COM(2022)0516
EUR-Lex

EUR-Lex
SWD(2022)0407

COM(2022)0416
EUR-Lex

COM(2021)0962
EUR-Lex

EUR-Lex
SWD(2021)0308

COM(2020)0747
EUR-Lex

SWD(2020)0277

COM(2020)0740
EUR-Lex

In accordance with Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community (ETS), the Commission presents a report on the functioning of the European carbon market for 2018. It also presents initiatives proposed or agreed in the first half of 2019.

State of play

Following the entering into force of the EU ETS revision for phase 4 in April 2018, the adoption of the implementing legislation for the fourth trading period is progressing at a fast pace. Over the past year, implementing legislation on the new carbon leakage list and free allocation rules has been adopted, and the legal framework for the Union Registry system has been revised to accommodate the required adjustments for phase 4.

Moreover, the rules for the operationalisation of the Innovation Fund – the ETS’s main instrument for the funding of low-carbon innovative technologies and breakthrough innovation in phase 4 - have been established. At the same time, the Auctioning Regulation has been revised to enable the auctioning of the first 50 million allowances for the Innovation Fund in 2020.

A second revision to create the institutional framework for the auctioning of allowances for the Innovation and the Modernisation Funds in phase 4 was adopted by the Commission in August 2019.

2018 was also marked by the increased confidence of market participants, which was reflected in a reinforced carbon price signal. The higher price of emission allowances led to a substantial increase in the total revenues from auctioning generated by Member States - in 2018, the generated total revenues were EUR 14 billion, more than two times higher than the revenues generated in 2017. Based on data submitted by Member States, over the course of 2018, close to 70% of these revenues were spent (or were planned for spending) on specified climate and energy related purposes.

Legislative changes

The legislative changes agreed in recent years to address the surplus of allowances continue to show marked results. The Market Stability Reserve surplus indicator was published for the third time in 2019, and together with the 2017 indicator, led to a reduction in auction volumes by nearly 40%, or close to 397 million allowances in 2019. As a result, some 30% fewer allowances will be auctioned in 2019 than in 2018.

Revenues from allowances

The total revenues generated by Member States from the auctions between 2012 and 30 June 2019 exceeded EUR 42 billion. As stated, in 2018 alone, the generated total revenues were EUR 14 billion. The EU ETS Directive provides that at least 50% of auction revenues, including all revenues generated from allowances distributed for the purposes of solidarity and growth, should be used by Member States for climate and energy related purposes. According to the information submitted to the Commission by Member States, Member States spent or planned to spend close to 70% of these revenues for specified climate and energy related purposes in 2018. In the period 2013-2018, about 80% of auction revenues were spent for such purposes.

Progress on emissions

The year was also marked by a substantial fall in emissions from EU ETS-covered installations. The decrease of 4.1% compared to 2017 was mainly driven by electricity and heat production, with emissions from industry falling only slightly. However, verified aviation emissions continued to grow in 2018, increasing by 3.9% compared to 2017.

Surplus of allowances

The surplus has been decreasing over the course of the current trading period, remaining stable in 2014 and falling significantly to 1.78 billion allowances in 2015, 1.69 billion allowances in 2016, and 1.65 billion allowances in 2017. In 2018, the surplus remained at 1.65 billion allowances.

Aviation

In 2018, allowances were issued in line with the intra-EEA scope. Free allocation amounted to slightly over 32.3 million allowances. This number comprises both free allocation (slightly over 31.2 million allowances) for incumbent operators and nearly 1.1 million allowances allocated from the special reserve for new entrants and fast growing operators. Allocations from this reserve are doubled in 2017-2020 as they relate to the full period 2013-2020. The volume auctioned in 2018 was approximately 5.6 million allowances.

Verified aviation emissions continued to grow and amounted to 67 million tonnes of carbon dioxide in 2018, an increase of 4% compared to 2017.

The EU ETS architecture

In 2018, EU ETS compliance has remained very high - the compliance rate exceeded 99% for both stationary installations and aircraft operators. The EU ETS architecture has remained robust and the administrative organisation across Member States has proven to be effective.

