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 (Text with EEA relevance)
Date: 2003-10-13
Institutions: Council of the European Union, European Parliament
Subjects: climate change policy, greenhouse gas, intra-EU trade, marketing standard, tradeable emission permit

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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

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Having regard to the Treaty establishing the European Com-
munity, and in particular Article 175(1) thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Economic and
Social Committee (2),

Having regard to the opinion of
Regions (3),

the Committee of

the

Acting in accordance with the procedure laid down in Article
251 of the Treaty (4),

Whereas:

(1)

(2)

The Green Paper on greenhouse gas emissions trading
within the European Union launched a debate across
Europe on the suitability and possible functioning of
greenhouse gas emissions trading within the European
Union. The European Climate Change Programme has
considered Community policies and measures through a
multi-stakeholder process, including a scheme for green-
house gas
trading within the
Community (the Community scheme) based on the
Green Paper. In its Conclusions of 8 March 2001, the
Council recognised the particular importance of
the
European Climate Change Programme and of work
based on the Green Paper, and underlined the urgent
need for concrete action at Community level.

emission allowance

the Council (5)

establishment of a Community-wide

The Sixth Community Environment Action Programme
the
established by Decision No 1600/2002/EC of
identifies
European Parliament and of
climate change as a priority for action and provides for
the
emissions
trading scheme by 2005. That Programme recognises
that the Community is committed to achieving an 8 %
reduction in emissions of greenhouse gases by 2008 to
2012 compared to 1990 levels, and that, in the longer-
term, global emissions of greenhouse gases will need to
be reduced by approximately 70 % compared to 1990
levels.

(3)

(4)

(5)

(6)

The ultimate objective of the United Nations Framework
Convention on Climate Change, which was approved by
Council Decision 94/69/EC of 15 December 1993
concerning the conclusion of the United Nations Frame-
work Convention on Climate Change (6),
is to achieve
stabilisation of greenhouse gas concentrations in the
atmosphere at a level which prevents dangerous anthro-
pogenic interference with the climate system.

the Kyoto Protocol

Once it enters into force, the Kyoto Protocol, which was
approved by Council Decision 2002/358/EC of 25 April
2002 concerning the approval, on behalf of
the
to the
European Community, of
United Nations Framework Convention on Climate
Change and the joint fulfilment of commitments there-
under (7), will commit the Community and its Member
States to reducing their aggregate anthropogenic emis-
sions of greenhouse gases listed in Annex A to the
Protocol by 8 % compared to 1990 levels in the period
2008 to 2012.

The Community and its Member States have agreed to
fulfil their commitments to reduce anthropogenic green-
house gas emissions under the Kyoto Protocol jointly, in
accordance with Decision 2002/358/EC. This Directive
aims to contribute to fulfilling the commitments of the
European Community and its Member States more effec-
tively, through an efficient European market in green-
house gas emission allowances, with the least possible
diminution of economic development and employment.

Council Decision 93/389/EEC of 24 June 1993 for a
monitoring mechanism of Community CO2 and other
greenhouse gas emissions (8), established a mechanism
for monitoring greenhouse gas emissions and evaluating
progress towards meeting commitments in respect of
these emissions. This mechanism will assist Member
States in determining the total quantity of allowances to
allocate.

(1) OJ C 75 E, 26.3.2002, p. 33.
(2) OJ C 221, 17.9.2002, p. 27.
(3) OJ C 192, 12.8.2002, p. 59.
(4) Opinion of the European Parliament of 10 October 2002 (not yet
published in the Official Journal), Council Common Position of 18
March 2003 (OJ C 125 E, 27.5.2003, p. 72), Decision of the
European Parliament of 2 July 2003 (not yet published in the Offi-
cial Journal) and Council Decision of 22 July 2003.

(5) OJ L 242, 10.9.2002, p. 1.

(7)

Community provisions relating to allocation of allow-
ances by the Member States are necessary to contribute
to preserving the integrity of the internal market and to
avoid distortions of competition.

(6) OJ L 33, 7.2.1994, p. 11.
(7) OJ L 130, 15.5.2002, p. 1.
(8) OJ L 167, 9.7.1993, p. 31. Decision as amended by Decision 1999/

296/EC (OJ L 117, 5.5.1999, p. 35).

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Member States should have regard when allocating
allowances to the potential for industrial process activ-
ities to reduce emissions.

(17) Member States may participate in international emissions
trading as Parties to the Kyoto Protocol with any other
Party included in Annex B thereto.

(8)

(9)

Member States may provide that they only issue allow-
ances valid for a five-year period beginning in 2008 to
persons
corre-
in respect of allowances cancelled,
sponding to emission reductions made by those persons
on their national territory during a three-year period
beginning in 2005.

(10)

Starting with the said five-year period, transfers of allow-
ances to another Member State will
involve corre-
sponding adjustments of assigned amount units under
the Kyoto Protocol.

(11) Member States should ensure that

the operators of
certain specified activities hold a greenhouse gas emis-
sions permit and that they monitor and report their
emissions of greenhouse gases specified in relation to
those activities.

