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2003/87/EC of the European Parliament and of the Council (notified under document C(2011) 2772) (2011/278/EU) (repealed)

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(2011/278/EU) (repealed)

THE EUROPEAN COMMISSION,

Having regard to the Treaty of the Functioning of the European Union,

Having regard to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC(1), and in particular Article 10a thereof,

Whereas:

(1) Article 10a of the Directive requires that the Community-wide and fully-harmonised implementing measures for the allocation of free emission allowances should, to the extent feasible, determine ex-ante benchmarks so as to ensure that the free allocation of emission allowances takes place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques, by taking account of the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of carbon dioxide, where such facilities are available, and should not provide incentives to increase emissions. Allocations must be fixed prior to the trading period so as to enable the market to function properly.

(2) In defining the principles for setting ex-ante benchmarks in individual sectors or sub-sectors, the starting point should be the average performance of the 10 % most efficient installations in a sector or sub-sector in the EU in the years 2007-2008. The benchmarks should be calculated for products rather than for inputs, in order to maximise greenhouse gas emissions reductions and energy efficiency savings throughout each production process of the sector or the sub-sector concerned.

(3) In order to establish the benchmarks, the Commission has consulted the relevant stakeholders, including the sectors and sub-sectors concerned. Information necessary for setting the benchmarks, installation data on the production, emissions and energy use, was collected as of February 2009 from industry associations, Member States, publicly and commercially available sources and through a survey asking installations to participate.

(4) To the extent feasible, the Commission has developed benchmarks for products, as well as intermediate products that are traded between installations, produced from activities listed in Annex I to Directive 2003/87/EC. In principle, for each product one benchmark should be defined. Where a product is a direct substitute of another product, both should be covered by the same product benchmark and the related product definition.

(5) The Commission considered that setting a benchmark for a product was feasible where, taking into account the complexity of the production processes, product definitions and classifications were available that allow for verification of production data and a uniform application of the product benchmark across the Union for the purposes of allocating emission allowances. No differentiation was made on the basis of geography or on the basis of technologies, raw materials or fuels used, so as not to distort comparative advantages in carbon efficiency across the Union economy, and to enhance harmonisation of the transitional free allocation of emission allowances.

(6) The benchmark values should cover all production-related direct emissions, including emissions related to the production of measurable heat used for production, regardless of whether the measurable heat was produced on-site or by another installation. Emissions related to the production of electricity and to the export of measurable heat, including avoided emissions of alternative heat or electricity production in cases of exothermic processes or the production of electricity without direct emissions, were deducted when setting the benchmark values. In case the deduction of emissions related to the export of measurable heat was not feasible, this heat should not be eligible for the free allocation of emission allowances.

(7) In order to ensure that benchmarks lead to reductions in greenhouse gas emissions, for some production processes in which direct emissions eligible for the free allocation of emission allowances and indirect emissions from electricity production not eligible for free allocation on the basis of Directive 2003/87/EC are to a certain extent interchangeable, the total emissions including indirect emissions related to the production of electricity have been considered for the determination of the benchmark values to ensure a level playing field for fuel and electro-intensive installations. For the purpose of the allocation of emission allowances on the basis of the benchmarks concerned, only the share of the direct emissions in the total emissions should be taken into account in order to avoid providing free allocation of emission allowances for emissions related to electricity.

(8) For the determination of benchmark values, the Commission has used as a starting point the arithmetic average of the eenhouse gas performance of the 10 % most greenhouse gas efficient installations in 2007 and 2008 for which data has been collected. In addition, the Commission has in accordance with Article 10a(1) of Directive 2003/87/EC analysed for all sectors for which a product benchmark is provided for in Annex I, on the basis of additional information received from several sources and on the basis of a dedicated study analysing most efficient techniques and reduction potentials at European and international level, whether these starting points sufficiently reflect the most efficient techniques, substitutes, alternative production processes, high efficiency cogeneration, efficient energy recovery of waste gases, use of biomass and capture and storage of carbon dioxide, where such facilities are available. Data used for determining the benchmark values has been collected from a wide range of sources in order to cover a maximum of installations producing a benchmarked product in the years 2007 and 2008. First, data on the greenhouse gas performance of ETS installations producing benchmarked products has been collected by or on behalf of the respective European sector associations based on defined rules, so-called ‘sector rule books’. As reference for these rule books, the Commission provided guidance on quality and verification criteria for benchmarking data for the EU-ETS. Second, to complement the data collection by European sector associations, consultants on behalf of the European Commission collected data from installations not covered by industry’s data and also competent authorities of Member States provided data and analyses.