Follow-up

The Commission will continue to monitor the European carbon market and provide the next report in late 2020.

COM(2019)0557
EUR-Lex

COM(2018)0842

In accordance with Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community (ETS), the Commission presents a report on the functioning of the European carbon market for 2017. It also presents initiatives proposed or agreed in the first half of 2018.

The EU Emissions Trading System (EU ETS) contributes significantly to the achievement of the EU's target of cutting greenhouse gas (GHG) emissions by 20% from 1990 levels by 2020. While the EU is on track to surpass this target, cutting GHG emissions by at least 40% by 2030 – as part of the EU's 2030 climate and energy policy framework – requires continued progress. A well-functioning EU ETS constitutes the main mechanism to achieve the EU's 2030 target, by facilitating a decrease of 43% of GHG emissions compared to 2005 levels in the sectors covered by the system.

Legislative changes

After extensive negotiations, the revised EU ETS Directive reforming the system for the next decade, entered into force on 8 April 2018. The revised Directive for phase 4 aims to facilitate the achievement of the threefold objective of a 43% GHG emissions reduction for EU ETS sectors by 2030, safeguarding industrial competitiveness, and fostering low-carbon modernisation and innovation by a series of interlinked measures.

To increase the pace of emissions cuts, the overall number of emission allowances will decline at an annual rate of 2.2% from 2021 onwards, compared to 1.74% currently. This increase implies a steady reduction of some 48 million allowances annually, compared to 38 million currently, and is consistent with a 43% reduction in GHG emissions from ETS covered sectors by 2030, compared to 2005 levels.

In 2017, the EU ETS Directive was further revised to accommodate the development of a global measure for reducing aviation emissions by the International Civil Aviation Organisation (ICAO), by continuing to keep the systems' coverage confined to flights within the European Economic Area (EEA).

2017 also marked the signature of an agreement between the EU and Switzerland on linking the Swiss greenhouse gas emissions trading system to the EU ETS - the first such agreement for the EU.

Following the adoption of the revised legislation, the focus has now shifted towards implementing the new provisions ahead of the start of phase 4. Implementation work, in particular on carbon leakage and free allocation, as well as on the Innovation Fund is in full swing.

Progress on emissions

In 2017, emissions from installations covered by the European Emissions Trading System (EU ETS) increased slightly by 0.18% compared to 2016. While this breaks the decreasing emissions trend since the start of the system’s third trading period (2013- 2020), it can be explained by growth in real GDP of 2.4%, which is higher than in any year since the beginning of the period. The increase was mainly driven by industry, while emissions from the power sector decreased slightly for the fourth consecutive year.

Surplus of allowances

Over the last three years, the surplus of allowances in the European carbon market has been steadily declining, by an overall amount of almost half a billion allowances, mainly due to back loading, i.e. postponed auctioning of allowances. The reformed ETS will further address the surplus by reinforcing the Market Stability Reserve - the EU's mechanism established in 2015 to reduce the oversupply of allowances and to improve the EU ETS's resilience to future shocks. From 2019 (when the reserve will start operating) to 2023, the percentage of the surplus to be placed in the Market Stability Reserve will be doubled from the initially agreed 12%, to 24%. Moreover, as of 2023, reserve holdings exceeding the previous year's auction volume will no longer be valid. Together with the second publication of the Market Stability Reserve surplus indicator in May 2018, these reforms will lead to placing almost 265 million allowances (16% of the surplus) into the Market Stability Reserve from January to August 2019 instead of auctioning them. This will reduce the auction volume over the first 8 months of 2019 by some 40% compared to the corresponding volume in 2018.

Due to the doubled amount of allowances to be placed in the reserve for the first five years of its operation, it is widely expected that the surplus will continue to decline substantially in the coming years. Progress on these fronts has translated into increased confidence by market participants as illustrated by the reinforced carbon price signal over the last year.