(12) Member States should lay down rules on penalties
applicable to infringements of this Directive and ensure
that
they are implemented. Those penalties must be
effective, proportionate and dissuasive.

(20)

(13)

In order to ensure transparency, the public should have
access to information relating to the allocation of allow-
ances and to the results of monitoring of emissions,
subject only to restrictions provided for in Directive
the
2003/4/EC of
Council of 28 January 2003 on public access to environ-
mental information (1).

the European Parliament and of

(14) Member States should submit a report on the implemen-
tation of this Directive drawn up on the basis of Council
Directive 91/692/EEC of 23 December 1991 standar-
dising and rationalising reports on the implementation
of certain Directives relating to the environment (2).

(21)

(15)

(16)

The inclusion of additional installations in the Commu-
nity scheme should be in accordance with the provisions
laid down in this Directive, and the coverage of the
Community scheme may thereby be extended to emis-
sions of greenhouse gases other than carbon dioxide,
inter alia from aluminium and chemicals activities.

This Directive should not prevent any Member State
from maintaining or
trading
schemes regulating emissions of greenhouse gases from
activities other than those listed in Annex I or included
in the Community scheme, or
from installations
temporarily excluded from the Community scheme.

establishing national

(18)

(19)

Linking the Community scheme to greenhouse gas emis-
sion trading schemes in third countries will increase the
cost-effectiveness of achieving the Community emission
reductions target as laid down in Decision 2002/358/EC
on the joint fulfilment of commitments.

Project-based mechanisms including Joint Implementa-
tion (JI) and the Clean Development Mechanism (CDM)
are important to achieve the goals of both reducing
global greenhouse gas emissions and increasing the cost-
effective functioning of
In
accordance with the relevant provisions of the Kyoto
Protocol and Marrakech Accords, the use of the mechan-
isms should be supplemental to domestic action and
domestic action will thus constitute a significant element
of the effort made.

the Community scheme.

technologies,

This Directive will encourage the use of more energy-
efficient
including combined heat and
power technology, producing less emissions per unit of
output, while the future directive of the European Parlia-
ment and of the Council on the promotion of cogenera-
tion based on useful heat demand in the internal energy
market will specifically promote combined heat and
power technology.

pollution

integrated

prevention

Council Directive 96/61/EC of 24 September 1996
concerning
and
control (3) establishes a general framework for pollution
prevention and control, through which greenhouse gas
emissions permits may be issued. Directive 96/61/EC
should be amended to ensure that emission limit values
are not set for direct emissions of greenhouse gases from
an installation subject to this Directive and that Member
States may choose not to impose requirements relating
to energy efficiency in respect of combustion units or
other units emitting carbon dioxide on the site, without
prejudice to any other requirements pursuant to Direc-
tive 96/61/EC.

(22)

This Directive is compatible with the United Nations
Framework Convention on Climate Change and the
Kyoto Protocol. It should be reviewed in the light of
developments in that context and to take into account
experience in its implementation and progress achieved
in monitoring of emissions of greenhouse gases.

(1) OJ L 41, 14.2.2003, p. 26.
(2) OJ L 377, 31.12.1991, p. 48.

(3) OJ L 257, 10.10.1996, p. 26.

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(23)

Emission allowance trading should form part of a
comprehensive and coherent package of policies and
measures implemented at Member State and Community
level. Without prejudice to the application of Articles 87
and 88 of the Treaty, where activities are covered by the
Community scheme, Member States may consider the
implications of regulatory, fiscal or other policies that
pursue the same objectives. The review of the Directive
should consider the extent to which these objectives
have been attained.

(24)

The instrument of taxation can be a national policy to
limit emissions from installations temporarily excluded.

(25)

Policies and measures should be implemented at Member
State and Community level across all sectors of
the
European Union economy, and not only within the
industry and energy sectors,
to generate
substantial
reductions. The Commission
should, in particular, consider policies and measures at
the transport sector
Community level
makes a substantial contribution to the Community and
its Member States meeting their climate change obliga-
tions under the Kyoto Protocol.

in order that

emissions

in order

(26) Notwithstanding the multifaceted potential of market-
based mechanisms,
the European Union strategy for
climate change mitigation should be built on a balance
between the Community scheme and other types of
Community, domestic and international action.

(27)

rights and
This Directive respects
observes the principles recognised in particular by the
Charter of Fundamental Rights of the European Union.

the fundamental

(28)

The measures necessary for the implementation of this
Directive should be adopted in accordance with Council
Decision 1999/468/EC of 28 June 1999 laying down
the procedures for the exercise of implementing powers
conferred on the Commission (1).

(29) As the criteria (1), (5) and (7) of Annex III cannot be
amended through comitology, amendments in respect of
periods after 2012 should only be made through co-
decision.

(30)

Since the objective of the proposed action, the establish-
ment of a Community scheme, cannot be sufficiently
achieved by the Member States acting individually, and
can therefore by reason of the scale and effects of the
proposed action be better achieved at Community level,
the Community may adopt measures, in accordance with
the principle of subsidiarity as set out in Article 5 of the
Treaty. In accordance with the principle of proportion-

ality, as set out in that Article, this Directive does not go
beyond what
to achieve that
objective,

is necessary in order

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Subject matter

This Directive establishes a scheme for greenhouse gas emission
allowance trading within the Community (hereinafter referred
to as the ‘Community scheme’) in order to promote reductions
of greenhouse gas emissions in a cost-effective and economic-
ally efficient manner.

