### 3. member states shall determine the use of revenues generated from the auctioning of allowances , except for the revenues established as own resources in accordance with article 311(3) tfeu and entered in the union budget. member states shall use their revenues generated from the auctioning of allowances referred to in paragraph 2 , with the exception of the revenues used for the compensation of indirect carbon costs referred to in article 10a(6) , for one or more of the following:; ### 3. member states shall determine the use of revenues generated from the auctioning of allowances , except for the revenues established as own resources in accordance with article 311(3) tfeu and entered in the union budget. member states shall use their revenues generated from the auctioning of allowances referred to in paragraph 2 , with the exception of the revenues used for the compensation of indirect carbon costs referred to in article 10a(6) , for one or more of the following , including nuclear energy-related activities and technologies;


### paragraph 1 is amended as follows: ### deleted


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly. ### deleted


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly. ### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation may not be granted fully if the recommendations of the audit report are not fully implemented within a period of five years or at the earliest reasonable opportunity in case the project requires a scheduled downtime of the installation , to the extent that the pay-back time for the relevant investments does not exceed three years and that the costs of those investments are proportionate. otherwise , the amount of relevant free allocation shall be reduced up to 25 % proportionally to the direct emissions related to the not implemented investments. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly.


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly. ### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] ,free allocation shall only be granted fully if , following an appeal procedure , the recommendations of the audit report are implemented within a period of 3 years , to the extent that the pay-back time for the relevant investments does not exceed three years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced proportionately to the amount of emissions corresponding to the recommendations of the report , and in any event by not more than 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented or is implementing other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly.


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly ### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by a maximum of 25 % , a percentage that may be reduced proportionally in line with the recommendations that have been implemented. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly. ### in the case of installations whose greenhouse gas emission levels are above the average of the 10 % most efficient installations in a sector or subsector in the union in the years 2021 and 2022 for the relevant product benchmarks , the amount of free allocation shall be reduced by 25 %. the measures referred to in the first subparagraph shall be adjusted accordingly.


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly. ### co2 emissions of recipients of free allowances will be brought in line with the eu's annual climate targets on the basis of 2026 (linear on the basis of 1990 to -55 % in 2030 and -100 % in 2050). as from 1 january 2028 free allocation shall only be granted fully if the emission targets are reached on a yearly base. otherwise , the amount of free allocation shall be reduced by 25 %.the amount of free allocation shall not be reduced if an operator demonstrates that it has launched concrete transformation projects with verifiable emission reduction targets , which are suitable for achieving the climate targets by 2030 and 2050. if the projects are not implemented , free certificates shall be repaid. in case an operator exceeds the emission reduction targets , the operator shall receive additional free allowances in proportion to the additional savings reached , to incentivise further investments in decarbonisation.


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### deleted


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### free allocation given to installations in sectors or subsectors covered by other measures to address the risk of carbon leakage as established by regulation (eu) 2021/1119 (cbam) shall be gradually reduced , not earlier than 2030 and once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products , thus preventing the risk of reduced competitiveness of european producers. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### free allocation given to installations inspectors or subsectors covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**) shall be gradually reduced , not earlier than 2030 and once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### free allocation given to installations in sectors or subsectors covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**) shall be gradually reduced not earlier than 2030 and once the cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**) except for the production for the non-eu market or delivered further down the value chain to activities not covered by this measure. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly ### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**) once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products.. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### free allocation given in relation to the production of products listed in annex i of regulation (eu)2021/1119 [cbam] shall be gradually reduced , once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products , at which point factor reducing the free allocation for the production of these products shall be applied (cbam factor).


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism except for the production for the non-eu market or delivered further down the value chain to activities not covered by this measure.


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### free allocation at benchmark level shall be ensured in relation to the production of products listed in annex i of regulation [cbam] until the new mechanism has demonstrated its effectiveness in addressing the risk of carbon leakage and in protecting the competitiveness of european exports.


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### free allocation at benchmark level shall be given in relation to the production of products listed in annex i of regulation [cbam] until the full effectiveness of the cbam in tackling the carbon leakage risk both on the eu market and on export markets is assessed and positively verified.


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### free allocation at benchmark level shall be given in relation to the production of products listed in annex i of regulation [cbam] until the full effectiveness of cbam in tackling the carbon leakage risk both on the union market and on export markets is assessed and positively verified.


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date when cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products.