Revenues from allowances

The total revenues generated by Member States from the auctions between 2012 and 30 June 2018 exceeded EUR 26 billion (in 2017 alone, the generated total revenues were EUR 5.6 billion). The EU ETS Directive provides that at least 50% of auction revenues, including all revenues generated from allowances distributed for the purposes of solidarity and growth, should be used by Member States for climate and energy related purposes. According to the information submitted to the Commission, Member States spent or planned to spend approximately 80% of these revenues for specified climate and energy related purposes in 2017.

Aviation

To provide continued momentum to the international process of establishing a global scheme to curb aviation emissions, and to facilitate its future implementation in the EU, the limited scope for aviation to only flights within the European Economic Area has been extended until 2023. As from 2021, a linear reduction factor will for the first time apply to the aviation sector, reducing the cap on aviation emissions by 2.2% annually.

EU ETS architecture

In the fifth year of phase 3, the EU ETS architecture has remained robust and the administrative organisation across Member States has proven to be effective. Moreover, the overall level of transparency, investor protection, and integrity in the carbon market has increased with the classification of emission allowances as financial instruments under the new financial market rules. An important step has also been taken towards the continued protection of the European carbon market against VAT fraud, with the adoption of an amendment to the VAT Directive to extend the application of the reverse charge mechanism derogation beyond the end of 2018.

Following the enhanced transparency and reporting requirements of the revised EU ETS Directive, the report provides for the first time an overview of the actual amounts of state aid spent by Member States on indirect carbon cost compensation in 2017.

COM(2018)0842
EUR-Lex

In accordance with Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community (ETS), the Commission has submitted a report on the functioning of the European carbon market.

The present report covers the year 2016, but also presents certain initiatives proposed or agreed in 2017.

The EU Emissions Trading System (EU ETS) has been the cornerstone of the EU's strategy for reducing greenhouse gas (GHG) emissions from industry and the power sector since 2005.

In order to reach the target of reducing emissions by at least 40% by 2030, the Commission presented in July 2015 a legislative proposal to reform the ETS for its fourth trading period (2021-2030). A political agreement was reached on the proposal in early November 2017. The reformed ETS is expected to reduce emissions by 43% compared with 2005 in the sectors covered by the ETS.

Progress achieved : based on information from the Union Registry, it is estimated that in 2016, GHG emissions from installations participating in the EU ETS decreased by 2.9% compared to 2015 . This reflects a downward trend in emissions since the beginning of Phase 3 of the system in 2013.

At the start of Phase 3, the EU ETS was characterised by a large imbalance between the supply and demand of allowances , resulting in a surplus of around 2.1 billion in 2013. The surplus was reduced slightly in 2014 and then fell significantly to 1.78 billion allowances in 2015 and to 1.69 billion allowances in 2016. This reflects the impact of a further reduction of the supply of allowances in 2016, the final year of the back-loading measure, by 200 million.

To address the structural imbalance between the supply and demand of allowances, the creation of a Market Stability Reserve (MSR) was agreed in 2015 to render the auction supply of emission allowances more flexible. Ultimately, the back-loaded allowances will be transferred to the reserve, which will be operational as of January 2019.

EU ETS infrastructure : in the fourth year of phase 3 the EU ETS architecture has proven to remain robust. The compliance rate has remained consistently very high for both stationary installations and aviation operators and the administrative organisation in participating countries has proven to be effective.

According to the reports submitted by the participating countries in 2017, the total number of permitted installations amounted to 10 790 in 2016, compared to around 10 950 in 2015 and 11 200 the previous year.

As was the case in previous years, the fuels combusted within the EU ETS in 2016 remained overwhelmingly fossil. However, 29 countries also reported biomass use (compared to 27 in 2015) in connection with 2 079 installations (19% of all installations).

The total value of reported investment support during the years 2009 to 2016 is around EUR 11 billion . About 80% of this was dedicated to upgrading and retrofitting infrastructure, while the rest of the investments were in clean technologies or diversification of supply. Some examples of investments include the reduction of energy consumption for electricity production in Lithuania, the replacement of insulation on existing steam distribution lines in the Czech Republic, and the construction of a cogeneration unit fuelled mainly by natural gas in Bulgaria.

