It should be noted that, pursuant to the Decision, an impact on the installation’s allocation of EUAs have, generally, three categories of events:
1) the change to an installation’s capacity (Articles 20 and 21 of the Decision),
2) the change to an installation’s operation (Article 22 of the Decision), and
3) the change to an installation’s activity level (Article 23 of the Decision).
The article was written on 4 February 2011.
The Commission’s Decision determining transitional Union-wide rules for the harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC has been adopted on 27 April 2011.
On 14 September 2011 the Guidance Document n°7 on the harmonized free allocation methodology for the EU-ETS post 2012 Guidance on New Entrants and Closures (dealing with the matter outlined in this article) has been issued.
Other related articles:
The takeover of the heat supply – implications for allocations of CO2 allowances
Enigmatic cross-sectoral correction factor – worries about final allocation
For the operators of installations (or – to be precise – sub-installations, because the Decision attributes legal effects to changes in particular sub-installations rather than installations) might be of utmost importance, which of these changes could affect their allocations of CO2 allowances. It seems to be really necessary to bear in mind all these detailed formulas when planning production and potential investments. Obviously – it relates only to these of installations, which fall under the scope of the Decision.
It is impossible to embrace here all legal and economic effects of the aforementioned provisions, also impact assessment prepared by the Commission services treats the Chapter IV (titled: New Entrants and Closures) of the Decision rather marginally.
Beyond all doubt the provisions of the said Chapter of the Decision as well as definitions of ‘incumbent installation, 'significant capacity extension', 'significant capacity reduction', significant capacity change', 'added capacity', 'reduced capacity', 'start of normal operation', 'start of changed operation' (Article 3 points (a), and (i) - (o), respectively) should be the subject of strict attention of those responsible for the carrying out the respective activities.
The subject-matter of the present considerations is only the general outline of certain, subjectively chosen, specific problems.
Background
To begin with, it should be reminded that the provisions of Articles 10a(19) and 10a(20) of the Directive 2003/87/EC (as amended by the Directive 2009/29/EC), which relate to transitional Community-wide rules for harmonised free allocation in the third trading period 2013 – 2020 envision that by 31 December 2010 the Commission shall adopt not only Community-wide and fully-harmonised implementing measures for the allocation of the allowances but also any necessary provisions for a harmonised application of Articles 10a(19) and 10a(20) of the Directive.
Let’s recall that according to Article 10a(19) of the Directive, ‘No free allocation shall be given to an installation that has ceased its operations, unless the operator demonstrates to the competent authority that this installation will resume production within a specified and reasonable time. Installations for which the greenhouse gas emissions permit has expired or has been withdrawn and installations for which the operation or resumption of operation is technically impossible shall be considered to have ceased operations’ and pursuant to Article 10a(20) the Commission should, as part of the said Decision, ‘include measures for defining installations that partially cease to operate or significantly reduce their capacity, and measures for adapting, as appropriate, the level of free allocations given to them accordingly.
It is apparent from Articles 10a(1) and 10a(7) of the Directive that this fully-harmonised implementing measure to be adopted by 31 December 2010 should also include rules on allocations in the reserve for new entrants (5 % - Art. 10a(7)) as well as ‘harmonised application of paragraph 19’ (which relates to the ‘installations that has ceased its operations’). According to thes said Art. 10a(7) of the Directive by 31 December 2010, the Commission should adopt harmonised rules for the application of the definition of ‘new entrant’, in particular in relation to the definition of ‘significant extensions’.