### no free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] as from the date of application of the carbon border adjustment mechanism. ### free allocation shall be given in relation to the production of products listed in annex i of regulation [cbam] for a transitional period between 2026 and 2030.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### thereafter , a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of an eu ets trading period within which the effectiveness of the cbam has been fully demonstrated.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation. to this end , in 2029 the commission shall present to the european parliament and the council a report with the objective of evaluating the full effectiveness of the cbam in addressing carbon leakage and in protecting the competitiveness of european exports. if the report demonstrates such full effectiveness , a factor reducing the free allocation for the production of these products shall be applied (cbam factor) as from 2030. the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2030 , 90 % in 2031 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### for this purpose , in 2029 the commission shall present to the european parliament and the council a report pursuant to regulation [cbam] regarding the effectiveness of the cbam. the report shall also include the selected option toad dress the carbon leakage risk on export markets.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### for this purpose , in 2029 the commission shall present to the european parliament and the council a report pursuant to regulation [cbam] regarding the effectiveness of the cbam. the report shall also include the selected option to address the carbon leakage risk on export markets.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### once the cbam has fully demonstrated its effectiveness , a factor reducing the free allocation for the production of these products shall be applied (cbam factor) after 2030. the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2030 and shall be reduced by 20 percentage points each year to reach 0 % by 2035.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported and domestic products and in protecting the competitiveness of european exports , and not earlier than 2030 , the cbam factor shall be equal to 90 % in [xxx – date at which the cbam fully equalises co2 costs] and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. the cbam factor shall be equal to 100 % for exports outside of the eu , until a wto-compatible export solution measure equalising co2 costs has been implemented upon a proposal by the commission. the cbam factor shall be adjusted to take into account existing carbon pricing schemes in third countries


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### by way of derogation from the first subparagraph , for the first years of operation of regulation [cbam] , the production of products listed in annex i to that regulation shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of those products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period between … [ the date of entry into force of [cbam regulation]] and the end of 2030 , 80 % in 2031 and shall be reduced by 20 percentage points each year to reach 0 % by the fifth year.


### by way of derogation from the previous subparagraph , for the first years of operation of regulation [cbam] , the production of these products shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of these products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period during the entry into force of [cbam regulation] and the end of 2025 , 90 % in 2026 and shall be reduced by 10 percentage points each year to reach 0 % by the tenth year. ### by way of derogation from the first subparagraph , for the first years of operation of regulation [cbam] , the production of products listed in annex i to that regulation shall benefit from free allocation in reduced amounts. a factor reducing the free allocation for the production of those products shall be applied (cbam factor). the cbam factor shall be equal to 100 % for the period between … [ the date of entry into force of [cbam regulation]and the end of 2030 , 80 % in 2031 and shall be reduced by 20 percentage points each year to reach 0 % by the fifth year.


### the reduction of free allocation shall be calculated annually as the average share of the demand for free allocation for the production of products listed in annex i of regulation [cbam] compared to the calculated total free allocation demand for all installations , for the relevant period referred to in article 11 , paragraph 1. the cbam factor shall be applied. ### deleted


### the reduction of free allocation shall be calculated annually as the average share of the demand for free allocation for the production of products listed in annex i of regulation [cbam] compared to the calculated total free allocation demand for all installations , for the relevant period referred to in article 11 , paragraph 1. the cbam factor shall be applied. ### the report by the commission shall be accompanied by a legislative proposal to amend this article in view of gradually phasing out free allocation after 2030 proportionally to the proven level of effectiveness of the cbam.


### the reduction of free allocation shall be calculated annually as the average share of the demand for free allocation for the production of products listed in annex i of regulation [cbam] compared to the calculated total free allocation demand for all installations , for the relevant period referred to in article 11 , paragraph 1. the cbam factor shall be applied. ### the report by the commission shall be accompanied by a legislative proposal to amend this article in view of gradually phasing out free allocation after 2030proportionally to the proven level of effectiveness of the cbam.


### allowances resulting from the reduction of free allocation shall be made available to support innovation in accordance with article 10a(8).; ### deleted


### allowances resulting from the reduction of free allocation shall be made available to support innovation in accordance with article 10a(8).; ### allowances resulting from the reduction of free allocation shall be made available to support innovation in relation to the production of products listed in annex i to regulation [cbam] in accordance with article 10a (8).


### allowances resulting from the reduction of free allocation shall be made available to support innovation in accordance with article 10a(8).; ### allowances resulting from the reduction of free allocation shall be made available to support innovation in relation to the production of products listed in annex i of regulation [cbam] in accordance with article 10a(8).


### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph. ### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 365 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , from which are to be deducted the allowances used for the ocean fund established under article 3gdb , as well as the allowances referred to in article 10(1) , fifth subparagraph , and any allowances resulting from the reduction of free allocation and released from the carbon leakage protection reserve pursuant to article 10a(1b) , third subparagraph , and released from the market stability reserve pursuant to article 10(1) , shall be made available to a fund with the objective of supporting innovation in and deployment of low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). the innovation fund shall support nuclear energy-related activities. to foster innovation in breakthrough technologies as soon as possible , the commission should ensure that the financing made available through the innovation fund is ‘frontloaded’ during the first five years of implementation of the present directive. allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph.


### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph. ### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). to foster innovation in breakthrough technologies as soon as possible , the commission should ensure that the financing made available through the innovation fund is provided as soon as possible during the first years of implementation of the present directive. allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph.


### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph. ### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). to foster innovation in breakthrough technologies as soon as possible , the commission should ensure that the financing made available through the innovation fund is ‘frontloaded’ during the first years of implementation of this directive. allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph.


### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph. ### 365 million allowances from the quantity which could otherwise be allocated for free pursuant to this article , and 85 million allowances from the quantity which could otherwise be auctioned pursuant to article 10 , as well as the allowances resulting from the reduction of free allocation referred to in article 10a(1a) , shall be made available to a fund with the objective of supporting innovation in low-carbon technologies and processes , and contribute to zero pollution objectives (the ‘innovation fund’). the innovation fund should support nuclear energy-related activities. allowances that are not issued to aircraft operators due to the closure of aircraft operators and which are not necessary to cover any shortfall in surrenders by those operators , shall also be used for innovation support as referred to in the first subparagraph.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture , transport and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies , infrastructure and the production of low- and zero-carbon fuels in aviation , rail and road transport , including collective forms of transport such as public transport and occasional coach services. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , co2 transport , renewable energy and energy storage , in a way that contributes to mitigating climate change. the innovation fund may also support break-through innovative technologies in the agriculture sector and the reduction of emissions in the waste sector. a significant amount of the innovation fund shall be earmarked for projects to support innovation and new technologies in the aviation sector , in particular those related to operational , aeronautics , airframe , and engine innovation , and clean and sustainable aviation fuels to reduce greenhouse gas emissions , including projects that address the total climate impact of aviation.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products and processes substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies , including for refuelling and recharging infrastructure in ports , connection to electricity grid and other energy infrastructure , and first industrial application to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation and road transport; further development of the railway system and local public transport addressing both the physical and digital infrastructure and fleets. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies with no immediate market effect such as energy derived from oxidation of marine hydrogen sulphides , break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies , as well as projects dedicated to the supply of rare earths and permanent magnets; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , investments in carbon capture use and storage (ccus) technologies , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy , energy storage and carbon removal technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs” , including “beccs” and “daccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### projects in the territory of all member states , including small-scale projects , shall be eligible. technologies receiving support shall be innovative and not yet commercially viable at a similar scale without support but shall represent breakthrough solutions or be sufficiently mature for application at pre-commercial scale. ### projects in the territory of all member states , including small-scale projects , shall be eligible. technologies receiving support shall be innovative , demonstrate a potential for large-scale greenhouse gas reduction and not yet commercially viable at a similar scale without support but shall represent breakthrough or not yet commercially implementable solutions or be sufficiently technologically mature for application at commercial scale.


### the investments supported shall be consistent with the aims of this directive , as well as the objectives of the communication from the commission of 11 december 2019 on the european green deal (*) and regulation (eu) 2021/1119 of the european parliament and of the council (**) and the long-term objectives as expressed in the paris agreement. no support from the modernisation fund shall be provided to energy generation facilities that use fossil fuels.”; ### the investments supported shall be consistent with the aims of this directive , as well as the objectives of the communication from the commission of 11 december 2019 on the european green deal (*) and regulation (eu) 2021/1119 of the european parliament and of the council (**) and the long-term objectives as expressed in the paris agreement. the modernisation fund shall provide support to transitional fuels and technologies.”;


### the generation and use of electricity from renewable sources; ### the generation and use of electricity from renewable , fossil-free as well as nuclear sources;


### the generation and use of electricity from renewable sources; ### the generation and use of electricity from renewable and low-carbon sources;


### heating and cooling from renewable sources; ### heating and cooling from renewable , fossil-free as well as nuclear sources;


### heating and cooling from renewable sources; ### heating and cooling from renewable and low-carbon sources;


### the improvement of demand side energy efficiency , including in transport , buildings , agriculture and waste; ### the improvement of demand and supply side energy efficiency , including in transport , buildings , agriculture and waste;