In 2016, the auctioning of ETS allowances generated EUR 3.79 billion of revenues for the Member States. According to the information submitted to the Commission, Member States spent or planned to spend approximately 80% of these revenues for specified climate and energy related purposes in 2016, however there are variations among them.

Aviation sector : significant progress has been made in the aviation sector. EU Member States have signalled their intention to join the ICAO global scheme from the start provided that certain conditions are met. Pending the application of the global measure, the Commission has proposed to continue the same EU ETS approach for aviation beyond 2016, namely to keep the geographic scope as intra-EEA.

As regards developments in aviation emissions within the EU ETS, in 2016, verified emissions continued to grow and amounted to 61 million tonnes of CO2, an increase of 7.9% compared to 2015. The free allocation amounted to slightly over 32 million allowances in 2016. The amount of allowances auctioned between January and December 2016 was approximately 6 million.

Outlook : after more than 2 years of negotiations on the proposal for reforming the EU ETS for its fourth trading period, a landmark agreement has been reached in November 2017 which demonstrates that the European Union is turning its Paris commitment into concrete action.

The revised and substantially strengthened EU ETS will be a major part of the EU contribution to the implementation of the Paris agreement towards a global low-carbon transition.

The Commission will continue to monitor the European carbon market and provide the next report in late 2018.

COM(2017)0693
EUR-Lex

In accordance with Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emission allowance trading within the Community

(EU ETS Directive), the Commission presents a report on the functioning of the European carbon market. The report covers year 2015 but it also presents certain initiatives proposed or agreed in 2016.

Since 2005, the EU Emissions Trading System (EU ETS) has been the cornerstone of EU strategy for reducing greenhouse gas emissions from industry and the power sector. In order to achieve the target of cutting emissions by at least 40% by 2030, the Commission the Commission presented a legislative proposal to revise the EU ETS for the next decade. A reformed EU ETS will amount to the decrease of 43% of emissions compared to 2005 in the sectors covered by the EU ETS.

Progress to date: according to the information recorded in the Union Registry in 2015, emissions of greenhouse gases from installations participating in the EU ETS are estimated to have decreased by just under 0.4% . This confirms the decreasing trend over the last five years of the functioning of the system.

Furthermore, 2015 marks the first year in which the surplus of allowances that has built up in the system since 2009 - largely due to the deep and sustained economic recession that reduced emissions more than anticipated – showed a material decline.

At the start of phase 3 (2013-2020), the EU ETS was characterised by a large imbalance between supply and demand of allowances, resulting in a surplus of around 2.1 billion in 2013. In 2014, it has been slightly reduced to some 2.07 billion and in 2015 it fell significantly to 1.78 billion allowances .

The decline in the surplus reflects the reduction in auction volumes due to the implementation of the back-loading measure provided for in Decision No 1359/2013/EU , which postponed the auctioning of 400 million allowances in 2014, 300 million in 2015 and 200 million in 2016. Ultimately these allowances will be transferred to the Market Stability Reserve, which will be implemented as of 2019.

EU ETS architecture: the third year of phase 3 further indicated that the EU ETS architecture is robust. Since 2005 the system provides a price signal for power plants and other installations, to promote research, development and investment in clean, low-carbon technologies .

The total value of reported investment support during the years 2009 to 2015 is around EUR 9.49 billion. About 80% of this was dedicated to upgrading and retrofitting infrastructure, while the rest of the investments related to clean technologies or diversification of supply. Examples of investments include a new cogeneration-condensing steam turbine in Estonia, rehabilitation of district heating networks in Bulgaria, the substitution of coal by renewable energy sources through waste utilisation in the Czech Republic and the construction of an interconnector pipeline for natural gas in Hungary.

In 2015, the auctioning of ETS allowances generated EUR 4.9 billion of revenues for Member States. On average, in 2015, Member States spent or planned to spend 77% of these revenues for specified climate and energy related purposes.

Aviation sector: in response to the ICAO Assembly agreement to develop by 2016 a global market-based mechanism to be implemented from 2020 to tackle emissions from international aviation, the scope the EU ETS is temporarily reduced to emissions from flights within the EEA between 2013 and 2016.