(9) To ensure that the benchmark values are based on correct and compliant data, the Commission, supported by consultants, carried out in-depth compliance checks of the sector rule books as well as plausibility checks of the starting point values derived from the data. As indicated in the guidance on quality and verification, data has been verified to the extent necessary by independent verifiers.

(10) Where several products are produced in one installation and an assignment of emissions to the individual products has not been regarded feasible, only single product installations have been covered by the data collection and included in the benchmark setting. This concerns the product benchmarks for lime, dolime, bottles and jars of colourless glass, bottles and jars of coloured glass, facing bricks, pavers, spray-dried powder, uncoated fine paper, tissue, testliner and fluting, uncoated carton board as well as coated carton board. To increase the significance and check the plausibility of the results, the values for the average performance of the 10 % most efficient installations have been compared against literature on most efficient techniques.

(11) In case no data or no data collected in compliance with the benchmarking methodology has been available, information on present levels of emissions and consumptions and on most efficient techniques, mainly derived from the Reference Documents on Best Available Techniques (BREF) established in accordance with Directive 2008/1/EC of the European Parliament and of the Council of 15 January 2008 concerning integrated pollution prevention and control(2) has been used to derive benchmark values. In particular, due to a lack of data on the treatment of waste gases, heat exports and electricity production, the values for the product benchmarks for coke and hot metal have been derived from calculations of direct and indirect emissions based on information on relevant energy flows provided by the relevant BREF and default emission factors set out in Commission Decision 2007/589/EC of 18 July 2007 establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council(3). For the product benchmark for sintered ore, data has also been corrected based on relevant energy flows provided by the relevant BREF, taking into account the combustion of waste gases in the sector.

(12) Where deriving a product benchmark was not feasible, but greenhouse gases eligible for the free allocation of emission allowances occur, those allowances should be allocated on the basis of generic fallback approaches. A hierarchy of three fallback approaches has been developed in order to maximise greenhouse gas emission reductions and energy savings for at least parts of the production processes concerned. The heat benchmark is applicable for heat consumption processes where a measurable heat carrier is used. The fuel benchmark is applicable where non-measurable heat is consumed. The heat and fuel benchmark values have been derived based upon the principles of transparency and simplicity, using the reference efficiency of a widely available fuel that can be regarded as second-best in terms of greenhouse gas efficiency, considering energy efficient techniques. For process emissions, emission allowances should be allocated on the basis of historical emissions. In order to ensure that the free allocation of emission allowances for such emissions provides sufficient incentives for reductions in greenhouse gas emissions and to avoid any difference in treatment of process emissions that are allocated on the basis of historical emissions and those within the system boundaries of a product benchmark, the historical activity level of each installation should be multiplied by a factor equal to 0,9700 to determine the number of free emission allowances.

(13) From 2013 onwards, all free allocations pursuant to Article 10a of Directive 2003/87/EC should be done in accordance with these rules. To give effect to the transitional system provided for by Article 10a(11) of Directive 2003/87/EC, according to which the free allocation of emission allowances should decrease from 80 % of the amount that corresponded to the allowances to be allocated in 2013 to 30 % of this amount in 2020 with a view to reaching no free allocation in 2027, the factors set out in Annex VI apply. Where a sector or sub-sector has been put on the list determined by Commission Decision 2010/2/EU of 24 December 2009 determining, pursuant to Directive 2003/87/EC of the European Parliament and of the Council, a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage(4), these factors do not apply. Allocations under this Decision will be taken into account in determining future lists of sectors or sub-sectors deemed to be exposed to a significant risk of carbon leakage.

