permit;

(b)

‘product benchmark sub-installation’ means inputs, outputs and corresponding emissions relating to the production of a product for which a benchmark has been set in Annex I;

(c)

‘heat benchmark sub-installation’ means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production, the import from an installation or other entity covered by the Union scheme, or both, of measurable heat which is:

• consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, or

• exported to an installation or other entity not covered by the Union scheme with the exception of the export for the production of electricity;

(d)

‘fuel benchmark sub-installation’ means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production of non-measurable heat by fuel combustion consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, including safety flaring;

(e)

‘measurable heat’ means a net heat flow transported through identifiable pipelines or ducts using a heat transfer medium, such as, in particular, steam, hot air, water, oil, liquid metals and salts, for which a heat meter is or could be installed;

(f)

‘heat meter’ means a heat meter within the meaning of Annex MI-004 to Directive 2004/22/EC of the European Parliament and of the Council(1) or any other device to measure and record the amount of heat energy produced based upon flow volumes and temperatures;

(g)

‘non-measurable heat’ means all heat other than measurable heat;

(h)

‘process emissions sub-installation’ means greenhouse gas emissions listed in Annex I to Directive 2003/87/EC other than carbon dioxide, which occur outside the system boundaries of a product benchmark listed in Annex I, or carbon dioxide emissions, which occur outside the system boundaries of a product benchmark listed in Annex I, as a result of any of the following activities and emissions stemming from the combustion of incompletely oxidised carbon produced as a result of the following activities for the purpose of the production of measurable heat, non-measurable heat or electricity provided that emissions that would have occurred from the combustion of an amount of natural gas, equivalent to the technically usable energy content of the combusted incompletely oxidised carbon, are subtracted:

(i)

the chemical or electrolytic reduction of metal compounds in ores, concentrates and secondary materials;

(ii)

the removal of impurities from metals and metal compounds;

(iii)

the decomposition of carbonates, excluding those for flue gas scrubbing;

(iv)

chemical syntheses where the carbon bearing material participates in the reaction, for a primary purpose other than the generation of heat;

(v)

the use of carbon containing additives or raw materials for a primary purpose other than the generation of heat;

(vi)

the chemical or electrolytic reduction of metalloid oxides or non-metal oxides such as silicon oxides and phosphates;

(i)

‘significant capacity extension’ means a significant increase in a sub-installation’s initial installed capacity whereby all of the following occur:

(i)

one or more identifiable physical changes relating to its technical configuration and functioning other than the mere replacement of an existing production line take place; and

(ii)

the sub-installation can be operated at a capacity that is at least 10 % higher compared to the initial installed capacity of the sub-installation before the change; or

(iii)

the sub-installation to which the physical changes relate has a significantly higher activity level resulting in an additional allocation of emission allowances of more than 50 000 allowances per year representing at least 5 % of the preliminary annual number of emission allowances allocated free of charge for this sub -installation before the change;

(j)

‘significant capacity reduction’ means one or more identifiable physical changes leading to a significant decrease in a sub-installation’s initial installed capacity and its activity level of the magnitude considered to constitute a significant capacity extension;

(k)

‘significant capacity change’ means either a significant capacity extension or a significant capacity reduction;

(l)

‘added capacity’ means the difference between the initial installed capacity of a sub-installation and the installed capacity of that same sub-installation after having had a significant extension determined on the basis of the average of the 2 highest monthly production volumes within the first 6 months following the start of changed operation;

(m)

‘reduced capacity’ means the difference between the initial installed capacity of a sub-installation and the installed capacity of that same sub-installation after having had a significant capacity reduction determined on the basis of the average of the 2 highest monthly production volumes within the first 6 months following the start of changed operation;

(n)

‘start of normal operation’ means the verified and approved first day of a continuous 90-day period, or, where the usual production cycle in the sector concerned does not foresee continuous production, the first day of a 90-day period split in sector-specific production cycles, during which the installation operates at least at 40 % of the capacity that the equipment is designed to accommodate taking into account, where appropriate, the installation-specific operating conditions;

(o)

‘start of changed operation’ means the verified and approved first day of a continuous 90-day period, or, where the usual production cycle in the sector concerned does not foresee continuous production, the first day of a 90-day period split in sector-specific production cycles, during which the changed sub-installation operates at least at 40 % of the capacity that the equipment is designed to accommodate taking into account, where appropriate, the sub-installation-specific operating conditions;

(p)

‘safety flaring’ means the combustion of pilot fuels and highly fluctuating amounts of process or residual gases in a unit open to atmospheric disturbances which is explicitly required for safety reasons by relevant permits for the installation;

(q)

‘private household’ means a residential unit in which persons make arrangements, individually or in groups, for providing themselves with measurable heat;

(r)

‘verifier’ means a competent, independent, person or verification body with responsibility for performing and reporting on the verification process, in accordance with the detailed requirements established by the Member State pursuant to Annex V to Directive 2003/87/EC;

(s)

‘reasonable assurance’ means a high but not absolute level of assurance, expressed positively in the verification opinion, whether the data subject to verification is free from material misstatement;

(t)

‘level of assurance’ means the degree to which the verifier is confident in the verification conclusions that it has been proved whether or not the data submitted for an installation is free from material misstatement;

(u)

‘material misstatement’ means a substantial misstatement (omissions, misrepresentations and errors, not considering the permissible uncertainty) in the data submitted that, according to the professional judgment of the verifier, could affect subsequent use of the data by the competent authority in the calculation of the allocation of emission allowances.