Verified emissions from flights between airports located in the EEA amounted to 56.9 million tonnes of carbon dioxide in 2015 , an increase of 3.6% compared to 54.9 million tonnes in 2014.

The amount of allowances to be auctioned for 2015 as determined on the basis of an expected annual amount of 5.7 million, following the adjustments made to auction volumes in accordance with Regulation (EU) No 421/2014 . These figures show around 19 million tonnes of net demand for allowances created by aviation in 2015.

Monitoring of emissions: the Commission continues to seek continuous improvements in the guidance and templates that it makes available to facilitate consistent implementation of the Monitoring and Reporting Regulation (MRR) and the Accreditation and Verification Regulation (AVR). Another new initiative concerns drafting of guidance on EU ETS inspection. The Commission continues to monitor the monitoring, reporting verification, and accreditation (MRVA) implementation across all Member States. It is recognised that the efficiency of the compliance system has improved since the MRR allowed Member States to make electronic reporting mandatory.

Under the revised rules, which are proposed to apply as of phase 4 (2021-2030), the EU ETS will continue to be a cost-effective driver for low-carbon investments for the years to come.

A stronger European carbon market has the potential to make a major contribution to the transition to a low-carbon economy in Europe. It will also contribute to the global low-carbon transition, following the adoption of the first universal climate change agreement in Paris.

The Commission will continue to monitor the carbon market and provide the next report in late 2017.

COM(2017)0048
EUR-Lex

The Commission adopted the climate action progress report , including the report on the functioning of the European carbon market and the report on the review of Directive 2009/31/EC on the geological storage of carbon dioxide. The report also responds to the requirements of Directive 2003/87/EC of the European Parliament and of the Council establishing a scheme for greenhouse gas emissions allowance trading within the Community (EU ETS).

The report notes that the EU is currently on track towards meeting its Europe 2020 greenhouse gas reduction target as well as its Kyoto Protocol targets . However, additional measures are needed for the EU to meet the target of a domestic reduction in greenhouse gas emissions of at least 40 % by 2030 compared to 1990.

To address this, the Commission has proposed a revision of the EU Emissions Trading System (EU ETS) in July 2015. In the first half of 2016, the Commission will also make proposals on the implementation of the non-ETS emissions reduction target of 30% compared to 2005.

EU ETS: since 2013, the EU ETS has operated under the improved and more harmonised rules of phase 3. The report on the functioning of the European carbon market covering the first two years of phase 3, 2013 and 2014, confirms that the system is robust and that it has created a functioning market infrastructure and a liquid market.

On 15 July 2015, the Commission presented a legislative proposal on the revision of the EU ETS for phase 4. The proposal aims to achieve a 43% reduction in EU ETS emissions compared to 2005 levels . To this end, the overall number of allowances will decrease at an annual rate of 2.2 % from 2021 onwards. Compared to the current 1.74%, this leads to a significant additional emissions reduction, estimated at around 550 million tonnes between 2021 and 2030.

Financing the fight against climate change : the report provides an overview of the use of climate finance generated by the auctioning of EU ETS allowances and the EU budget . It also summarises data on EU and Member States climate spending in support of developing countries.

In 2014, the total revenue from the auctioning of EU ETS allowances amounted to EUR 3.2 billion. On average in 2014, Member States used or are planning to use around 87 % of these revenues for climate and energy related purposes , largely to support domestic investment in climate and energy. Nevertheless, a few Member States are still in the process of setting up the appropriate legal and financial instruments to make use of some of their revenues. Under the NER 300 programme , 38 renewable energy projects and one CCS project were selected for funding in 20 Member States. Total NER 300 funding will be EUR 2.1 billion, which is expected to leverage an additional EUR 2.7 billion of private investment. The new Innovation Fund proposed as part of the revised EU ETS Directive would have 400 million allowances plus 50 million of unallocated allowances. It would build on the NER 300 programme while extending its scope to low carbon innovation in industrial sectors. The Commission has also proposed a new Modernisation Fund , designed for 10 Member States with a GDP per capita of less than 60 % of the EU average in order to modernise their energy systems and improve energy efficiency and ultimately provide citizens with cleaner, secure and affordable energy. Between 2021 and 2030, 2% of the allowances, which means some 310 million allowances in total, will be used to establish the fund.