### the support of low-income households , including in rural and remote areas , to address energy poverty and to modernise their heating systems; and ### the support modernisation of heating and cooling systems and energy efficiency efforts in buildings for both residential and commercial use , including in rural and remote areas; and


### the support of low-income households , including in rural and remote areas , to address energy poverty and to modernise their heating systems; and ### the support modernisation of heating and cooling systems and energy efficiency efforts in buildings for both residential and commercial use , including in rural and remote areas;


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.; ### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.;


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.; ### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks , ensuring that free allocation for the production of a product is independent of the type of production process , as long as the same change in chemical composition has been carried out. the adjusted benchmark values should be published as soon as the necessary information becomes available , in order for those adjusted benchmark values to be applicable from 2026;


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.; ### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the commission needs to conduct a thorough impact assessment to determine if union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks .;


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks; ### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed , taking into consideration the principle of best available techniques (bat) , before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.; ### deleted


### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks.; ### in order to provide further incentives for reducing greenhouse gas emissions and improving energy efficiency , the determined union-wide ex-ante benchmarks shall be reviewed before the period from 2026 to 2030 in view of potentially modifying the definitions and system boundaries of existing product benchmarks. the benchmark values resulting from that review shall be published as soon as the necessary information becomes available , in order for the updates to apply as of 2026. the revision of the product benchmarks should lead to the creation of a specific benchmark for alumina used for the production of aluminium. considering the key role of the alumina sector as regards eu strategic autonomy for raw materials and the carbon intensity of the production despite the technological progress made to decarbonise the sector , free allowances allocated to alumina should be calculated in a separate product benchmark to prevent carbon leakage.;


### for the period from 2026 to 2030 , the benchmark values shall be determined in the same manner as set out in points (a) and (d) on the basis of information submitted pursuant to article 11 for the years 2021 and 2022 and on the basis of applying the annual reduction rate in respect of each year between 2008 and 2028.; ### for the period from 2026 to 2030 , the benchmark values shall be determined in the same manner as set out in points (a) and (d) on the basis of information submitted pursuant to article 11 for the years 2021 and 2022 and on the basis of applying the annual reduction rate in respect of each year between 2008 and 2028.;


### for the period from 2026 to 2030 , the benchmark values shall be determined in the same manner as set out in points (a) and (d) on the basis of information submitted pursuant to article 11 for the years 2021 and 2022 and on the basis of applying the annual reduction rate in respect of each year between 2008 and 2028.; ### for the period from 2026 to 2030 , the benchmark values shall be determined in the same manner as set out in points (a) and (d) on the basis of information submitted pursuant to article 11 for the years 2021 and 2022 and on the basis of applying the annual reduction rate in respect of each year between 2008 and 2028. the annual reduction rate calculated pursuant to the previous sub-paragraph shall not include in its calculation installations that were operational in the period referred to the first sub-paragraph of article 10a(2) when such installations are added in the product benchmark as a result of the modification of benchmark definitions and system boundaries pursuant to article 10a(1) , fifth subparagraph";


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028. , except in case of heat benchmark for district heating , whose maximum annual reduction rate should be defined in line with the district heating sector decarbonisation commitments until 2030 and should not exceed 1 ,6%.;


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028 except in case of heat benchmark for district heating , whose maximum annual reduction rate should be defined in line with the district heating sector decarbonisation commitments until 2030 and should not exceed 1 ,6 %.;


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.;


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028. by way of derogation from point (c) , the maximum annual reduction rate of the fuel and heat fallback benchmarks shall remain at 1 ,6 %.;


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 1 ,6% , the benchmark value for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by this percentage rate. where the annual reduction rate is below 0 ,2% , the benchmark value for the period from 2026 to 2030 shall be the benchmark value applicable in the period from 2013 to 2020.;


### where the annual reduction rate exceeds 2 ,5 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.; ### where the annual reduction rate exceeds 1 ,6 % or is below 0 ,2 % , the benchmark values for the period from 2026 to 2030 shall be the benchmark values applicable in the period from 2013 to 2020 reduced by whichever of those two percentage rates is relevant , in respect of each year between 2008 and 2028.;


### by way of derogation regarding the benchmark values for aromatics and syngas , those benchmark values shall be adjusted by the same percentage as the refineries benchmarks in order to preserve a level playing field for producers of those products.; ### by way of derogation regarding the benchmark values for aromatics , hydrogen and syngas , these benchmark values shall be adjusted by the same percentage as the refineries benchmarks in order to preserve a level playing field for producers of those products.;


### 5a. by way of derogation from paragraph 5 , an additional amount of up to 3 % of the total quantity of allowances shall , to the extent necessary , be used to increase the maximum amount available under paragraph 5. ### ‘5a. by way of derogation from paragraph 5 , an additional amount of up to [x %; x > 3 %] of the total quantity of allowances shall , to the extent necessary , be used to increase the maximum amount available under paragraph 5.