Article 2

Scope

This Directive shall apply to emissions from the activities

1.
listed in Annex I and greenhouse gases listed in Annex II.

This Directive shall apply without prejudice to any

2.
requirements pursuant to Directive 96/61/EC.

Article 3

Definitions

For the purposes of this Directive the following definitions shall
apply:

(a) ‘allowance’ means an allowance to emit one tonne of
carbon dioxide equivalent during a specified period, which
shall be valid only for the purposes of meeting the require-
ments of this Directive and shall be transferable in accor-
dance with the provisions of this Directive;

(b) ‘emissions’ means the release of greenhouse gases into the

atmosphere from sources in an installation;

(c) ‘greenhouse gases’ means the gases listed in Annex II;

(d) ‘greenhouse gas emissions permit’ means the permit issued

in accordance with Articles 5 and 6;

(e) ‘installation’ means a stationary technical unit where one or
more activities listed in Annex I are carried out and any
other directly associated activities which have a technical
connection with the activities carried out on that site and
which could have an effect on emissions and pollution;

(f) ‘operator’ means any person who operates or controls an
installation or, where this is provided for in national legisla-
tion, to whom decisive economic power over the technical
functioning of the installation has been delegated;

(1) OJ L 184, 17.7.1999, p. 23.

(g) ‘person’ means any natural or legal person;

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(h) ‘new entrant’ means any installation carrying out one or
more of the activities indicated in Annex I, which has
obtained a greenhouse gas emissions permit or an update
of its greenhouse gas emissions permit because of a change
in the nature or functioning or an extension of the installa-
tion, subsequent to the notification to the Commission of
the national allocation plan;

(i) ‘the public’ means one or more persons and, in accordance
with national legislation or practice, associations, organisa-
tions or groups of persons;

(j) ‘tonne of carbon dioxide equivalent’ means one metric
tonne of carbon dioxide (CO2) or an amount of any other
greenhouse gas listed in Annex II with an equivalent
global-warming potential.

Article 4

Greenhouse gas emissions permits

Member States shall ensure that, from 1 January 2005, no
installation undertakes any activity listed in Annex I resulting
in emissions specified in relation to that activity unless its
operator holds a permit issued by a competent authority in
accordance with Articles 5 and 6, or
the installation is
temporarily excluded from the Community scheme pursuant to
Article 27.

Article 5

Applications for greenhouse gas emissions permits

An application to the competent authority for a greenhouse
gas emissions permit shall include a description of:

(a) the installation and its activities including the technology

used;

(b) the raw and auxiliary materials, the use of which is likely to

lead to emissions of gases listed in Annex I;

(c) the sources of emissions of gases listed in Annex I from the

installation; and

(d) the measures planned to monitor and report emissions in
accordance with the guidelines adopted pursuant to Article
14.

The application shall also include a non-technical summary of
the details referred to in the first subparagraph.

A greenhouse gas emissions permit may cover one or more
installations on the same site operated by the same operator.

Greenhouse gas emissions permits

2.
following:

shall contain the

(a) the name and address of the operator;

(b) a description of the activities and emissions from the instal-

lation;

(c) monitoring requirements, specifying monitoring metho-

dology and frequency;

(d) reporting requirements; and

(e) an obligation to surrender allowances equal to the total
emissions of the installation in each calendar year, as veri-
fied in accordance with Article 15, within four months
following the end of that year.

Article 7

Changes relating to installations

The operator shall
inform the competent authority of any
changes planned in the nature or functioning, or an extension,
of the installation which may require updating of the green-
house gas emissions permit. Where appropriate, the competent
authority shall update the permit. Where there is a change in
the competent
the installation's operator,
the identity of
authority shall update the permit to include the name and
address of the new operator.

Article 8

Coordination with Directive 96/61/EC

Member States shall take the necessary measures to ensure that,
where installations carry out activities that are included in
Annex I to Directive 96/61/EC, the conditions of, and proce-
dure for, the issue of a greenhouse gas emissions permit are
coordinated with those for the permit provided for in that
Directive. The requirements of Articles 5, 6 and 7 of this Direc-
tive may be integrated into the procedures provided for in
Directive 96/61/EC.

Article 9

National allocation plan

Article 6

Conditions

for and contents of

the greenhouse gas

emissions permit

The competent authority shall

1.
issue a greenhouse gas
emissions permit granting authorisation to emit greenhouse
gases from all or part of an installation if it is satisfied that the
operator is capable of monitoring and reporting emissions.

1.
For each period referred to in Article 11(1) and (2), each
Member State shall develop a national plan stating the total
quantity of allowances that it intends to allocate for that period
and how it proposes to allocate them. The plan shall be based
on objective and transparent criteria, including those listed in
Annex III, taking due account of comments from the public.
The Commission shall, without prejudice to the Treaty, by 31
December 2003 at the latest develop guidance on the imple-
mentation of the criteria listed in Annex III.