Article 4 U.K. Competent authority and rounding

1. Member States shall make the appropriate administrative arrangements, including designation of the competent authority or authorities in accordance with Article 18 of Directive 2003/87/EC, for the implementation of the rules of this Decision.

2. All calculations relating to a number of allowances carried out in accordance with this Decision shall be rounded up to the nearest allowance.

CHAPTER II U.K. INCUMBENT INSTALLATIONS

Article 5 U.K. Identification of installations

1. Each Member State shall identify all installations in its territory and eligible for free allocation under Article 10a of Directive 2003/87/EC.

2. Each Member State shall also identify all heat producing electricity generators and small installations, which may be excluded from the Union scheme pursuant to Article 27 of Directive 2003/87/EC.

Article 6 U.K. Division into sub-installations

1. For the purposes of this Decision, Member States shall divide each installation eligible for the free allocation of emission allowances under Article 10a of Directive 2003/87/EC into one or more of the following sub-installations, as required:

(a) a product benchmark sub-installation;

(b) a heat benchmark sub-installation;

(c) a fuel benchmark sub-installation;

(d) a process emissions sub-installation.

Sub-installations shall correspond, to the extent possible, to physical parts of the installation.

For heat benchmark sub-installations, fuel benchmark sub-installations and process emissions sub-installations, Member States shall clearly distinguish on the basis of NACE and Prodcom codes between whether or not the relevant process serves a sector or subsector deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU.

Where an installation included in the Union scheme has produced and exported measurable heat to an installation or other entity not included in the Union scheme, Member States shall consider that the relevant process of the heat benchmark sub-installation for this heat does not serve a sector or subsector deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU unless the competent authority is satisfied that the consumer of the measurable heat belongs to a sector or subsector deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU.

2. The sum of the inputs, outputs and emissions of each sub-installation shall not exceed the inputs, outputs and total emissions of the installation.

Article 7 U.K. Baseline data collection

1. For each incumbent installation eligible for the free allocation of emission allowances under Article 10a of Directive 2003/87/EC, including installations that are operated only occasionally, in particular, installations that are kept in reserve or on standby and installations operating on a seasonal schedule, Member States shall, for all years of the period from 1 January 2005 to 31 December 2008, or 1 January 2009 to 31 December 2010 where applicable, during which the installation has been operating, collect from the operator all relevant information and data regarding each parameter listed in Annex IV.

2. Member States shall collect data for each sub-installation separately. If necessary, Member States may require the operator to submit more data.

Where 95 % of the inputs, outputs and corresponding emissions of the heat benchmark sub-installation, of the fuel benchmark sub-installation or of the process emissions sub-installation, serve sectors or subsectors deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU or where 95 % of the inputs, outputs and corresponding emissions of the heat benchmark sub-installation, of the fuel benchmark sub-installation or of the process emissions sub-installation serve sectors or subsectors not deemed to be exposed to a significant risk of carbon leakage, Member States may exempt the operator from providing data allowing for the distinction in terms of carbon leakage exposure.

3. Member States shall require the operator to submit the initial installed capacity of each product benchmark sub-installation, determined as follows:

(a) in principle, the initial installed capacity shall be the average of the 2 highest monthly production volumes in the period from 1 January 2005 to 31 December 2008 assuming that the sub-installation has been operating at this load 720 hours per month for 12 months per year;

(b) Where it is not possible to determine the initial installed capacity according to point (a), an experimental verification of the sub-installation’s capacity under the supervision of a verifier shall take place in order to ensure that the parameters used are typical for the sector concerned and that the results of the experimental verification are representative.

4. Where a sub-installation has had a significant capacity change between 1 January 2005 and 30 June 2011, Member States shall require the operator to submit in addition to the initial installed capacity of that sub-installation, determined in accordance with paragraph 3, until the start of changed operation, the added or, where applicable, the reduced capacity as well as the installed capacity of the sub-installation after having had a significant capacity change determined on the basis of the average of the 2 highest monthly production volumes within the first 6 months following the start of changed operation. Member States shall consider this installed capacity of the sub-installation after having had a significant capacity change as the sub-installation’s initial installed capacity when assessing any further significant capacity change.

5. Member States shall obtain, record and document data in a manner that enables an appropriate use of it by the competent authority.

Member States may require the operator to use an electronic template or specify a file format for submission of the data. However, Member States shall accept an operator’s use of any electronic template or file format specification published by the Commission for the purpose of data collection under this Article, unless the Member State’s template or file format specification requires at least input of the same data.

6. Inputs, outputs and corresponding emissions for which only data for the installation as a whole is available, shall be proportionally attributed to the relevant sub-installations, as follows:

(a) where different products are produced one after the other in the same production line, inputs, outputs and corresponding emissions shall be attributed sequentially based on the usage time per year for each sub-installation;

(b) where it is not possible to attribute inputs, outputs and corresponding emissions according to point (a), they shall be attributed based on the mass or volume of individual products produced or estimates based on the ratio of free reaction enthalpies of the chemical reactions involved or based on another suitable distribution key that is corroborated by a sound scientific methodology.

7. Member States shall require operators to submit complete and consistent data and to ensure that there are no overlaps between sub-installations and no double counting. Member States shall, in particular, ensure that operators exercise due diligence and submit data that presents highest achievable accuracy so as to enable reasonable assurance of the integrity of data.

To this end, Member States shall ensure that each operator also submits a methodology report containing, in particular, a description of the installation, the compilation methodology applied, different data sources, calculation steps and, where applicable, assumptions made and the methodology applied to attribute emissions to the relevant sub-installations in accordance with paragraph 6. Member States may order the operator to demonstrate the accuracy and completeness of the data provided.