(14) To facilitate the data collection from operators and the calculation of the emission allowances to be allocated by Member States, each installation should be divided into sub-installations where required. Member States should ensure that emissions are correctly attributed to the relevant sub-installations and that there are no overlaps between sub-installations.

(15) Member States should ensure that data collected from the operators and used for allocation purposes is complete, consistent and presents the highest achievable accuracy. It should be verified by an independent verifier so as to ensure that the free allocation of emission allowances is based on solid and reliable data. This decision should provide for specific minimum requirements for data collection and verification to facilitate a harmonised and consistent application of the allocation rules.

(16) The amount of allowances to be allocated free of charge to incumbent installations should be based on historical production data. In order to ensure that the reference period is as far as possible representative of industry cycles, covers a relevant period where good quality data is available and reduces the impact of special circumstances, such as temporary closure of installations, the historical activity levels have been based on the median production during the period from 1 January 2005 to 31 December 2008, or, where it is higher, on the median production during the period from 1 January 2009 to 31 December 2010. It is also appropriate to take account of any significant capacity change that has taken place in the relevant period. For new entrants, the determination of activity levels should be based on standard capacity utilisation based on sector-specific information or on installation-specific capacity utilisation.

(17) The information collected by Member States should facilitate the application of this Decision by competent authorities and by the Commission.

(18) In order to avoid any distortion of competition and to ensure an orderly functioning of the carbon market, Member States should ensure that when determining the allocation of individual installations no double counting and no double allocation takes place. In this context, Member States should pay particular attention to cases where a benchmarked product is produced in more than one installation, where more than one benchmarked product is produced in the same installation or where intermediate products are exchanged across installation boundaries.

(19) To ensure that the emissions trading system delivers reductions over time, Directive 2003/87/EC provides for the Union-wide quantity of allowances to decrease in a linear manner. As this decreasing Union-wide quantity is taken into account for determining the maximum annual amount of allowances pursuant to Article 10a(5) of Directive 2003/87/EC, all free emission allowances allocated on the basis of this Decision to installations not covered by this maximum annual amount referred to in Article 10a(5) should be adjusted in the same linear manner as the Union-wide quantity of allowances, using the year 2013 as a reference.

(20) The uniform cross-sectoral correction factor that is applicable in each year of the period from 2013 to 2020 to installations that are not identified as electricity generators, and that are not new entrants, pursuant to Article 10a(5) of Directive 2003/87/EC, should be determined on the basis of the preliminary total annual amount of emission allowances allocated free of charge over the period from 2013 to 2020 calculated for these installations pursuant to this Decision, including the installations that might be excluded according to Article 27 of that Directive. This amount of free emission allowances allocated in each year of the period should be compared 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 Community-wide total quantity, as determined pursuant to Article 9 of that Directive, and the relevant amount of emissions that are only included in the Union scheme from 2013 onwards.

(21) Where measurable heat is exchanged between two or more installations, the free allocation of emission allowances should be based on the heat consumption of an installation and take account of the risk of carbon leakage. Thus, to ensure that the number of free emission allowances to be allocated is independent from the heat supply structure, emission allowances should be allocated to the heat consumer.

(22) To enhance the significance of the available data on the greenhouse gas performance of the installations covered by the Union scheme, the product benchmarks for sulphite pulp, thermo-mechanical pulp and mechanical pulp as well as for recovered paper are based on BREF information on most efficient techniques reflecting the use of fossil start-up fuels, the use of fossil fuels (for sulphite pulp, thermo-mechanical and mechanical pulp) and of thermal energy (for recovered paper). The product benchmark for newsprint has also been based on most efficient techniques reflecting the use of thermal energy to derive a significant benchmark value.