The report also notes that the current multiannual financial framework sets a target of allocating at least 20 % of the EU budget to climate-related objectives. This represents around EUR 180 billion and is a threefold increase from the 6-8% share in the 2007-2013 EU budget. There has been significant progress. The overall contribution in 2015 represents around 16.8%. In 2016, 20.6% of the EU budget is expected to contribute to achieving the EU’s climate goals.

Furthermore, the EU and its Member States are the biggest providers of official development assistance to developing countries, accounting for over US$ 70 billion per annum (around EUR 58 billion in 2014). They allocated EUR 7.34 billion to ‘fast start finance’ over the 2010-2012 period. In 2014 the EU and its Member States collectively committed EUR 14.5 billion to help developing countries in tackling climate change.

COM(2015)0576
EUR-Lex

EUR-Lex
SWD(2015)0246

COM(2012)0652

The Commission presented a report on the state of the European carbon market in 2012 . The purpose of this first report is to analyse the functioning of the carbon market and to consider whether regulatory action is needed, as foreseen in the EU Emission Trading System (ETS) Directive. It also responds to the call of the European Parliament and the Council made on the Commission in the context of the Energy Efficiency Directive.

The ETS as a central pillar in European climate change policy: the report underlines that the EU ETS has created a functioning market infrastructure and a liquid market producing an EU wide carbon price signal. This has contributed to delivering real greenhouse gas (GHG) emissions reductions in line with the EU targets for 2020.

The implementation of the EU ETS has been accompanied by a wealth of market and operational experience for governments and companies . This experience fed into the major revision of the system’s operational design, agreed in 2008 for application as of 2013, where the following fundamental changes will apply:

an EU-wide cap on allowances, as opposed to 27 individual Member State caps, decreasing by 1.74% annually, up to and beyond 2020, providing much greater regulatory predictability and stability; auctioning as the default system of allocation in phase 3; harmonised rules for free allocation, based on performance benchmarks established prior to phase 3; stricter rules on the type of international credits that are allowed for use in the EU ETS.

Mismatch between supply and demand: the effects of the crisis compounded by a number of regulatory provisions related to the transition to Phase 3 have caused serious imbalances to emerge between supply and demand in the short term with potentially negative long-term repercussions.

By the end of 2011, 8 171 million allowances had been put into circulation and 549 million international credits had been used for compliance, in total adding up to 8 720 million units that were available for compliance over the period 2008-2011. In contrast, verified emissions in the period 2008-2011 were only 7 765 million tonnes CO2-eq. Consequently, by early 2012, a surplus of 955 million allowances had accumulated .

If not addressed, these imbalances will profoundly affect the ability of the EU ETS to meet the ETS target in future phases in a cost-effective manner, when significantly more demanding domestic emission objectives than today would have to be reached.

The Commission therefore proposes action on two fronts :

1) Revision of the auctioning timetable as a short-term measure: in order to address the rapid increase of supply in the transition to phase 3, the Commission proposes to change the auctioning timetable and invites the Climate Change Committee to give an opinion on the draft amendment to the Auctioning Regulation before the end of the year in order to provide certainty for market participants.

To eliminate any legal uncertainty, Parliament and Council are invited to urgently adopt the proposed "mini-amendment" of the EU ETS Directive that would clarify expressly the relevant provision and would then allow the Commission to swiftly adopt an amendment to the Auctioning Regulation.

2) Options regarding structural measures: the Commission considers that structural measures should be discussed and explored with stakeholders without delay. These discussions can benefit from insights of the 2050 Low Carbon Economy and Energy Roadmaps. Changing the auctioning profile is only a short-term and temporary measure that would allow for a more stable phase 3 and more gradual build-up of the surplus. It would not be a solution that addresses the structural surplus. To do so would require deploying a structural measure affecting more profoundly and permanently the balance between supply of and demand for allowances .