8. Where data is missing, Member States shall require the operator to duly justify any lack of data.

Member States shall require the operator to substitute all missing data with conservative estimates, in particular, based on best industry practice, recent scientific and technical knowledge before or, at the latest, during verification by the verifier.

Where data are partly available, conservative estimate means that the value extrapolated shall be not more than 90 % of the value obtained by using the data available.

Where no data on measurable heat flows for the heat benchmark sub-installation is available, a proxy value may be derived from the corresponding energy input multiplied by the measured efficiency of the heat production as verified by a verifier. In case no such efficiency data is available, a reference efficiency of 70 % shall be applied on the corresponding energy input of the production of measurable heat.

9. Upon request, each Member State shall make the data collected on the basis of paragraph 1 to 6 available to the Commission.

Article 8 U.K. Verification

1. In the process of collecting data in accordance with Article 7, Member States shall only accept data that has been verified as satisfactory by a verifier. The verification process shall relate to the methodology report and the reported parameters referred to in Article 7 and Annex IV. The verification shall address the reliability, credibility and accuracy of the data provided by the operator and shall come to a verification opinion that states with reasonable assurance whether the data submitted is free from material misstatements.

2. Member States shall ensure that the verifier is independent of the operator, carries out his activities in a sound and objective professional manner, and understands each of the following:

(a) the provisions of this Decision, as well as relevant standards and guidance;

(b) the legislative, regulatory, and administrative requirements relevant to the activities being verified;

(c) the generation of all information related to each parameter or source of emissions in the installation, in particular, relating to the collection, measurement, calculation and reporting of the data.

3. In addition to the requirements set out in Decision 2007/589/EC, Member States shall ensure that all of the following minimum requirements are met:

(a) the verifier has planned and performed the verification with an attitude of professional scepticism recognising that circumstances may exist that cause the information and data submitted to be materially misstated;

(b) the verifier has only validated reported parameters determined with a high degree of certainty. A high degree of certainty requires the operator to show that:

(i)

the reported parameters are free of inconsistencies;

(ii)

the collection of the parameters has been carried out in accordance with applicable standards or guidance;

(iii)

the relevant records of the installation are complete and consistent;

(c) the verifier has commenced the verification process with a strategic analysis of all relevant activities carried out in the installation and has an overview of all the activities and their significance for allocation purposes;

(d) the verifier has taken account of the information contained in the greenhouse gas emissions permit or other relevant environmental permits, such as the permit provided for in Directive 2008/1/EC, in particular when assessing the initial installed capacity of sub-installations;

(e) the verifier has analysed the inherent risks and control risks related to the scope and complexity of the operator’s activities and related to allocation parameters, which could lead to material misstatements and has drawn up a verification plan following this risk analysis;

(f) the verifier has conducted a site visit, when appropriate, to inspect the operation of meters and monitoring systems, conduct interviews, and collect sufficient information and evidence. If the verifier has deemed a site visit is not appropriate, he should be able to fully justify his decision to an appropriate authority;

(g) the verifier has carried out the verification plan by gathering data in accordance with the defined sampling methods, walkthrough tests, document reviews, analytical procedures and data review procedures, including any relevant additional evidence, upon which the verifier’s verification opinion will be based;

(h) the verifier has requested the operator to provide any missing data or complete missing sections of audit trails, explain variations in parameters or emissions data, or revise calculations, or adjust reported data;

(i) the verifier has prepared an internal verification report. The verification report shall record evidence showing that the strategic analysis, the risk analysis and the verification plan has been performed in full, and provide sufficient information to support verification opinions. The internal verification report shall as well facilitate a potential evaluation of the audit by the competent authority, and accreditation body;

(j) the verifier has made a judgment with respect to whether the reported parameters contain any material misstatement and whether there are other issues relevant for the verification opinion based on the findings contained in the internal verification report;

(k) the verifier has presented the verification methodology, his findings and verification opinion in a verification report, addressed to the operator, to be submitted by the operator with the methodology report and the reported parameters to the competent authority.

4. Member States shall not allocate emission allowances free of charge to an installation where data relating to this installation has not been verified as satisfactory.

Member States may only decide to allocate emission allowances free of charge to an installation where data relating to this installation has not been verified as satisfactory, if they are satisfied that the data gaps leading to the verifier’s judgment are due to exceptional and unforeseeable circumstances that could not have been avoided even if all due care had been exercised and that are beyond the control of the operator of the installation concerned, in particular because of circumstances such as natural disasters, war, threats of war, terrorist acts, revolution, riot, sabotage or acts of vandalism.

5. Upon verification, Member States shall, in particular, ensure that there are no overlaps between sub-installations and no double counting.

Article 9 U.K. Historical activity level

1. For incumbent installations, Member States shall determine historical activity levels of each installation for the baseline period from 1 January 2005 to 31 December 2008, or, where they are higher, for the baseline period from 1 January 2009 to 31 December 2010, on the basis of the data collected under Article 7.

2. The product-related historical activity level shall, for each product for which a product benchmark has been determined as referred to in Annex I, refer to the median annual historical production of this product in the installation concerned during the baseline period.

3. The heat-related historical activity level shall refer to the median annual historical import from an installation covered by the Union scheme, production, or both, during the baseline period, of measurable heat consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, or exported to installations or other entity not covered by the Union scheme with the exception of the export for the production of electricity expressed as terajoule per year.

4. The fuel-related historical activity level shall refer to the median annual historical consumption of fuels used for the production of non-measurable heat consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, including safety flaring, during the baseline period expressed as terajoule per year.