(23) In order to take account of additional greenhouse gas emissions not reflected in the data for determining the benchmark values for some installations, in particular methane emissions, and to ensure that the allocation of free emission allowances on the basis of the product benchmark takes into account the greenhouse gas efficiency of the processes and does not provide incentives to increase emissions, the individual data points of the installations on the benchmark curve for nitric acid have been corrected on the basis of information on the average of these emissions provided by industry and of information derived from the BREF. The product benchmark for nitric acid reflects this correction.

(24) In order to take into account differences in refinery configurations, the product benchmark for the refinery sector should be based on the ‘CO₂ weighted tonne’ (hereinafter ‘CWT’) approach. Thereby the single product of the refinery is the CWT and its production has been calculated on the basis of defined generic process units each of which has been weighted with an emission factor relative to crude distillation, denoted as the CWT factor and representative of the CO₂ emission intensity at an average level of energy efficiency, for the same standard fuel type for each process unit for combustion, and for average process emissions of the process unit. On this basis, the data points used for setting the product benchmark have been derived by comparing the actual emissions to the total CWT of each refinery. The free allocation of emission allowances to refineries is then corrected to exclude electricity use and production in order to be consistent with Article 10a(1) of Directive 2003/87/EC.

(25) Given the wide range of product qualities that can be achieved, the product benchmarks for lime and dolime refer to a standard composition concerning calcium oxide and magnesium oxide. Regarding combustion emissions data for specific combustion emissions of the production of these standard products has been used based on Decision 2007/589/EC.

(26) Whereas several product benchmarks, such as the ammonia and soda ash benchmarks, assume that all CO₂ resulting from the production processes is emitted to the atmosphere, emissions should be monitored and reported in accordance with the regulation for the monitoring and reporting of emissions from the activities listed in Annex I, to be adopted by 31 December 2011 pursuant to Article 14(1) of Directive 2003/87/EC, assuming that all CO₂ produced during these production processes was emitted to the atmosphere, irrespective of any potential use of the CO₂ as feedstock in chemical production processes.

(27) The steam cracking benchmark does not cover the so-called supplemental feed, high value chemicals that are not produced in the main process as well as the related emissions, but, where applicable, supplemental feed should be considered for the free allocation of emission allowances using specific emission factors.

(28) In order to ensure a level playing field for the production of aromatics in refineries and in chemical plants, the free allocation of emission allowances for aromatics should be based on the CWT approach and the benchmark value of the refineries product benchmark should be applied.

(29) Considering that in the production of vinyl chloride monomer, hydrogen is used to some extent as fuel substituting conventional fuels such as natural gas, thus reducing the direct emissions of the combusting process, but considering also that the use of hydrogen as a feedstock is preferable in terms of total greenhouse gas efficiency, the vinyl chloride monomer benchmark accounts for the fuel use of hydrogen as if it was natural gas.

(30) In order to ensure a level playing field for the production of hydrogen and synthesis gas in refineries and in chemical plants, the benchmark for these products should be based on the CWT approach and the benchmark value of the refineries benchmark. Both product benchmarks refer to a defined volumetric concentration of hydrogen.

(31) Given that full auctioning should be the rule from 2013 onwards for the power sector, taking into account its ability to pass on the increased cost of carbon dioxide, and that no free allocation should be made in respect of any electricity production, except for transitional free allocation for the modernisation of electricity generation and electricity produced from waste gases, this Decision should not cover the free allocation of emission allowances related to the production or consumption of electricity. Nevertheless, according to Article 10a(6) of Directive 2003/87/EC, sectors or subsectors deemed to be exposed to a significant risk of carbon leakage may be compensated for costs related to greenhouse gas emissions passed on in electricity prices by financial measures adopted by Member States in accordance with state aid rules applicable and to be adopted by the Commission in this area.