To remedy the growing structural imbalance between supply and demand and to gather stakeholders’ views, six non-exhaustive options for structuralmeasures have been put forward by the Commission:

Option 1: increasing the EU GHG target to 30% in 2020; Option 2: withdrawing a number of allowances during phase 3; Option 3: early revision of the linear reduction factor (the total amount of allowances decreases by the linear factor of 1.74% annually, compared to the average annual total quantity for the period 2008-2012); Option 4: extension of the scope of the EU ETS to other sectors; Option 5: limit access to international credits; Option 6: discretionary price management mechanisms.

Should the Commission decide to pursue any of these options, all would require a legislative proposal by the Commission to the co-legislators, accompanied by a full impact assessment in line with smart regulation principles.

While each option affects supply or demand, some options will require more time to analyse, decide upon and subsequently implement. Options also have different impacts on market certainty in the short term and the interaction with other policies such as renewables and energy efficiency will need to be further analysed.

The Commission welcomes stakeholders' views on structural options and will as the next step shortly launch a formal stakeholder consultation process.

COM(2012)0652
EUR-Lex

This Commission communication concerns the assessment of national allocation plans for the allocation of greenhouse gas emission allowances in the second period of the EU Emissions Trading Scheme accompanying Commission Decisions of 29 November 2006 on the national allocation plans of Germany, Greece, Ireland, Latvia, Lithuania, Luxembourg, Malta, Slovakia, Sweden and the United Kingdom in accordance with Directive 2003/87/EC.

This Communication sets out the Commission’s approach to the assessment of second period plans and is accompanied by a first package of decisions addressed to 10 Member States.

For each trading period, each Member State is obliged to notify a national allocation plan to the Commission. The Directive requires the Commission to assess each plan according to the same criteria set out in Annex III to and Article 10 of the Directive. The Commission adopts a separate decision within three months of a complete plan being notified.

By 29 November 2006, 19 Member States had notified a national allocation plan to the Commission. Of these, 10 were sufficiently complete to allow the Commission to take a decision on their compatibility with the Directive. These plans represent about half of the overall quantity of allowances allocated in the first trading period.

On 12 October 2006, the Commission launched infringement proceedings on all outstanding plans. It will continue to exert legal pressure so as to ensure that outstanding plans are notified as soon as possible. The Commission has placed particular emphasis on assessing the second period plans in a consistent, fair and transparent manner. In so doing, the Commission has identified several issues that have been scrutinised in detail for compatibility with the Annex III criteria. These fall under the following main headings:

setting a cap consistent with each Member State ’s Kyoto Protocol commitment, emissions development and reduction potential; ex-post adjustments; consistency with supplementarity obligations (Joint Implementation/Clean Development Mechanism project credit limit); other issues specific to individual plans with a view to avoiding undue distortions of competition and of the internal market.

The Commission states that a successful EU ETS is of vital importance to sustaining the EU's credibility in relation to the post-2012 climate regime. At the same time greater use of the EU ETS is crucial to respecting the EU's Kyoto commitments during the period 2008 to 2012. A number of national allocation plans proposed to the Commission would not only endanger the achievement of Europe's Kyoto commitments, but would at the same time create undue distortions in the internal market.

With the objective and transparent assessment of the second period plans, as presented in this Communication, the Commission is safeguarding the achievement of the Kyoto commitments and a successful and growing carbon market into the future.

COM(2006)0725
EUR-Lex

In this Communication, the European Commission has set out its agenda for revising the EU emissions trading scheme (EU ETS) in the light of experience gained since it first began operating in January 2005. The report has been prepared on the basis of Article 30 of Directive 2003/87/EC, which requires the Commission to draw up a report on the application of the Directive – and if appropriate prepare further proposals. The Commission has decided that, at this stage, it would be premature to make legislative proposals. In addition, for reasons of regulatory stability and predictability, any changes to the Directive should take effect at the start of the third trading period commencing in 2013.

