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


 

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 (OJ L 275, 25.10.2003, p. 32 as amended) establishes the European Union system for greenhouse gas emission allowance trading (EU ETS) in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.

 

The scope of Directive 2003/87 has been broadened from 1 January 2013 onwards so as to include, inter alia, emissions from the production of aluminium and from certain sectors of the chemicals industry.

  

To that end, Annex I to Directive 2003/87, which lists the categories of activities which fall within the scope of that directive was amended by Directive 2009/29.

 

 

Backloading

 

The absence of legal mechanism accommodating the 2003/87/EC Directive's arrangements to market fluctuations occurred fundamental from practical perspective in the third phase of the EU ETS.

 

It is noteworthy that in the context of the so-called back-loading of emission allowances of the third phase a proposition has been put to add in the first subparagraph of Article 10(4) of 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 the following sentence:

 

"The Commission shall, where appropriate, adapt the timetable for each period so as to ensure an orderly functioning of the market."

 

The said wording was contained in the European Commission’s Proposal of 25 July 2012 for a Decision of the European Parliament and of the Council amending Directive 2003/87/EC clarifying provisions on the timing of auctions of greenhouse gas allowances

 

This amendment has been considered against the background of the simultaneous change of the auction time profile for phase 3 allowances done by amending the Auctioning Regulation.

 

The European Parliament upheld on 14 March 2013 by a slight majority a non-binding recommendation for regulators to intervene in the balance of the supply and demand set by the earlier rules of the Directive (see point 91 of the European Parliament resolution of 14 March 2013 on the Energy roadmap 2050, a future with energy (2012/2103(INI)).

 

Finally, Decision No 1359/2013/EU of the European Parliament and of the Council of 17 December 2013 amending Directive 2003/87/EC clarifying provisions on the timing of auctions of greenhouse gas allowances has been adopted in the following wording:

 

"Article 1
In the first subparagraph of Article 10(4) of Directive 2003/87/EC the following sentences are added:
'Where an assessment shows for the individual industrial sectors that no significant impact on sectors or subsectors exposed to a significant risk of carbon leakage is to be expected, the Commission may, in exceptional circumstances, adapt the timetable for the period referred to in Article 13(1) beginning on 1 January 2013 so as to ensure the orderly functioning of the market. The Commission shall make no more than one such adaptation for a maximum number of 900 million allowances.'".

 

See here for the European Commision's Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/EC to enhance cost-effective emission reductions and low-carbon investments of 15 July 2015 (COM(2015) 337 final) 2015/148 (COD) setting out the draft EU ETS legal framework for the fourth trading period as from 2020.

 

The above European Commission's Proposal is intended to be a first piece of legislation implementing the 2030 Climate and Energy package agreed by the European Council in October 2014.

 

Pursuant to Article 2(1) of the draft Directive the EU Member States will be required to bring into force the laws, regulations and administrative provisions necessary to comply by 31 December 2018 (deadline for transposition).

 

The EU ETS Directive earlier modifications were introduced to accommodate the backloading of emission allowances (see box) as well as the Market Stability Reserve.

 

Compliance

 

The EU ETS Directive provides for a monetary penalty in the form of an 'excess emissions penalty' of €100 for each tonne CO2 emitted for which no allowance has been surrendered in due time.

 

However, these penalties were so far rather rarely applied given the EU ETS' very high compliance rate.

 

Pursuant to the Report on the functioning of the European carbon market, accompanying the document Report from the Commission to the European Parliament and to the Council, 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 of 18 November 2015 (COM(2015) 576 final) (p. 29) each year around 99% of the emissions are actually covered by the required number of allowances.

 

The level of compliance with the EU ETS rules was also very high in the aviation sector: aircraft operators responsible for more than 99.5 % of aviation emissions covered under the EU ETS complied.

 

This also includes more than 100 commercial aircraft companies based outside EU, which operated flights within the EEA.

 

For 2014, the application of 'excess emissions penalty' was reported for a low number of cases (ca. 0.1% of installations) in 6 Member States (DE, ES, PL, PT, RO, UK).

 

Another important sanction represents the prohibition on the selling of allowances as long as the installations are non-compliant with the system requirements (this measure has been applied in 2014 by twenty-two EU Member States), as well as the publicaction of names of non-compliant operators (11 Member States, respectively).

 

 

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Last Updated on Sunday, 22 May 2016 21:02
 

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