5. For process emissions, which occurred in relation with the production of products in the installation concerned during the baseline period referred to in paragraph 1, the process-related historical activity level shall refer to the median annual historical process emissions expressed as tonnes of carbon dioxide equivalent.

6. For the purposes of the determination of the median values referred to in paragraphs 1 to 5 only calendar years during which the installation has been operating for at least 1 day shall be taken into account.

If the installation has been operating less than 2 calendar years during the relevant baseline period, the historical activity levels shall be calculated on the basis of the initial installed capacity determined in accordance with the methodology set out in Article 7(3) of each sub-installation multiplied by the relevant capacity utilisation factor determined in accordance with Article 18(2).

7. By way of derogation from paragraph 2, Member States shall determine the product-related historical activity level for products to which the product benchmarks referred to in Annex III apply on the basis of the median annual historical production according to the formulas set out in this same Annex.

8. Incumbent installations that are operated only occasionally, including, in particular, installations that are kept in reserve or on standby and installations operating on a seasonal schedule and that have not been operating for at least 1 day in a given calendar year during the baseline period, shall be taken into account when determining the median values referred to in paragraph 1, where all of the following conditions are met:

(a) it is clearly demonstrated that the installation is used occasionally, in particular, operated regularly as standby or reserve capacity or operated regularly following a seasonal schedule;

(b) the installation is covered by a greenhouse gas emissions permit and by all other relevant permits required in the national legal order of the Member State to operate the installation;

(c) it is technically possible to start operation on short notice and maintenance is carried out on a regular basis.

9. Where an incumbent installation has had a significant capacity extension or a significant reduction of capacity between 1 January 2005 and 30 June 2011, the historical activity levels of the installation concerned shall be the sum of the median values determined in accordance with paragraph 1 without the significant capacity change and the historical activity levels of the added or reduced capacity.

The historical activity levels of the added or reduced capacity shall be the difference between the initial installed capacities of each sub-installation having had a significant capacity change determined in accordance with Article 7(3) until the start of changed operation and the installed capacity after the significant capacity change determined in accordance with Article 7(4) multiplied by the average historical capacity utilisation of the installation concerned of the years prior to the start of changed operation.

Article 10 U.K. Allocation at installation level

1. Based on the data collected in accordance with Article 7, Member States shall, for each year, calculate the number of emission allowances allocated free of charge from 2013 onwards to each incumbent installation on their territory in accordance with paragraphs 2 to 8.

2. For the purpose of this calculation, Member States shall first determine the preliminary annual number of emission allowances allocated free of charge for each sub-installation separately as follows:

(a) for each product benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the value of this product benchmark as referred to in Annex I multiplied by the relevant product-related historical activity level;

(b) for:

(i)

the heat benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the value of the heat benchmark for measurable heat as referred to in Annex I multiplied by the heat-related historical activity level for the consumption of measurable heat;

(ii)

the fuel benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the value of the fuel benchmark as referred to in Annex I multiplied by the fuel-related historical activity level for the fuel consumed;

(iii)

the process emissions sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the process-related historical activity level multiplied by 0,9700.

3. To the extent that measurable heat is exported to private households and the preliminary annual number of emission allowances determined in accordance with paragraph 2(b), point (i), for 2013 is lower than the median annual historical emissions related to the production of measurable heat exported to private households by that sub-installation in the period from 1 January 2005 to 31 December 2008, the preliminary annual number of emission allowances for 2013 shall be adjusted by the difference. In each of the years 2014 to 2020, the preliminary annual number of emission allowances determined in accordance with paragraph 2(b), point (i), shall be adjusted to the extent that the preliminary annual number of emission allowances for that year is lower than a percentage of the abovementioned median annual historical emissions. This percentage shall be 90 % in 2014 and decline by 10 percentage points each subsequent year.

4. For the purpose of implementing Article 10a(11) of Directive 2003/87/EC, the factors referred to in Annex VI shall be applied to the preliminary annual number of emission allowances allocated free of charge determined for each sub-installation pursuant to paragraph 2 of this Article for the year concerned where the processes in those sub-installations serve sectors or subsectors deemed not to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU.

Where the processes in those sub-installations serve sectors or subsectors deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU, the factor to be applied for the years 2013 and 2014 shall be 1. The sectors or subsectors for which the factor is 1 for the years 2015 to 2020 shall be determined pursuant to Article 10a(13) of Directive 2003/87/EC.

5. Where at least 95 % of the historical activity level of the heat benchmark sub-installation, of the fuel benchmark sub-installation or of the process emissions sub-installation serve sectors or subsectors deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU, the sub-installation as a whole is deemed to be exposed to a significant risk of carbon leakage.

Where at least 95 % of the historical activity level of the heat benchmark sub-installation, of the fuel benchmark sub-installation or of the process emissions sub-installation serve sectors or subsectors not deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU, the sub-installation as a whole is not deemed to be exposed to a significant risk carbon leakage.

6. The preliminary annual number of emission allowances allocated free of charge for sub-installations that received measurable heat from sub-installations producing products covered by the nitric acid benchmarks referred to in Annex I shall be reduced by the annual historical consumption of that heat during the baseline period referred to in Article 9(1) multiplied by the value of the heat benchmark for this measurable heat as referred to in Annex I.

7. The preliminary total annual amount of emission allowances allocated free of charge for each installation shall be the sum of all sub-installations’ preliminary annual numbers of emission allowances allocated free of charge calculated in accordance with paragraphs 2, 3, 4, 5 and 6.