### member states should adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided that such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition in the internal market. the financial measures adopted should not compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.; ### member states should adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided that such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition in the internal market. the sectors or subsectors shall be determined according to the methodology , criteria and thresholds set out in article 10b , as applied to indirect emissions only , where relevant. the financial measures adopted should not compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.;


### member states should adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided that such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition in the internal market. the financial measures adopted should not compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.; ### member states shall adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided that such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition in the internal market. the financial measures adopted should not compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.;


### member states should adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition on the internal market. the financial measures adopted should not compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.; ### member states should adopt financial measures in accordance with the second and fourth subparagraphs in favour of sectors or subsectors which are exposed to a genuine risk of carbon leakage due to significant indirect costs that are actually incurred from greenhouse gas emission costs passed on in electricity prices , provided such financial measures are in accordance with state aid rules , and in particular do not cause undue distortions of competition on the internal market. the financial measures adopted cannot compensate indirect costs covered by free allocation in accordance with the benchmarks established pursuant to paragraph 1. where a member state spends an amount higher than the equivalent of 25 % of their auction revenues of the year in which the indirect costs were incurred , it shall set out the reasons for exceeding that amount.;


### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , as well as of innovative renewable energy and energy storage technologies; in geographically balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the production of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change. ### the innovation fund shall cover the sectors listed in annex i and annex iii , including environmentally safe carbon capture and utilisation (“ccu”) that contributes substantially to mitigating climate change , as well as products substituting carbon intensive ones produced in sectors listed in annex i , and to help stimulate the construction and operation of projects aimed at the environmentally safe capture and geological storage (“ccs”) of co2 , taking the utmost account of the precautionary principle in assessing the safety of such projects and technologies , as well as of innovative renewable energy and energy storage technologies; in regionally balanced locations. the innovation fund may also support break-through innovative technologies and infrastructure to decarbonise the maritime sector and for the development of low- and zero-carbon fuels in aviation , rail and road transport. special attention shall be given to projects in sectors covered by the [cbam regulation] to support innovation in low carbon technologies , ccu , ccs , renewable energy and energy storage , in a way that contributes to mitigating climate change.


### a fund to support investments proposed by the beneficiary member states , including the financing of small-scale investment projects , to modernise energy systems and improve energy efficiency shall be established for the period from 2021 to 2030 (the ‘modernisation fund’). the modernisation fund shall be financed through the auctioning of allowances as set out in article 10 , for the beneficiary member states set out therein. ### a fund to support investments proposed by the beneficiary member states , including the financing of small-scale and community investment projects , to modernise energy systems and improve energy efficiency shall be established for the period from 2021 to 2030 (the ‘modernisation fund’). the modernisation fund shall be financed through the auctioning of allowances as set out in article 10 , for the beneficiary member states set out therein.


### the support of low-income households , including in rural and remote areas , to address energy poverty and to modernise their heating systems; and ### the support of low-income households , including in rural and remote areas , to address existing energy poverty and to prevent its occurrence , and to modernise their heating systems; and


### in [the year following entry into force of this amendment] , the union-wide quantity of allowances shall be decreased by [-- million allowances (to be determined depending on year of entry into force)]. in the same year , the union-wide quantity of allowances shall be increased by 79 million allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be 4 ,2 %. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted].; ### in [the year following entry into force of this amendment] , the union-wide quantity of allowances shall be decreased by 450 million allowances. in the same year , the union-wide quantity of allowances shall be increased by 79 million allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be adjusted with a 2030 emission reduction target for the sectors covered by the eu ets of at least 70 % compared to 2005 taking into account the cap adjustment. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted].;


### in [the year following entry into force of this amendment] , the union-wide quantity of allowances shall be decreased by [-- million allowances (to be determined depending on year of entry into force)]. in the same year , the union-wide quantity of allowances shall be increased by 79 million allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be 4 ,2 %. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted].; ### in [the year following entry into force of this amendment] , the union-wide quantity of allowances shall be increased by 79 million allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be 5 ,09 % until 2030. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted]


