Below are outlined the most common and simple situations of heat exchanges between installations and their influence on allocation of free allowances.
Heat flows between two ETS installations
As a general rule, free allocation is given to the heat consuming installation.
The carbon leakage factor to be used is the carbon leakage exposure factor for the heat consumer, i.e. the importing sub-installation.
Heat flows from an ETS installation to a non-ETS installation or entity
Allocation in case heat flows from an installation that is in the EU ETS to an entity that is not in the EU-ETS since it does not perform an activity listed in Annex I of the EU ETS Directive, e.g. a heat producing installation delivers its heat to private households through a district heating network.
In this situation, free allowances are given to the heat producer for the heat exported.
The non-ETS entities are by default deemed not exposed to carbon leakage.
The carbon leakage exposure factor for carbon leakage exposed sectors can only be used if the heat exporter provides satisfactory evidence that it exports heat to a non-ETS entity that is exposed to a significant risk of carbon leakage: the operator will for example provide a list of his customers consuming the heat, along with the NACE codes of these customers and the amounts of heat delivered to them.
If the heat is exported to more than one non-ETS entity with different exposure factors, then the heat exporting sub-installation needs to be split in two sub-installations.
A special situation exists if the non-ETS entity consists of private households and ETS installations provide heat to these private households (this situation isn’t covered here).
Heat flows from a non-ETS entity to an ETS installation
This type of heat flow occurs when a heat importing installation is in the EU ETS and receives heat from a heat exporter that is not in the EU ETS because it does not perform an activity listed in Annex I of the EU ETS Directive. This can for example be:
- An installation for the incineration of municipal waste selling the heat produced to a ceramics plant
- A 5 MW CHP selling the heat produced to a mineral wool plant
The consumption of heat produced outside ETS is not eligible for free allocation.
The carbon leakage exposure factor to be used is the carbon leakage exposure factor for
the heat consuming sub-installation.