(32) It is also appropriate that the product benchmarks take account of the efficient energy recovery of waste gases and emissions related to their use. To this end, for the determination of the benchmark values for products of which the production generates waste gases, the carbon content of these waste gases has been taken into account to a large extent. Where waste gases are exported from the production process outside the system boundaries of the relevant product benchmark and combusted for the production of heat outside the system boundaries of a benchmarked process as defined in Annex I, related emissions should be taken into account by means of allocating additional emission allowances on the basis of the heat or fuel benchmark. In the light of the general principle that no emission allowances should be allocated for free in respect of any electricity production, to avoid undue distortions of competition on the markets for electricity supplied to industrial installations and taking into account the inherent carbon price in electricity, it is appropriate that, where waste gases are exported from the production process outside the system boundaries of the relevant product benchmark and combusted for the production of electricity, no additional allowances are allocated beyond the share of the carbon content of the waste gas accounted for in the relevant product benchmark.

(33) The product benchmarks also take account of the historical emissions from flaring of waste gases related to the production of a given product and fuel used for safety flaring should be considered fuel used for the production of non-measurable heat in order to take account of the compulsory nature of these flares.

(34) Substantial investment efforts are necessary to combat climate change and to reduce the carbon intensity of economies. This Decision should therefore be applied in a manner to foster investment in clean technologies in each sector and sub-sector. In accordance with Directive 2003/87/EC, other policies and measures may in the future supplement this goal and encourage the effective use of allowances in order to generate substantial investments in more energy-efficient technologies. In particular, if the final annual amount of allowances allocated free of charge for all incumbent installations determined in accordance with this Decision falls significantly below the maximum annual amount of allowances referred to in Article 10a(5) of Directive 2003/87/EC, an amendment to this Decision could provide incentives for further reductions in greenhouse gas emissions in accordance with Article 10a(1) of Directive 2003/87/EC by allocating allowances to installations capable of implementing innovative technologies that further reduce greenhouse gas emissions.

(35) Investments in significant capacity extensions giving access to the reserve for new entrants provided for in Article 10a(7) of Directive 2003/87/EC should be unambiguous and of a certain scale in order to avoid an early depletion of the reserve of emission allowances created for new entrants, to avoid distortions of competition, to avoid any undue administrative burden and to ensure equal treatment of installations across Member States. It is therefore appropriate to define the threshold for a significant capacity change by 10 % of the installation’s installed capacity and require that the change in the installed capacity triggers a significantly higher or lower activity level of the installation concerned. However, incremental capacity extensions or reductions should be taken into account when assessing whether this threshold is reached.

(36) Considering the limited number of allowances in the reserve for new entrants, it is appropriate to assess, when a considerable amount of these allowances is issued to new entrants, whether a fair and equitable access to the remaining allowances in this reserve is guaranteed. In the light of the outcome of this assessment, the possibility for a queuing system may be provided. The design and the definition of the eligibility criteria of such a system should take account of different permitting practices in Member States, avoid any misuse and not provide incentives to reserve allowances over an unreasonable period of time.

(37) To ensure that no emission allowances are allocated free of charge to an installation that has ceased its operations, this Decision should provide for measures defining such installations and prohibiting the issuance of allowances, unless it can be established that the installation will resume its operations within a specified and reasonable amount of time.

(38) In order to adapt the number of emission allowances to be allocated to an installation having partially ceased operations, specific thresholds comparing the reduced activity level to the initial activity level have been defined. The number of emission allowances to be allocated should then be adjusted accordingly as of the year following the year during which the installation partially ceased operations. Where such an installation again reaches an activity level above the thresholds, the initial number of emission allowances to be allocated should be partly or even fully be reinstated depending of the installation’s level of operation.

(39) Where applicable, account has been taken of the guidance on interpretation of Annex I to Directive 2003/87/EC.

(40) The measures provided for in this Decision are in accordance with the opinion of the Climate Change Committee,

HAS ADOPTED THIS DECISION:

(1)

OJ L 275, 25.10.2003, p. 32.

(2)

OJ L 24, 29.1.2008, p. 8.

(3)

OJ L 229, 31.8.2007, p. 1.

(4)

OJ L 1, 5.1.2010, p. 10.