### in [the year following entry into force of this amendment] , the union-wide quantity of allowances shall be decreased by [-- million allowances (to be determined depending on year of entry into force)]. in the same year , the union-wide quantity of allowances shall be increased by 79 million allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be 4 ,2 %. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted].; ### in 2029 , the union-wide quantity of allowances shall be increased by [number corresponding to scope of application to maritime transport activities as set out in article 3g of directive 2003/87/ec] allowances for maritime transport. starting in [the year following entry into force of this amendment] , the linear factor shall be [xx] % , calculated to reduce the overall cap in view of reaching the 2030 target. the commission shall publish the union-wide quantity of allowances within 3 months of [date of entry into force of the amendment to be inserted].;


### measures intended to improve energy efficiency , district heating systems and insulation , or to provide financial support in order to address social aspects in lower- and middle-income households , including by reducing distortive taxes;; ### measures intended to improve energy efficiency , reduce reliance on fossil fuels and increase energy self-sufficiency of households , through increased energy efficiency of buildings , decarbonisation of heating and cooling of buildings , installation of renewable energy systems , or to provide financial support in order to address social aspects in lower- and middle-income households , including by reducing distortive taxes;


### measures intended to improve energy efficiency , district heating systems and insulation , or to provide financial support in order to address social aspects in lower- and middle-income households , including by reducing distortive taxes;; ### measures intended to improve energy efficiency , district heating systems and insulation , or to provide financial support in order to address social aspects in lower- and middle-income households , including by reducing taxes and excise duties or providing tax- and excise-free renewable energy;


### measures intended to improve energy efficiency , district heating systems and insulation , or to provide financial support in order to address social aspects in lower- and middle-income households , including by reducing distortive taxes;; ### measures intended to improve energy efficiency , district heating systems and insulation , or to provide financial support in order to address social aspects in lower- and middle-income households , as well as smes and microenterprises , including by reducing distortive taxes;;


### 4. the commission is empowered to adopt delegated acts in accordance with article 23 to supplement this directive concerning the timing , administration and other aspects of auctioning , including the modalities for the transfer of a share of revenues to the union budget , in order to ensure that it is conducted in an open , transparent , harmonised and non-discriminatory manner. ### 4. the commission is empowered to adopt delegated acts in accordance with article 23 to supplement this directive concerning the timing , administration and other aspects of auctioning , including the modalities for the transfer of a share of revenues to the union budget , aviation fund and maritime fund in order to ensure that it is conducted in an open , transparent , harmonised and non-discriminatory manner.


### 4. the commission is empowered to adopt delegated acts in accordance with article 23 to supplement this directive concerning the timing , administration and other aspects of auctioning , including the modalities for the transfer of a share of revenues to the union budget , in order to ensure that it is conducted in an open , transparent , harmonised and non-discriminatory manner. ### 4. the commission is empowered to adopt delegated acts in accordance with article 23 to supplement this directive concerning the timing , administration and other aspects of auctioning , including the modalities for the transfer of a share of revenues to the union budget and the maritime transition fund in order to ensure that it is conducted in an open , transparent , harmonised and non-discriminatory manner.


### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu of the european parliament and of the council(*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed five years and that the costs of those investments are proportionate. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly ### in the case of installations covered by the obligation to conduct an energy audit under article 8(4) of directive 2012/27/eu (*) of the european parliament and of the council (*) [article reference to be updated with the revised directive] , free allocation shall only be granted fully if the recommendations of the audit report are implemented , to the extent that the pay-back time for the relevant investments does not exceed 10 years. otherwise , the amount of free allocation shall be reduced by 25 %. the amount of free allocation shall not be reduced if an operator demonstrates that it has implemented other measures which lead to greenhouse gas emission reductions equivalent in terms of outcome to those recommended by the audit report. the measures referred to in the first subparagraph shall be adjusted accordingly


### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**). the measures referred to in the first subparagraph shall be adjusted accordingly. ### no free allocation shall be given to installations in sectors or subsectors to the extent they are covered by other measures to address the risk of carbon leakage as established by regulation (eu) …./.. [reference to cbam](**) once cbam has fully demonstrated its effectiveness in equalising co2 costs between imported products and those produced in europe. the measures referred to in the first subparagraph shall be adjusted accordingly.