Where an installation encompasses sub-installations producing pulp (short fibre kraft pulp, long fibre kraft pulp, thermo-mechanical pulp and mechanical pulp, sulphite pulp or other pulp not covered by a product benchmark) exporting measurable heat to other technically connected sub-installations, the preliminary total amount of emission allowances allocated free of charge shall, without prejudice to the preliminary annual numbers of emission allowances allocated free of charge for other sub-installations of the installation concerned, only take into account the preliminary annual number of emission allowances allocated free of charge to the extent that pulp products produced by this sub-installation are placed on the market and not processed into paper in the same or other technically connected installations.

8. When determining the preliminary total annual amount of emission allowances allocated free of charge for each installation, Member States shall ensure that emissions are not double counted and that the allocation is not negative. In particular, where an intermediate product that is covered by a product benchmark according to the definition of the respective system boundaries set out in Annex I is imported by an installation, emissions shall not be double counted when determining the preliminary total annual amount of emission allowances allocated free of charge for both installations concerned.

9. The final total annual amount of emission allowances allocated free of charge for each incumbent installation, except for installations covered by Article 10a(3) of Directive 2003/87/EC, shall be the preliminary total annual amount of emission allowances allocated free of charge for each installation determined in accordance with paragraph 7 multiplied by the cross-sectoral correction factor as determined in accordance with Article 15(3).

For installations covered by Article 10a(3) of Directive 2003/87/EC and eligible for the allocation of free emission allowances, the final total annual amount of emission allowances allocated free of charge shall correspond to the preliminary total annual amount of emission allowances allocated free of charge for each installation determined in accordance with paragraph 7 annually adjusted by the linear factor referred to in Article 10a(4) of Directive 2003/87/EC, using the preliminary total annual amount of emission allowances allocated free of charge for the installation concerned for 2013 as a reference.

Article 11 U.K. Allocation in respect of steam cracking

By way of derogation from Article 10(2)(a), the preliminary annual number of emission allowances allocated free of charge for a product benchmark sub-installation relating to the production of high value chemicals (hereinafter ‘HVC’) shall correspond to the value of the steam cracking product benchmark referred to in Annex I multiplied by the historical activity level determined in accordance with Annex III and multiplied by the quotient of the total direct emissions including emissions from net imported heat over the baseline period referred to in Article 9(1) of this Decision expressed as tonnes of carbon dioxide equivalent and the sum of these total direct emissions and the relevant indirect emissions over the baseline period referred to in Article 9(1) of this Decision calculated in accordance with Article 14(2) To the result of this calculation, 1,78 tonnes of carbon dioxide per ton of hydrogen times the median historical production of hydrogen from supplemental feed expressed in tons of hydrogen, 0,24 tonnes of carbon dioxide per ton of ethylene times the median historical production of ethylene from supplemental feed expressed in tons of ethylene and 0,16 tonnes of carbon dioxide per ton of HVC times the median historical production of other high value chemicals than hydrogen and ethylene from supplemental feed expressed in tons of HVC shall be added.

Article 12 U.K. Allocation in respect of vinyl chloride monomer

By way of derogation from Article 10(2)(a), the preliminary annual number of emission allowances allocated free of charge for a sub-installation relating to the production of vinyl chloride monomer (hereinafter ‘VCM’) shall correspond to the value of the VCM benchmark multiplied by the historical activity level for VCM production expressed as tonnes and multiplied by the quotient of the direct emissions for the production of VCM including emissions from net imported heat over the baseline period referred to in Article 9(1) of this Decision, calculated in accordance with Article 14(2), expressed as tonnes of carbon dioxide equivalent and the sum of these direct emissions and the hydrogen-related emissions for the production of VCM over the baseline period referred to in Article 9(1) of this Decision expressed as tonnes of carbon dioxide equivalent calculated on the basis of the historical heat consumption stemming from hydrogen combustion expressed as terajoules (TJ) times 56,1 tonnes of carbon dioxide per TJ.

Article 13 U.K. Heat flows between installations

Where a product-benchmark sub-installation encompasses measurable heat imported from an installation or other entity not included in the Union scheme, the preliminary annual number of emission allowances allocated free of charge for the product benchmark sub-installation concerned determined pursuant to Article 10(2)(a) shall be reduced by the amount of heat historically imported from an installation or other entity not included in the Union scheme in the year concerned multiplied by the value of the heat benchmark for measurable heat set out in Annex I.

Article 14 U.K. Exchangeability of fuel and electricity

1. For each product benchmark sub-installation referred to in Annex I with consideration of exchangeability of fuel and electricity, the preliminary annual number of emission allowances allocated free of charge shall correspond to the value of the relevant product benchmark set out in Annex I multiplied by the product-related historical activity level and multiplied by the quotient of the total direct emissions including emissions from net imported heat over the baseline period referred to in Article 9(1) of this Decision expressed as tonnes of carbon dioxide equivalent and the sum of these total direct emissions and the relevant indirect emissions over the baseline period referred to in Article 9(1) of this Decision.

2. For the purposes of the calculation pursuant to paragraph 1, the relevant indirect emissions refer to the relevant electricity consumption as specified in the definition of processes and emissions covered in Annex I during the baseline period referred to in Article 9(1) of this Decision expressed in megawatt-hours for the production of the product concerned times 0,465 tonnes of carbon dioxide per megawatt-hour and expressed as tonnes of carbon dioxide.

For the purposes of the calculation pursuant to paragraph 1, the emissions from net imported heat refer to the amount of measurable heat for the production of the product concerned imported from installations covered by the Union scheme during the baseline period referred to in Article 9(1) of this Decision multiplied by the value of the heat benchmark as referred to in Annex I.

