# EUR-Lex - 52012PC0416 - EN

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# 52012PC0416

**Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC clarifying provisions on the timing of auctions of greenhouse gas allowances /* COM/2012/0416 final - 2012/0202 (COD) */**

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EXPLANATORY MEMORANDUM

1.           INTRODUCTION

The emission trading system (EU ETS) set up
by Directive 2003/87/EC has created the world's first major carbon market and
an EU-wide carbon price. The market is generally considered liquid and based on
a well-functioning infrastructure. Part of this infrastructure relates to the
modalities for auctioning of emissions allowances, where the Directive confers
implementing powers to the Commission, notably through the adoption of a
Regulation on "the timing, administration and other aspects" of
auctioning. The Commission has already exercised this power and the Regulation
in question was already amended a number of times.

However, in the context of an ongoing
debate about the need and options for possible future action to address
imbalances between supply and demand, some stakeholders have challenged the
interpretation the Commission has so far relied on as regards to the extent of
its powers. The Directive should urgently be clarified on this point so as to
eliminate any doubts about the scope of the Commission's powers and ensure
legal certainty regarding possible future measures adopted by the Commission on
this basis.

2.           REGULATORY CONTEXT

One of the features of the change from the
phase 2 (period from 2008 to 2012) into phase 3 (period from 2013 to 2020) and
the implementation provisions adopted so far is that the supply of allowances
and international credits is expected to temporarily increase significantly in
the short term. This exacerbates the already significant, unforeseen impact of
the macro economic developments, due to which emissions have decreased
considerably and are not expected to increase significantly in 2012 and 2013.
This combination of increased net supply and reduced demand increasingly
affects the orderly functioning of the European carbon market in the transition
to phase 3.

In the light of such exceptional
circumstances, the Commission is therefore currently reviewing the need for a
further change of the auctioning timetable and will invite experts in the
Climate Change Committee to consider a draft for a future amendment to
Commission Regulation (EU) No 1031/2010 and indicate their view on the
appropriate action to be taken before the end of this year. The Commission also
invites any other interested stakeholders to express their views on this draft
and will actively engage with them in this regard. Further information is
available in the Commission Staff Working Document Information provided on
the functioning of the EU Emission Trading System, the volumes of greenhouse
gas emission allowances auctioned and freely allocated and the impact on the
surplus of allowances in the period up to 2020. Meanwhile, the legislative
process to clarify the scope of the Commission's powers by means of the present
proposal should proceed swiftly and independently of the result of
consultations with the Climate Change Committee.

Finally, the Commission reaffirms its
commitment, as stated in the context of the agreement on the Energy Efficiency
Directive, to urgently examine and present options for action with a view
to adopting further appropriate structural measures to strengthen the ETS
during phase 3, and make it more effective.

3.           LEGAL ELEMENTS OF THE PROPOSAL

For the purposes of legal certainty, it
should be clarified that, in order to ensure an orderly functioning of the
market, the Commission is able to adapt the auction timetable laid down in
Commission Regulation (EU) No 1031/2010. The proposed amendment would expressly
provide such clarification in the relevant provision of the EU ETS Directive.

2012/0202 (COD)

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

amending Directive 2003/87/EC clarifying
provisions on the timing of auctions of greenhouse gas allowances

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Article 192(1) thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[1],

Having regard to the opinion of the
Committee of the Regions[2],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       Article 10(4) of Directive
2003/87/EC of the European Parliament and of the Council of 13 October 2003
establishing a scheme for greenhouse gas emission allowance trading within the
Community and amending Council Directive 96/61/EC[3] does not specify how volumes of
greenhouse gas emission allowances to be auctioned are to be distributed over
the trading period.

(2)       For the purposes of legal
certainty and market predictability, it should be clarified that, in order to
ensure an orderly functioning of the market, the Commission is able in
exceptional circumstances to adapt the auction timetable pursuant to Article
10(4) of Directive 2003/87/EC.

(3)       Directive 2003/87/EC
should therefore be amended accordingly,

HAVE ADOPTED THIS DECISION:

Article 1

In the first subparagraph of Article 10(4)
of Directive 2003/87/EC the following sentence is added:

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

Article 2

This Decision is addressed to the Member
States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

[1]               OJ C , , p. .

[2]               OJ C , , p. .

[3]               OJ L 275, 25.10.2003, p. 32.