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For the period referred to in Article 11(1), the plan shall be
published and notified to the Commission and to the other
Member States by 31 March 2004 at the latest. For subsequent
the plan shall be published and notified to the
periods,
Commission and to the other Member States at
least 18
months before the beginning of the relevant period.

National allocation plans shall be considered within the

2.
committee referred to in Article 23(1).

3. Within three months of notification of a national alloca-
tion plan by a Member State under paragraph 1, the Commis-
sion may reject that plan, or any aspect thereof, on the basis
that it is incompatible with the criteria listed in Annex III or
with Article 10. The Member State shall only take a decision
under Article 11(1) or
if proposed amendments are
accepted by the Commission. Reasons shall be given for any
rejection decision by the Commission.

(2)

Article 10

Method of allocation

For the three-year period beginning 1 January 2005 Member
States shall allocate at least 95 % of the allowances free of
charge. For the five-year period beginning 1 January 2008,
Member States shall allocate at least 90 % of the allowances free
of charge.

Article 11

Allocation and issue of allowances

1.
For the three-year period beginning 1 January 2005, each
Member State shall decide upon the total quantity of allow-
ances it will allocate for that period and the allocation of those
allowances to the operator of each installation. This decision
shall be taken at least three months before the beginning of the
period and be based on its national allocation plan developed
pursuant to Article 9 and in accordance with Article 10, taking
due account of comments from the public.

2.
For the five-year period beginning 1 January 2008, and
for each subsequent five-year period, each Member State shall
decide upon the total quantity of allowances it will allocate for
that period and initiate the process for the allocation of those
allowances to the operator of each installation. This decision
shall be taken at least 12 months before the beginning of the
relevant period and be based on the Member State's national
allocation plan developed pursuant to Article 9 and in accor-
dance with Article 10, taking due account of comments from
the public.

The competent authority shall issue a proportion of the
4.
total quantity of allowances each year of the period referred to
in paragraph 1 or 2, by 28 February of that year.

Article 12

Transfer, surrender and cancellation of allowances

1. Member States shall ensure that allowances can be trans-
ferred between:

(a) persons within the Community;

(b) persons within the Community and persons in third coun-
tries, where such allowances are recognised in accordance
with the procedure referred to in Article 25 without restric-
tions other than those contained in, or adopted pursuant
to, this Directive.

2. Member States shall ensure that allowances issued by a
competent authority of another Member State are recognised
for the purpose of meeting an operator's obligations under
paragraph 3.

3. Member States shall ensure that, by 30 April each year at
the latest, the operator of each installation surrenders a number
of allowances equal to the total emissions from that installation
during the preceding calendar year as verified in accordance
with Article 15, and that these are subsequently cancelled.

4. Member States shall take the necessary steps to ensure
that allowances will be cancelled at any time at the request of
the person holding them.

Article 13

Validity of allowances

Allowances shall be valid for emissions during the period

1.
referred to in Article 11(1) or (2) for which they are issued.

Four months after the beginning of the first five-year
2.
period referred to in Article 11(2), allowances which are no
longer valid and have not been surrendered and cancelled in
accordance with Article 12(3) shall be cancelled by the compe-
tent authority.

Member States may issue allowances to persons for the current
period to replace any allowances held by them which are
cancelled in accordance with the first subparagraph.

3.
Decisions taken pursuant to paragraph 1 or 2 shall be in
accordance with the requirements of the Treaty, in particular
Articles 87 and 88 thereof. When deciding upon allocation,
Member States shall take into account the need to provide
access to allowances for new entrants.

3.
Four months after the beginning of each subsequent five-
year period referred to in Article 11(2), allowances which are
no longer valid and have not been surrendered and cancelled in
accordance with Article 12(3) shall be cancelled by the compe-
tent authority.

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Member States shall issue allowances to persons for the current
period to replace any allowances held by them which are
cancelled in accordance with the first subparagraph.

Article 14

Guidelines for monitoring and reporting of emissions

1.
The Commission shall adopt guidelines for monitoring
and reporting of emissions resulting from the activities listed in
Annex I of greenhouse gases specified in relation to those activ-
ities, in accordance with the procedure referred to in Article
23(2), by 30 September 2003. The guidelines shall be based on
the principles for monitoring and reporting set out in Annex
IV.

2. Member States shall ensure that emissions are monitored
in accordance with the guidelines.

3. Member States shall ensure that each operator of an
installation reports the emissions from that installation during
each calendar year to the competent authority after the end of
that year in accordance with the guidelines.

Article 15

Verification

the reports submitted by
Member States shall ensure that
operators pursuant to Article 14(3) are verified in accordance
with the criteria set out in Annex V, and that the competent
authority is informed thereof.

Member States shall ensure that an operator whose report has
not been verified as satisfactory in accordance with the criteria
set out in Annex V by 31 March each year for emissions during
the preceding year cannot make further transfers of allowances
until a report from that operator has been verified as satis-
factory.