CHAPTER III U.K. ALLOCATION DECISIONS

Article 15 U.K. National Implementation measures

1. In accordance with Article 11(1) of Directive 2003/87/EC, Member States shall submit to the Commission by 30 September 2011 a list of installations covered by Directive 2003/87/EC in their territory, including installations identified pursuant to Article 5, using an electronic template provided by the Commission.

2. The list referred to in paragraph 1 shall for each incumbent installation contain, in particular:

(a) an identification of the installation and its boundaries using the installation identification code in the CITL;

(b) an identification of each sub-installation of an installation;

(c) for each product benchmark sub-installation the initial installed capacity together with the annual production volumes of the product concerned in the period 1 January 2005 to 31 December 2008;

(d) for each installation and sub-installation information on whether or not it belongs to a sector or subsector deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU;

(e) for each sub-installation the preliminary annual number of emission allowances allocated free of charge over the period from 2013 to 2020 as determined in accordance with Article 10(2);

(f) in addition to point (d), for sub-installations not serving a sector or subsector deemed to be exposed to a significant risk of carbon leakage as determined by Decision 2010/2/EU, the preliminary annual numbers of emission allowances allocated free of charge over the period from 2013 to 2020 decreasing by equal amounts from 80 % of the quantity in 2013 to 30 % in 2020 as determined in accordance with Article 10(4);

(g) for each installation the preliminary total annual amounts of emission allowances allocated free of charge over the period from 2013 to 2020 as determined in accordance with Article 10(6).

The list shall also identify all heat producing electricity generators, and small installations that may be excluded from the Union scheme pursuant to Article 27 of Directive 2003/87/EC.

3. Upon receipt of the list referred to in paragraph 1 of this Article, the Commission shall assess the inclusion of each installation in the list and the related preliminary total annual amounts of emission allowances allocated free of charge.

After notification by all Member States of the preliminary total annual amounts of emission allowances allocated free of charge over the period from 2013 to 2020, the Commission shall determine the uniform cross-sectoral correction factor as referred to in Article 10a(5) of Directive 2003/87/EC. It shall be determined by comparing the sum of the preliminary total annual amounts of emission allowances allocated free of charge to installations that are not electricity generators in each year over the period from 2013 to 2020 without application of the factors referred to in Annex VI with the annual amount of allowances that is calculated in accordance with Article 10a(5) of Directive 2003/87/EC for installations that are not electricity generator or new entrants, taking into account the relevant share of the annual Union-wide total quantity, as determined pursuant to Article 9 of that Directive, and the relevant amount of emissions which are only included in the Union scheme from 2013 onwards.

4. If the Commission does not reject an installation’s inscription on this list, including the corresponding preliminary total annual amounts of emission allowances allocated free of charge for this installation, the Member State concerned shall proceed to the determination of the final annual amount of emission allowances allocated free of charge for each year over the period from 2013 to 2020 in accordance with Article 10(9) of this Decision.

5. After determination of the final annual amount for all incumbent installations in their territory, Member States shall submit to the Commission a list of the final annual amounts of emission allowances allocated free of charge over the period from 2013 to 2020 as determined in accordance with Article 10(9).

Article 16 U.K. Changes to carbon leakage exposure

Within 3 months of the adoption of the list referred to in Article 10a(13) of Directive 2003/87/EC for the years 2015 to 2020 or of the adoption of any addition to the list determined by Commission Decision 2010/2/EU for the years 2013 and 2014, each Member State shall revise the list referred to in Article 15(1) of this Decision clearly indicating the changes to the deemed carbon leakage exposure of installations and sub-installations and the related preliminary annual amount of free allocation where applicable and submit that list to the Commission.

CHAPTER IV U.K. NEW ENTRANTS AND CLOSURES

Article 17 U.K. Application for free allocation

1. Upon application by a new entrant, Member States shall determine on the basis of the present rules the amount of allowances to be allocated free of charge once the installation concerned has started normal operation and its initial installed capacity has been determined.

2. Member States shall only accept applications that are submitted to the competent authority within 1 year following the start of normal operation of the installation or sub-installation concerned.

3. Member States shall divide the installation concerned in sub-installations in accordance with Article 6 of this Decision and shall require the operator to submit together with the application referred to in paragraph 1 all relevant information and data regarding each parameter listed in Annex V for each sub-installation separately to the competent authority. If necessary, Member States may require the operator to submit more disaggregated data.

4. For installations referred to in Article 3(h) of Directive 2003/87/EC, with the exception of installations that have had a significant extension after 30 June 2011, Member States shall require the operator to determine the initial installed capacity for each sub-installation according to the methodology set out in Article 7(3) using the continuous 90-day period on the basis of which the start of normal operation is determined as a reference. Member States shall approve this initial installed capacity of each sub-installation before calculating the allocation to the installation.

5. Member States shall only accept data submitted pursuant to this Article that has been verified as satisfactory by a verifier, in accordance with the requirements set out in Article 8, to ensure that reliable and correct data is reported.

