EN Official Journal of the European Union CE 78/431

(2004/C 78 E/0453)

WRITTEN QUESTION E-2795/03

by Eija-Riitta Korhola (PPE-DE) to the Commission

(19 September 2003)

Subject: Emissions trading: problem of period-based allocation

Under the emissions trading directive a firm's allocation is intended to cover three (first emissions trading period) or five years (second period). It is thus in the firm's interest to refrain from selling its unused portion allowances at the end of an emissions trading period if in that way it can secure an unchanged amount for the whole of the following five-year period. This likewise creates an incentive (unfortunate from the environmental point of view) for the firm to postpone environmental investment until the start of the first period, or beyond the beginning of 2008, to enable it to sell surplus emission allowances in as many years as possible.

Does the Commission consider the allocation rule described above to be compatible with the single accounting principle?

Does it believe that, when the directive is reviewed, the allocation rules should be assessed and, if necessary, amended in such a way as to ensure that the allocation for a firm selling emission allowances is altered without delay, in proportion to the quantity offered for sale, in the year following the sale, even though the emissions trading period might not yet have ended?

Joint answer

to Written Questions E-2789/03, E-2790/03, E-2791/03, E-2792/03, E-2793/03, E-2794/03 and E-2795/03

given by Mrs Wallström on behalf of the Commission

(7 November 2003)

E-2789/03

The Kyoto Protocol's first commitment period is from 2008-2012, and the Protocol provides that Parties may bank assigned amount units from 2008-2012 into the next commitment period in the case that Parties have reached their Kyoto target. The emissions trading Directive (1) is in line with the Kyoto Protocol by providing for banking of allowances by persons from the 2008-2012 period into the next period.

The Kyoto Protocol's quantified emission limitation and reduction requirements do not apply before 2008, and the emissions trading Directive allows Member States to decide individually whether to provide for banking of allowances by operators from the first period, 2005-2007, into the period 2008-2012. Under the emissions trading Directive, operators are allocated allowances, and transfers of allowances from 2008 will be accompanied by corresponding transfers of assigned amount units.

The question is based on a false link between the Kyoto Protocol and the Union emissions trading scheme. Member States do not have to keep trading scheme allowances, they issue them to plant operators when and as appropriate without any formal link to the obligations or the flexibility mechanisms of the Kyoto Protocol.

E-2790/03

The emissions trading Directive provides for transfers of allowances between Member States, in order to achieve cost-effective reductions of greenhouse gas emissions. As transfers of allowances from 2008 will be accompanied by corresponding transfers of assigned amount units, the Commission has explained to Member States the potential effects of allowing banking of allowances from 2005-2007 to 2008-2012. The Council and the Parliament have decided that Member States may allow the banking of allowances from 2005-2007 to 2008-2012, and agreed a recital which indicates how Member States may decide to allow the banking from 2005-2007 to 2008-2012. The Commission does not intend to re-open this issue.

E-2791/03

The Commission does not see a problem of double accounting nor one in respect of the equal treatment of firms. The Assigned Amount of each Party to the Kyoto Protocol is fixed. The addition and subtraction of Kyoto units will be taken into account in the compliance assessment by the Kyoto Protocol's Compliance Committee, but will not change the Assigned Amount of each Party to the Kyoto Protocol. Allocations to operators after 2012 will take into account the commitments of Member States for periods after 2012. Deducting allowances from an operator's subsequent allocation would furthermore imply that banking is de facto not possible.

E-2792/03

The Union emissions trading scheme is designed as a market based instrument to lower compliance cost for participating actors and for society. The nature of a market instrument is to use the individual decisions actors take in their efforts to optimize their profits from the system. As on all markets there may be speculation also on this one. One important issue when designing the scheme was therefore to make this market as broad and stable as possible. As there should be several thousands of actors already from the start this market could be expected to be reasonably stable. Of course, signs of market domination abuse must, as always, be monitored and addressed appropriately.

The rules of the EC Treaty on anti-competitive behaviour apply in any case, and the Commission does not intend to intervene unless those rules are breached.

E-2793/03

Member States can buy and sell assigned amount units in accordance with the rules agreed under the Kyoto Protocol and its implementing provisions. The Commission does not consider it appropriate to propose an amendment to the Kyoto Protocol relating to a definition and a ban on the sale of ‘hot air’.

E-2794/03

The Commission has made its position on reporting clear in its proposal for a Decision on the monitoring of greenhouse gas emissions and the implementation of the Kyoto Protocol (2). The Council and the Parliament are in the process of reaching agreements at first reading on this proposal, and have not proposed that this reporting should take place using the calculation of a five-year moving average.

E-2795/03

The emissions trading Directive has not laid down any specific allocation rule, including the one outlined in the written question.

A Member State has to develop periodically a national allocation plan adhering to the criteria laid down in Annex III of the emission trading Directive.

In the review in mid-2006 the Commission will, on the basis of the experience gathered by then, consider the further harmonisation of the allocation method and the criteria in Annex III.

The Commission disagrees with an allocation rule which would result in the reduction of an operator's allocation within an ongoing trading period after the operator has sold some allowances. Such a rule is not in line with the provisions of the Directive and would not be desirable from an economic point of view either.

(1) Directive 2003/87/EC of 13 October 2003, OJ L 275, 25.10.2003.

(2) COM(2003) 51 final.