Article 16

Penalties

1. Member States shall
lay down the rules on penalties
applicable to infringements of the national provisions adopted
pursuant to this Directive and shall take all measures necessary
to ensure that such rules are implemented. The penalties
provided for must be effective, proportionate and dissuasive.
Member States shall notify these provisions to the Commission
by 31 December 2003 at the latest, and shall notify it without
delay of any subsequent amendment affecting them.

2. Member States shall ensure publication of the names of
operators who are in breach of requirements to surrender suffi-
cient allowances under Article 12(3).

3. Member States shall ensure that any operator who does
not surrender sufficient allowances by 30 April of each year to
cover its emissions during the preceding year shall be held

liable for the payment of an excess emissions penalty. The
excess emissions penalty shall be EUR 100 for each tonne of
carbon dioxide equivalent emitted by that installation for which
the operator has not surrendered allowances. Payment of the
excess emissions penalty shall not release the operator from the
obligation to surrender an amount of allowances equal to those
excess emissions when surrendering allowances in relation to
the following calendar year.

During the three-year period beginning 1 January 2005,
4.
Member States shall apply a lower excess emissions penalty of
EUR 40 for each tonne of carbon dioxide equivalent emitted
by that installation for which the operator has not surrendered
allowances. Payment of the excess emissions penalty shall not
from the obligation to surrender an
release the operator
amount of allowances equal to those excess emissions when
surrendering allowances in relation to the following calendar
year.

Article 17

Access to information

Decisions relating to the allocation of allowances and the
reports of emissions required under the greenhouse gas emis-
sions permit and held by the competent authority shall be
made available to the public by that authority subject to the
restrictions laid down in Article 3(3) and Article 4 of Directive
2003/4/EC.

Article 18

Competent authority

Member States
shall make the appropriate administrative
the appropriate
including the designation of
arrangements,
competent authority or authorities, for the implementation of
the rules of this Directive. Where more than one competent
authority is designated, the work of these authorities under-
taken pursuant to this Directive must be coordinated.

Article 19

Registries

1. Member States shall provide for the establishment and
maintenance of a registry in order to ensure the accurate
accounting of the issue, holding, transfer and cancellation of
allowances. Member States may maintain their registries in a
consolidated system, together with one or more other Member
States.

2.
Any person may hold allowances. The registry shall be
accessible to the public and shall contain separate accounts to
record the allowances held by each person to whom and from
whom allowances are issued or transferred.

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In order to implement this Directive, the Commission
3.
shall adopt a Regulation in accordance with the procedure
referred to in Article 23(2) for a standardised and secured
system of registries in the form of standardised electronic data-
bases containing common data elements to track the issue,
holding, transfer and cancellation of allowances, to provide for
public access and confidentiality as appropriate and to ensure
that
there are no transfers incompatible with obligations
resulting from the Kyoto Protocol.

The Commission shall organise an exchange of informa-
3.
tion between the competent authorities of the Member States
concerning developments relating to issues of allocation, the
operation of registries, monitoring, reporting, verification and
compliance.

Article 22

Amendments to Annex III

Article 20

Central Administrator

The Commission may amend Annex III, with the exception of
criteria (1), (5) and (7), for the period from 2008 to 2012 in
the light of the reports provided for in Article 21 and of the
experience of the application of this Directive, in accordance
with the procedure referred to in Article 23(2).

1.
The Commission shall designate a Central Administrator
to maintain an independent transaction log recording the issue,
transfer and cancellation of allowances.

2.
The Central Administrator shall conduct an automated
check on each transaction in registries through the independent
transaction log to ensure there are no irregularities in the issue,
transfer and cancellation of allowances.

If

3.
irregularities are identified through the automated
check, the Central Administrator shall inform the Member State
or Member States concerned who shall not register the transac-
tions in question or any further transactions relating to the
allowances
irregularities have been
resolved.

concerned until

the

Article 23

Committee

The Commission shall be assisted by the committee insti-

1.
tuted by Article 8 of Decision 93/389/EEC.

2. Where reference is made to this paragraph, Articles 5 and
7 of Decision 1999/468/EC shall apply, having regard to the
provisions of Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC
shall be set at three months.

3.

The Committee shall adopt its rules of procedure.

Article 21

Article 24

Reporting by Member States

Procedures for unilateral inclusion of additional activities
and gases

1.
Each year the Member States shall submit to the Commis-
sion a report on the application of this Directive. This report
shall pay particular attention to the arrangements for the allo-
cation of allowances, the operation of registries, the application
of the monitoring and reporting guidelines, verification and
issues relating to compliance with the Directive and on the
fiscal treatment of allowances, if any. The first report shall be
sent to the Commission by 30 June 2005. The report shall be
drawn up on the basis of a questionnaire or outline drafted by
the Commission in accordance with the procedure laid down
in Article 6 of Directive 91/692/EEC. The questionnaire or
outline shall be sent to Member States at least six months
before the deadline for the submission of the first report.

1.
From 2008, Member States may apply emission allow-
ance trading in accordance with this Directive to activities,
installations and greenhouse gases which are not
listed in
Annex I, provided that inclusion of such activities, installations
and greenhouse gases is approved by the Commission in accor-
dance with the procedure referred to in Article 23(2), taking
into account all relevant criteria,
in particular effects on the
internal market, potential distortions of competition, the envir-
onmental integrity of the scheme and reliability of the planned
monitoring and reporting system.