Article 18 U.K. Activity levels

1. For installations referred to in Article 3(h) of Directive 2003/87/EC, with the exception of installations that have had a significant extension after 30 June 2011, Member States shall determine activity levels of each installation as follows:

(a) the product-related activity level shall, for each product for which a product benchmark has been determined as referred to in Annex I, be the initial installed capacity for the production of this product of the installation concerned multiplied by the standard capacity utilisation factor;

(b) the heat-related activity level shall be the initial installed capacity for the import from installations covered by the Union scheme, production, or both, of measurable heat consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, or exported to an installation or other entity not covered by the Union scheme with the exception of the export for the production of electricity multiplied by the relevant capacity utilisation factor;

(c) the fuel-related activity level shall be the initial installed capacity for the consumption of fuels used for the production of non-measurable heat consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling with the exception of the consumption for the production of electricity, including safety flaring, of the installation concerned multiplied by the relevant capacity utilisation factor;

(d) the process emissions-related activity level shall be the initial installed capacity for the production of process emissions of the process unit multiplied by the relevant capacity utilisation factor.

2. The standard capacity utilisation factor referred to in paragraph 1(a) shall be determined and published by the Commission on the basis of the data collection carried out by Member States in accordance with Article 7 of this Decision. For each product benchmark set out in Annex I, it shall be the 80-percentile of the average annual capacity utilisation factors of all installations producing the product concerned. The average annual capacity utilisation factor of each installation producing the product concerned shall correspond to the average annual production of the period 2005 to 2008 divided by the initial installed capacity.

The relevant capacity utilisation factor referred to in paragraphs 1(b) to (d) shall be determined by Member States on the basis of duly substantiated and independently verified information on the installation’s intended normal operation, maintenance, common production cycle, energy efficient techniques and typical capacity utilisation in the sector concerned compared to sector-specific information.

When determining the relevant capacity utilisation factor referred to in paragraph 1(d) in accordance with the previous sentence, Member States shall also take account of duly substantiated and independently verified information on the emission intensity of the input and greenhouse gas efficient techniques.

3. For installations which had a significant capacity extension after 30 June 2011, Member States shall determine in accordance with paragraph 1 the activity levels only for the added capacity of the sub-installations to which the significant capacity extension relates.

For installations which had a significant capacity reduction after 30 June 2011, Member States shall determine in accordance with paragraph 1 the activity levels only for the reduced capacity of the sub-installations to which the significant capacity reduction relates.

Article 19 U.K. Allocation to new entrants

1. For the purposes of the allocation of emission allowances to new entrants, with the exception of allocations to installations referred to in the third indent of Article 3(h) of Directive 2003/87/EC, Member States shall calculate the preliminary annual number of emission allowances allocated free of charge as of the start of normal operation of the installation for each sub-installation separately, as follows:

(a) for each product benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the value of that product benchmark multiplied by the product-related activity level;

(b) for each heat benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge shall correspond to the value of the heat benchmark for this measurable heat as referred to in Annex I multiplied by the heat-related activity level;

(c) for each fuel benchmark sub-installation, the preliminary annual number of emission allowances allocated free of charge shall correspond to the value of the fuel benchmark as referred to in Annex I multiplied by the fuel-related activity level;

(d) for each process emissions sub-installation, the preliminary annual number of emission allowances allocated free of charge for a given year shall correspond to the process-related activity level multiplied by 0,9700.

Articles 10(4) to (6) and (8), 11, 12, 13 and 14 of this Decision shall apply mutatis mutandis to the calculation of the preliminary annual number of emission allowances allocated free of charge.

2. For independently verified emissions of the new entrant which occurred prior to the start of normal operation, additional allowances shall be allocated on the basis of historic emissions expressed as tonnes of carbon dioxide equivalent.

3. The preliminary total annual amount of emission allowances allocated free of charge shall be the sum of all sub-installations’ preliminary annual numbers of emission allowances allocated free of charge calculated in accordance with paragraph 1 and the additional allowances referred to in paragraph 2. The second sentence of Article 10(7) shall apply.

4. Member States shall notify to the Commission without delay the preliminary total annual amount of emission allowances allocated free of charge. Emission allowances from the new entrants reserve created pursuant to Article 10a(7) of Directive 2003/87/EC shall be allocated on a first come, first served basis with regard to the receipt of this notification.

The Commission may reject the preliminary total annual amount of emission allowances allocated free of charge for the installation concerned. If the Commission does not reject this preliminary total annual amount of emission allowances allocated free of charge, the Member State concerned shall proceed to the determination of the final annual amount of emission allowances allocated free of charge.

5. The final annual amount of emission allowances allocated free of charge shall correspond to the preliminary total annual amount of emission allowances allocated free of charge for each installation determined in accordance with paragraph 3 of this Article annually adjusted by the linear reduction factor referred to in Article 10a(7) of Directive 2003/87/EC, using the preliminary total annual amount of emission allowances allocated free of charge for the installation concerned for 2013 as a reference.

6. When half of the amount of allowances set aside for new entrants pursuant to Article 10a(7) of Directive 2003/87/EC, notwithstanding the amount of allowances available pursuant to Article 10a(8) of Directive 2003/87/EC, is issued or to be issued until 2020 to new entrants, the Commission shall assess whether a queuing system should be put in place to ensure that access to the reserve is managed in a fair way.

Article 20 U.K. Allocation as new entrant following a significant capacity extension

1. Where an installation has had a significant capacity extension after 30 June 2011, Member States shall, upon application by the operator and without prejudice to the allocation to an installation pursuant to Article 10, determine on the basis of the methodology set out in Article 19 the number of free emission allowances to be allocated, in so far as the extension is concerned.

2. Member States shall require the operator to submit together with the application evidence demonstrating that the criteria for a significant capacity extension have been met and to provide the information referred to in Article 17(3) to support any allocation decision. In particular, Member States shall require the operator to submit the added capacity and the installed capacity of the sub-installation after having had a significant capacity extension verified as satisfactory by a verifier, in accordance with the requirements set out in Article 8. Member States shall consider this installed capacity of the sub-installation after having had a significant capacity extension as the sub-installation’s initial installed capacity when assessing any subsequent significant capacity change.

