As the beginning of the second trading period for the EU Emissions Trading Scheme approaches, the European Commission has completed the assessment and approved the proposed national plans for allocating carbon dioxide (CO2) emission allowances of the original 25 member states, as well as those of Bulgaria and Romania.

power plant and Emission

Power plants and other industrial facilities
are covered by the European Union Emissions Trading Scheme (EU
ETS) designed to reduce carbon dioxide (CO2)emissions.

The second period of the EU Emissions Trading Scheme (EU ETS) covers 2008-2012. National Allocation plans (NAP) determine for each Member State the cap, or limit, on the total amount of CO2 that installations covered by the EU ETS can emit, and specify how many CO2 emission allowances each plant will receive. The Commission is responsible for assessing Member States’ proposed NAPs against 12 allocation criteria listed in the Emissions Trading Directive. The Commission may accept a plan in part or in full.

The assessment criteria seek, among other things, to ensure that plans are consistent with meeting the EU and Member States’ Kyoto commitments, with actual verified emissions reported in the Commission’s annual progress reports, and with technological potential for reducing emissions.

The cleared annual average “EU-wide” cap in 2008-2012 for the 25 Member States that have participated in the EU ETS since 2005 is some 219 million allowances below the annual average cap for 2005-2007. Taking into account additional industrial installations that will be covered by the scheme from 2008 onward, this amounts to a reduction of some 12.5%.

Compared with verified emissions in 2005 from installations covered by the EU ETS, the cap for 2008-2012 represents a reduction of close to 140 million allowances (taking account of additional installations included in 2006/07 and those that will be added in 2008), or 6.8%. However, the actual allocation of free emission allowances to installations covered since 2005 will be reduced by more than this figure.

This is because the EU-wide cap for 2008-2012 includes allowances that are reserved for new entrants and allowances that will be sold by governments rather than allocated for free. Governments will auction at least 60 to 70 million allowances per year over the second trading period.

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