### (46) the regulated entities in the two new sectors and the point of regulation should be defined in line with the system of excise duty established by council directive (eu) 2020/26258 , with the necessary adaptations , as that directive already sets a robust control system for all quantities of fuels released for consumption for the purposes of paying excise duties. end-users of fuels in those sectors should not be subject to obligations under directive 2003/87/ec. ### (46) the regulated entities in the new sector and the point of regulation should be defined in line with the system of excise duty established by council directive (eu) 2020/26258 , with the necessary adaptations , as that directive already sets a robust control system for all quantities of fuels released for consumption for the purposes of paying excise duties. end-users of fuels in those sectors should not be subject to obligations under directive 2003/87/ec.


### (61) a well-functioning , reformed eu ets comprising an instrument to stabilise the market is a key means for the union to reach its agreed target for 2030 and the commitments under the paris agreement. the market stability reserve seeks to address the imbalance between supply and demand of allowances in the market. article 3 of decision (eu) 2015/1814 provides that the reserve is to be reviewed three years after it becomes operational , paying particular attention to the percentage figure for the determination of the number of allowances to be placed in the market stability reserve , the threshold for the total number of allowances in circulation (tnac) that determines the intake of allowances , and the number of allowances to be released from the reserve. ### (61) a well-functioning , reformed eu ets comprising an instrument to stabilise the market is a key means for the union to reach its agreed targets for 2030 and 2050 and the commitments under the paris agreement. the market stability reserve seeks to address the imbalance between supply and demand of allowances in the market. article 3 of decision (eu) 2015/1814 provides that the reserve is to be reviewed three years after it becomes operational , paying particular attention to the percentage figure for the determination of the number of allowances to be placed in the market stability reserve , the threshold for the total number of allowances in circulation (tnac) that determines the intake of allowances , and the number of allowances to be released from the reserve.


### ‘emissions’ means the release of greenhouse gases from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;; ### ‘emissions’ means the release of greenhouse gases in to the atmosphere from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;;


### ‘emissions’ means the release of greenhouse gases from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;; ### ‘emissions’ means the release of greenhouse gases into the atmosphere from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;;


### ‘emissions’ means the release of greenhouse gases from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;; ### ‘emissions’ means the release into the atmosphere of greenhouse gases from sources in an installation or the release from an aircraft performing an aviation activity listed in annex i or from ships performing a maritime transport activity listed in annex i of the gases specified in respect of that activity , or the release of greenhouse gases corresponding to the activity referred to in annex iii;;


### ‘shipping company’ means the shipowner or any other organisation or person , such as the manager or the bareboat charterer , that has assumed the responsibility for the operation of the ship from the shipowner and that , on assuming such responsibility , has agreed to take over all the duties and responsibilities imposed by the international management code for the safe operation of ships and for pollution prevention , set out in annex i to regulation (ec) no 336/2006 of the european parliament and of the council(*); ### ‘shipping company’ means the shipowner or any other organisation or person , such as the manager or the bareboat charterer , that has assumed the responsibility for the operation of the ship from the shipowner and that , on assuming such responsibility , has agreed to take over all the duties and responsibilities imposed by the international management code for the safe operation of ships and for pollution prevention , set out in annex i to regulation (ec) no 336/2006 of the european parliament and of the council(*). when the ultimate responsibility for the purchase of the fuel or the operation of the ship is assumed by a different entity pursuant to a contractual agreement , this entity shall be responsible under this contractual agreement to cover the costs arising from the implementation of this directive. operation of the ship for the purposes of this article shall mean determining the cargo carried , the route or the speed of the ship.


### ‘shipping company’ means the shipowner or any other organisation or person , such as the manager or the bareboat charterer , that has assumed the responsibility for the operation of the ship from the shipowner and that , on assuming such responsibility , has agreed to take over all the duties and responsibilities imposed by the international management code for the safe operation of ships and for pollution prevention , set out in annex i to regulation (ec) no 336/2006 of the european parliament and of the council(*); ### ‘shipping company’ means the shipowner or any other organisation or person , such as the manager or the bareboat charterer , that has assumed the responsibility for the operation of the ship from the shipowner and that , on assuming such responsibility , has agreed to take over all the duties and responsibilities imposed by the international management code for the safe operation of ships and for pollution prevention , set out in annex i to regulation (ec) no 336/2006 of the european parliament and of the council(*) as a whole or partially;


### ‘regulated entity’ for the purposes of chapter iva shall mean any natural or legal person , except for any final consumer of the fuels , that engages in the activity referred to in annex iii and that falls within one of the following categories: ### deleted