From 2005 Member States may under the same conditions
apply emissions allowance trading to installations carrying out
activities listed in Annex I below the capacity limits referred to
in that Annex.

2.
On the basis of the reports referred to in paragraph 1, the
Commission shall publish a report on the application of this
Directive within three months of receiving the reports from the
Member States.

2.
Allocations made to installations carrying out such activ-
ities shall be specified in the national allocation plan referred to
in Article 9.

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The Commission may, on its own initiative, or shall, on
3.
request by a Member State, adopt monitoring and reporting
guidelines for emissions from activities, installations and green-
house gases which are not listed in Annex I in accordance with
the procedure referred to in Article 23(2), if monitoring and
reporting of these emissions can be carried out with sufficient
accuracy.

The three preceding subparagraphs shall not apply to
installations temporarily excluded from the scheme for
greenhouse gas emission allowance trading within the
Community in accordance with Article 27 of Directive
2003/87/EC.

(*) OJ L 275, 25.10.2003, p. 32.’

4.
In the event that such measures are introduced, reviews
carried out pursuant to Article 30 shall also consider whether
Annex I should be amended to include emissions from these
activities in a harmonised way throughout the Community.

Article 25

Links with other greenhouse gas emissions

trading

schemes

Agreements should be concluded with third countries
1.
listed in Annex B to the Kyoto Protocol which have ratified the
Protocol to provide for the mutual recognition of allowances
between the Community scheme and other greenhouse gas
emissions trading schemes in accordance with the rules set out
in Article 300 of the Treaty.

2. Where an agreement referred to in paragraph 1 has been
concluded, the Commission shall draw up any necessary provi-
sions relating to the mutual recognition of allowances under
that agreement in accordance with the procedure referred to in
Article 23(2).

Article 27

Temporary exclusion of certain installations

1. Member States may apply to the Commission for installa-
tions to be temporarily excluded until 31 December 2007 at
the latest from the Community scheme. Any such application
shall list each such installation and shall be published.

If, having considered any comments made by the public
2.
on that application, the Commission decides,
in accordance
with the procedure referred to in Article 23(2), that the installa-
tions will:

(a) as a result of national policies,

limit their emissions as
much as would be the case if they were subject to the
provisions of this Directive;

(b) be subject to monitoring, reporting and verification require-
ments which are equivalent to those provided for pursuant
to Articles 14 and 15; and

(c) be subject to penalties at least equivalent to those referred
to in Article 16(1) and (4) in the case of non-fulfilment of
national requirements;

Article 26

it shall provide for the temporary exclusion of those installa-
tions from the Community scheme.

Amendment of Directive 96/61/EC

It must be ensured that there will be no distortion of the
internal market.

In Article 9(3) of Directive 96/61/EC the following subpara-
graphs shall be added:

‘Where emissions of a greenhouse gas from an installation
are specified in Annex I to 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 (*)
in relation to an activity
carried out in that installation, the permit shall not include
an emission limit value for direct emissions of that gas
unless it is necessary to ensure that no significant local
pollution is caused.

For activities listed in Annex I to Directive 2003/87/EC,
Member States may choose not to impose requirements
relating to energy efficiency in respect of combustion units
or other units emitting carbon dioxide on the site.

Where necessary, the competent authorities shall amend
the permit as appropriate.

Article 28

Pooling

1. Member States may allow operators of
installations
carrying out one of the activities listed in Annex I to form a
installations from the same activity for the period
pool of
referred to in Article 11(1) and/or the first five-year period
referred to in Article 11(2) in accordance with paragraphs 2 to
6 of this Article.

2.
Operators carrying out an activity listed in Annex I who
wish to form a pool shall apply to the competent authority,
specifying the installations and the period for which they want
the pool and supplying evidence that a trustee will be able to
fulfil the obligations referred to in paragraphs 3 and 4.

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25.10.2003

Operators wishing to form a pool shall nominate a

3.
trustee:

Article 30

(a) to be issued with the total quantity of allowances calculated
by installation of the operators, by way of derogation from
Article 11;

(b) to be responsible for surrendering allowances equal to the
total emissions from installations in the pool, by way of
derogation from Articles 6(2)(e) and 12(3); and

(c) to be restricted from making further transfers in the event
that an operator's report has not been verified as satisfac-
tory in accordance with the second paragraph of Article
15.

4.
The trustee shall be subject to the penalties applicable for
breaches of requirements to surrender sufficient allowances to
cover the total emissions from installations in the pool, by way
of derogation from Article 16(2), (3) and (4).

5.
A Member State that wishes to allow one or more pools
to be formed shall submit the application referred to in para-
graph 2 to the Commission. Without prejudice to the Treaty,
the Commission may within three months of receipt reject an
application that does not fulfil the requirements of this Direc-
tive. Reasons shall be given for any such decision. In the case
of rejection the Member State may only allow the pool to be
formed if proposed amendments are accepted by the Commis-
sion.