What the Commission is, however, suggesting is a thorough review of the EU ETS scheme prior to 2013. As such, the Commission wants to promote the environmental impact of emission trading by expanding it to new sectors and gases and further its global application as a key tool to combat climate change.

The review will seek to give greater predictability to investors and strengthen harmonisation by streamlining how the ETS is applied in the various Member States. The operation of the EU ETS, to date, has already generated position papers and studies by stakeholders which will feed into the review. The Communication sets out four broad categories of issues on which the review will focus:

Scope: The review will look at expanding the EU ETS to other sectors and other greenhouse gases besides carbon dioxide (CO2). The review will, therefore, assess the feasibility of including N2O from the production of nitric acid as well as the need to include CO2 emissions from combustion installations; from the production of petrochemicals; from the production of ammonia; from the use of fertilisers other than nitric acid and adipic acid; PFCs from the production of aluminium and CH4 from coal mines. In view of the many divergent interpretations by Member States, the review will consider ways to give greater clarity on which types of combustion installations should be covered. Separately from the review, the Commission, Council and European Parliament have all expressed support for bringing aviation into the EU ETS and the Commission intends to make a specific legislative proposal on the aviation sector within the next few months.

Further harmonisation and increased predictability : Further harmonisation is needed in relation to what types of installations are covered by emission trading, including how we deal with newly operating installations and of installations which close during the course of a trading period. Greater harmonisation on the allocation of emission allowances is also required. The Commission shares the widely expressed view that giving greater certainty to investors for longer than five years ahead, as the scheme currently does, is desirable. Increased predictability, as well as further harmonisation of the process under which Member States set an overall cap on their emissions and allocate emission allowances to installations, will thus be key to the review. The Commission plans to explore the option of setting a single EU-wide cap after 2012.

Robust compliance and enforcement: While initial experience regarding compliance with, and enforcement of, the ETS rules has been encouraging, there is a need to assess further harmonisation of requirements. The focus will, therefore, be on guidelines for monitoring and reporting emissions and rules for third-party verification of emissions reports.

Involving third countries: The Communication opens a discussion on how the EU ETS can be linked to existing or future schemes in third countries, such as the emissions trading schemes planned by the north-eastern States and California in the US and by Australian states. The Communication also contains a clear commitment by the Commission to maintain the scheme's recognition of credits from emission-saving projects carried out in developing countries and elsewhere, while further harmonising the EU ETS' provisions in this area. This will strengthen companies' willingness to engage in action to reduce emissions globally, leading to the transfer of clean technologies to third countries and to emission reductions taking place where this is most economically efficient.

A working group, within the framework of the European Climate Change Programme (ECCP), will begin work on this review in autumn 2006. Its review will feed into a legislative proposal, which will be presented to the Council and Parliament by the Commission in the course of 2007.

COM(2006)0676
EUR-Lex

32004R2216
OJ L 386 29.12.2004, p. 0001-0077

32004D0156
OJ L 059 26.02.2004, p. 0001-0074

COM(2003)0830
EUR-Lex

Directive 2003/87
OJ L 275 25.10.2003, p. 0030-0031

COM(2003)0463
EUR-Lex

T5-0319/2003
OJ C 074 24.03.2004, p. 0101-0642 E

T5-0319/2003

Debate in Parliament

A5-0207/2003

A5-0207/2003

SEC(2003)0364
EUR-Lex

15792/1/2002
OJ C 125 27.05.2003, p. 0072-0095 E

15792/1/2002

07290/1/2003

COM(2002)0680
EUR-Lex

COM(2002)0680
EUR-Lex

2457

T5-0461/2002
OJ C 279 20.11.2003, p. 0020-0096 E

Debate in Parliament

T5-0461/2002

A5-0303/2002

A5-0303/2002

2439

CES0680/2002
OJ C 221 17.09.2002, p. 0027

CDR0458/2001
OJ C 192 12.08.2002, p. 0059

2413

2399

EUR-Lex
OJ C 075 26.03.2002, p. 0033 E
COM(2001)0581

EUR-Lex
COM(2001)0581