### (17) in the european green deal , the commission stated its intention to take additional measures to address greenhouse gas emissions from the maritime transport sector through a basket of measures to enable the union to reach its emissions reduction targets. in this context , directive 2003/87/ec should be amended to include the maritime transport sector in the eu ets in order to ensure this sector contributes to the increased climate objectives of the union as well as to the objectives of the paris agreement , which requires developed countries to take the lead by undertaking economy-wide emission reduction targets , while developing countries are encouraged to move over time towards economy-wide emission reduction or limitation targets.49 considering that emissions from international aviation outside europe should be capped from january 2021 by global market-based action while there is no action in place that caps or prices maritime transport emissions , it is appropriate that the eu ets covers a share of the emissions from voyages between a port under the jurisdiction of a member state and port under the jurisdiction of a third country , with the third country being able to decide on appropriate action in respect of the other share of emissions. the extension of the eu ets to the maritime transport sector should thus include half of the emissions from ships performing voyages arriving at a port under the jurisdiction of a member state from a port outside the jurisdiction of a member state , half of the emissions from ships performing voyages departing from a port under the jurisdiction of a member state and arriving at a port outside the jurisdiction of a member state , emissions from ships performing voyages arriving at a port under the jurisdiction of a member state from a port under the jurisdiction of a member state , and emissions at berth in a port under the jurisdiction of a member state. this approach has been noted as a practical way to solve the issue of common but differentiated responsibilities and capabilities , which has been a longstanding challenge in the unfccc context. the coverage of a share of the emissions from both incoming and outgoing voyages between the union and third countries ensures the effectiveness of the eu ets , notably by increasing the environmental impact of the measure compared to a geographical scope limited to voyages within the eu , while limiting the risk of evasive port calls and the risk of delocalisation of transhipment activities outside the union. to ensure a smooth inclusion of the sector in the eu ets , the surrendering of allowances by shipping companies should be gradually increased with respect to verified emissions reported for the period 2023 to 2025. to protect the environmental integrity of the system , to the extent that fewer allowances are surrendered in respect of verified emissions for maritime transport during those years , once the difference between verified emissions and allowances surrendered has been established each year , a corresponding a number of allowances should be cancelled. as from 2026 , shipping companies should surrender the number of allowances corresponding to all of their verified emissions reported in the preceding year. ### (17) in the european green deal , the commission stated its intention to take additional measures to address greenhouse gas emissions from the maritime transport sector through a basket of measures to enable the union to reach its emissions reduction targets. in this context , directive 2003/87/ec should be amended to include the maritime transport sector in the eu ets in order to ensure this sector contributes to the increased climate objectives of the union as well as to the objectives of the paris agreement , which requires developed countries to take the lead by undertaking economy-wide emission reduction targets , while developing countries are encouraged to move over time towards economy-wide emission reduction or limitation targets.49the commission should assist developing countries in reaching that goal by dedicated eu global decarbonisation fund. considering that emissions from international aviation outside europe should be capped from january 2021 by global market-based action while there is no action in place that caps or prices maritime transport emissions , it is appropriate that the eu ets covers a share of the emissions from voyages between a port under the jurisdiction of a member state and port under the jurisdiction of a third country , with the third country being able to decide on appropriate action in respect of the other share of emissions. the extension of the eu ets to the maritime transport sector should thus include half of the emissions from ships performing voyages arriving at a port under the jurisdiction of a member state from a port outside the jurisdiction of a member state , half of the emissions from ships performing voyages departing from a port under the jurisdiction of a member state and arriving at a port outside the jurisdiction of a member state , emissions from ships performing voyages arriving at a port under the jurisdiction of a member state from a port under the jurisdiction of a member state , and emissions at berth in a port under the jurisdiction of a member state. this approach has been noted as a practical way to solve the issue of common but differentiated responsibilities and capabilities , which has been a longstanding challenge in the unfccc context. the coverage of a share of the emissions from both incoming and outgoing voyages between the union and third countries ensures the effectiveness of the eu ets , notably by increasing the environmental impact of the measure compared to a geographical scope limited to voyages within the eu , while limiting the risk of evasive port calls and the risk of delocalisation of transhipment activities outside the union. to ensure a smooth inclusion of the sector in the eu ets , the surrendering of allowances by shipping companies should be gradually increased with respect to verified emissions reported for the period 2023 to 2025. to protect the environmental integrity of the system , to the extent that fewer allowances are surrendered in respect of verified emissions for maritime transport during those years , once the difference between verified emissions and allowances surrendered has been established each year , a corresponding a number of allowances should be cancelled. as from 2026 , shipping companies should surrender the number of allowances corresponding to all of their verified emissions reported in the preceding year.