Review and further development

1.
On the basis of progress achieved in the monitoring of
emissions of greenhouse gases, the Commission may make a
proposal to the European Parliament and the Council by 31
December 2004 to amend Annex I to include other activities
and emissions of other greenhouse gases listed in Annex II.

2.
On the basis of experience of the application of this
Directive and of progress achieved in the monitoring of emis-
sions of greenhouse gases and in the light of developments in
the international context, the Commission shall draw up a
report on the application of this Directive, considering:

(a) how and whether Annex I should be amended to include
other relevant sectors, inter alia the chemicals, aluminium
and transport sectors, activities and emissions of other
greenhouse gases listed in Annex II, with a view to further
improving the economic efficiency of the scheme;

(b) the relationship of Community emission allowance trading
with the international emissions trading that will start in
2008;

(c) further harmonisation of

allocation
(including auctioning for the time after 2012) and of the
criteria for national allocation plans referred to in Annex
III;

the method of

In the event that the trustee fails to comply with penalties
6.
referred to in paragraph 4, each operator of an installation in
the pool shall be responsible under Articles 12(3) and 16 in
respect of emissions from its own installation.

(e) the relationship of emissions trading with other policies
and measures implemented at Member State and Com-
munity level,
that pursue the same
objectives;

including taxation,

(d) the use of credits from project mechanisms;

(f) whether it is appropriate for there to be a single Com-

munity registry;

Article 29

(g) the level of excess emissions penalties, taking into account,

inter alia, inflation;

Force majeure

(h) the functioning of the allowance market, covering in parti-

cular any possible market disturbances;

1.
During the period referred to in Article 11(1), Member
States may apply to the Commission for certain installations to
be issued with additional allowances in cases of force majeure.
The Commission shall determine whether
is
demonstrated, in which case it shall authorise the issue of addi-
tional and non-transferable allowances by that Member State to
the operators of those installations.

force majeure

(i) how to adapt

the Community scheme to an enlarged

European Union;

(j) pooling;

(k) the practicality of developing Community-wide benchmarks
as a basis for allocation, taking into account the best avail-
able techniques and cost-benefit analysis.

2.
The Commission shall, without prejudice to the Treaty,
develop guidance to describe the circumstances under which
force majeure is demonstrated, by 31 December 2003 at the
latest.

The Commission shall submit
to the European
Parliament and the Council by 30 June 2006, accompanied by
proposals as appropriate.

this report

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Official Journal of the European Union

L 275/41

Linking the project-based mechanisms,

including Joint
3.
Implementation (JI) and the Clean Development Mechanism
(CDM), with the Community scheme is desirable and important
to achieve the goals of both reducing global greenhouse gas
emissions and increasing the cost-effective functioning of the
Community scheme. Therefore, the emission credits from the
project-based mechanisms will be recognised for their use in
this scheme subject to provisions adopted by the European
Parliament and the Council on a proposal from the Commis-
sion, which should apply in parallel with the Community
scheme in 2005. The use of the mechanisms shall be supple-
mental to domestic action,
in accordance with the relevant
provisions of the Kyoto Protocol and Marrakesh Accords.

Article 31

Implementation

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 31 December 2003 at the latest. They shall forth-
with inform the Commission thereof. The Commission shall
notify the other Member States of these laws, regulations and
administrative provisions.

When Member States adopt these measures, they shall contain
a reference to this Directive or be accompanied by such a refer-
ence on the occasion of their official publication. The methods
of making such reference shall be laid down by Member States.

2. Member States shall communicate to the Commission the
text of the provisions of national law which they adopt in the
field covered by this Directive. The Commission shall inform
the other Member States thereof.

Article 32

Entry into force

This Directive shall enter into force on the day of its publica-
tion in the Official Journal of the European Union.

Article 33

Addressees

This Directive is addressed to the Member States.

Done at Luxembourg, 13 October 2003.

For the European Parliament

The President

P. COX

For the Council

The President

G. ALEMANNO

L 275/42

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Official Journal of the European Union

25.10.2003

ANNEX I

CATEGORIES OF ACTIVITIES REFERRED TO IN ARTICLES 2(1), 3, 4, 14(1), 28 AND 30

1. Installations or parts of installations used for research, development and testing of new products and processes are

not covered by this Directive.

2. The threshold values given below generally refer to production capacities or outputs. Where one operator carries out
several activities falling under the same subheading in the same installation or on the same site, the capacities of such
activities are added together.