Article 21 U.K. Significant capacity reduction

1. Where an installation has had a significant capacity reduction after 30 June 2011, Member States shall determine the amount by which the number of allowances to be allocated for free is reduced, in so far as this reduction is concerned. To this end, the Member States shall require the operator to submit the reduced capacity and the installed capacity of the sub-installation after having had a significant capacity reduction verified as satisfactory by a verifier, in accordance with the requirements set out in Article 8. Member States shall consider this installed capacity of the sub-installation after having had a significant capacity reduction as the sub-installation’s initial installed capacity when assessing any subsequent significant capacity change.

2. Member States shall reduce the preliminary annual number of emission allowances allocated free of charge for each sub-installation by the preliminary annual number of emission allowances allocated free of charge for the sub-installation concerned calculated in accordance with Article 19(1) in so far as the significant capacity reduction is concerned.

Member States shall then determine the preliminary total annual amount of the installation concerned according to the methodology applied to determine the preliminary total annual amount prior to the significant capacity reduction and the final total annual amount of emission allowances allocated free of charge to the installation concerned in accordance with Article 10(9).

3. The allocation to the installation shall be adjusted accordingly as of the year following the one during which the capacity reduction took place or as of 2013, if the significant capacity reduction took place before 1 January 2013.

Article 22 U.K. Cessation of operations of an installation

1. An installation is deemed to have ceased operations, where any of the following conditions is met:

(a) the greenhouse gas emissions permit, the permit in force in accordance with Directive 2008/1/EC or any other relevant environmental permit has expired;

(b) the permits referred to under point (a) have been withdrawn;

(c) operation of the installation is technically impossible;

(d) the installation is not operating, but has been operating before and it is technically impossible to resume operation;

(e) the installation is not operating, but has been operating before and the operator cannot establish that this installation will resume operation at the latest within 6 months after having ceased operations. Member States may extent this period up to a maximum of 18 months if the operator can establish that the installation cannot resume operation within 6 months due to exceptional and unforeseeable circumstances that could not have been avoided even if all due care had been exercised and that are beyond the control of the operator of the installation concerned, in particular because of circumstances such as natural disasters, war, threats of war, terrorist acts, revolution, riot, sabotage or acts of vandalism.

2. Paragraph 1(e) shall not apply to installations that are kept in reserve or standby and installations that are operated on a seasonal schedule, where all of the following conditions are fulfilled:

(a) the operator holds a greenhouse gas emissions permit and all other relevant permits;

(b) it is technically possible to start operations without making physical changes to the installation;

(c) regular maintenance is carried out.

3. Where an installation has ceased operation, the Member State concerned shall not issue emission allowances to this installation as of the year following the cessation of operations.

4. Member States may suspend the issuance of the emission allowances to installations referred to in paragraph 1(e) as long as it is not established that the installation will resume operations.

Article 23 U.K. Partial cessation of operations of an installation

1. An installation is deemed to have partially ceased operations, provided that one sub-installation, which contributes to at least 30 % of the installation’s final annual amount of emission allowances allocated free of charge or to the allocation of more than 50 000 allowances, reduces its activity level in a given calendar year by at least 50 % compared to the activity level used for calculating the sub-installation’s allocation in accordance with Article 9 or, where applicable, with Article 18 (hereinafter ‘initial activity level’).

2. The allocation of emission allowances to an installation that partially ceases operations shall be adjusted as of the year following the year during which it partially ceased operations or as of 2013, if the partial cessation took place before 1 January 2013, as follows:

• if the activity level of the sub-installation referred to in paragraph 1 is reduced by 50 % to 75 % compared to the initial activity level, the sub-installation shall only receive half of the initially allocated allowances;

• if the activity level of the sub-installation referred to in paragraph 1 is reduced by 75 % to 90 % compared to the initial activity level, the sub-installation shall only receive 25 % of the initially allocated allowances;

• if the activity level of the sub-installation referred to in paragraph 1 is reduced by 90 % or more compared to the initial activity level, no allowances shall be allocated free of charge in respect of the sub-installation concerned.

3. If the activity level of the sub-installation referred to in paragraph 1 reaches an activity level of more than 50 % compared to the initial activity level, the installation having partially ceased operations shall receive the allowances initially allocated to it as of the year following the calendar year during which the activity level exceeded the threshold of 50 %.

4. If the activity level of the sub-installation referred to in paragraph 1 reaches an activity level of more than 25 % compared to the initial activity level, the installation having partially ceased operations shall receive half of the allowances initially allocated to it as of the year following the calendar year during which the activity level exceeded the threshold of 25 %.

Article 24 U.K. Changes to the operation of an installation

1. Member States shall ensure that all relevant information about any planned or effective changes to the capacity, activity level and operation of an installation is submitted by the operator to the competent authority by 31 December of each year.

2. Where there is a change to an installation’s capacity, activity level or operation which has an impact on the installation’s allocation, Member States shall submit, using an electronic template provided by the Commission, all relevant information, including the revised preliminary total annual amount of emission allowances allocated free of charge for the installation concerned determined in accordance with this Decision, to the Commission before determining the final total annual amount of emission allowances allocated free of charge. The Commission may reject the revised preliminary total annual amount of emission allowances allocated free of charge for the installation concerned.

CHAPTER V U.K. FINAL PROVISION

Article 25 U.K. Addressees

This Decision is addressed to the Member States.