Activities

Greenhouse gases

Energy activities

Combustion installations with a rated thermal input exceeding 20 MW (except
hazardous or municipal waste installations)

Carbon dioxide

Mineral oil refineries

Coke ovens

Production and processing of ferrous metals

Metal ore (including sulphide ore) roasting or sintering installations

Installations for the production of pig iron or steel (primary or secondary fusion)
including continuous casting, with a capacity exceeding 2,5 tonnes per hour

Mineral industry

Installations for the production of cement clinker in rotary kilns with a produc-
tion capacity exceeding 500 tonnes per day or lime in rotary kilns with a produc-
tion capacity exceeding 50 tonnes per day or in other furnaces with a production
capacity exceeding 50 tonnes per day

Carbon dioxide

Carbon dioxide

Carbon dioxide

Carbon dioxide

Carbon dioxide

Installations for the manufacture of glass including glass fibre with a melting capa-
city exceeding 20 tonnes per day

Carbon dioxide

Installations for the manufacture of ceramic products by firing,
in particular
roofing tiles, bricks, refractory bricks, tiles, stoneware or porcelain, with a produc-
tion capacity exceeding 75 tonnes per day, and/or with a kiln capacity exceeding
4 m3 and with a setting density per kiln exceeding 300 kg/m3

Carbon dioxide

Other activities

Industrial plants for the production of
(a) pulp from timber or other fibrous materials

Carbon dioxide

(b) paper and board with a production capacity exceeding 20 tonnes per day

Carbon dioxide

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L 275/43

ANNEX II

GREENHOUSE GASES REFERRED TO IN ARTICLES 3 AND 30

Carbon dioxide (CO2)

Methane (CH4)

Nitrous Oxide (N2O)

Hydrofluorocarbons (HFCs)

Perfluorocarbons (PFCs)

Sulphur Hexafluoride (SF6)

ANNEX III

CRITERIA FOR NATIONAL ALLOCATION PLANS REFERRED TO IN ARTICLES 9, 22 AND 30

1. The total quantity of allowances to be allocated for the relevant period shall be consistent with the Member State's
obligation to limit its emissions pursuant to Decision 2002/358/EC and the Kyoto Protocol, taking into account, on
the one hand, the proportion of overall emissions that these allowances represent in comparison with emissions
from sources not covered by this Directive and, on the other hand, national energy policies, and should be consis-
tent with the national climate change programme. The total quantity of allowances to be allocated shall not be more
than is likely to be needed for the strict application of the criteria of this Annex. Prior to 2008, the quantity shall be
consistent with a path towards achieving or over-achieving each Member State's target under Decision 2002/358/
EC and the Kyoto Protocol.

2. The total quantity of allowances to be allocated shall be consistent with assessments of actual and projected progress
towards fulfilling the Member States' contributions to the Community's commitments made pursuant to Decision
93/389/EEC.

3. Quantities of allowances to be allocated shall be consistent with the potential, including the technological potential,
of activities covered by this scheme to reduce emissions. Member States may base their distribution of allowances
on average emissions of greenhouse gases by product in each activity and achievable progress in each activity.

4. The plan shall be consistent with other Community legislative and policy instruments. Account should be taken of

unavoidable increases in emissions resulting from new legislative requirements.

5. The plan shall not discriminate between companies or sectors in such a way as to unduly favour certain undertak-

ings or activities in accordance with the requirements of the Treaty, in particular Articles 87 and 88 thereof.

6. The plan shall contain information on the manner in which new entrants will be able to begin participating in the

Community scheme in the Member State concerned.

7. The plan may accommodate early action and shall contain information on the manner in which early action is
taken into account. Benchmarks derived from reference documents concerning the best available technologies may
be employed by Member States in developing their National Allocation Plans, and these benchmarks can incorporate
an element of accommodating early action.

8. The plan shall contain information on the manner in which clean technology, including energy efficient technolo-

gies, are taken into account.

9. The plan shall include provisions for comments to be expressed by the public, and contain information on the
arrangements by which due account will be taken of these comments before a decision on the allocation of allow-
ances is taken.

10. The plan shall contain a list of the installations covered by this Directive with the quantities of allowances intended

to be allocated to each.

11. The plan may contain information on the manner in which the existence of competition from countries or entities

outside the Union will be taken into account.

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25.10.2003

PRINCIPLES FOR MONITORING AND REPORTING REFERRED TO IN ARTICLE 14(1)

ANNEX IV

Monitoring of carbon dioxide emissions

Emissions shall be monitored either by calculation or on the basis of measurement.

Calculation

Calculations of emissions shall be performed using the formula:

Activity data × Emission factor × Oxidation factor

Activity data (fuel used, production rate etc.) shall be monitored on the basis of supply data or measurement.

Accepted emission factors shall be used. Activity-specific emission factors are acceptable for all fuels. Default factors are
acceptable for all fuels except non-commercial ones (waste fuels such as tyres and industrial process gases). Seam-specific
defaults for coal, and EU-specific or producer country-specific defaults for natural gas shall be further elaborated. IPCC
default values are acceptable for refinery products. The emission factor for biomass shall be zero.

If the emission factor does not take account of the fact that some of the carbon is not oxidised, then an additional oxida-
tion factor shall be used. If activity-specific emission factors have been calculated and already take oxidation into
account, then an oxidation factor need not be applied.

Default oxidation factors developed pursuant to Directive 96/61/EC shall be used, unless the operator can demonstrate
that activity-specific factors are more accurate.

A separate calculation shall be made for each activity, installation and for each fuel.

Measurement

Measurement of emissions shall use standardised or accepted methods, and shall be corroborated by a supporting calcu-
lation of emissions.

Monitoring of emissions of other greenhouse gases

Standardised or accepted methods shall be used, developed by the Commission in collaboration with all relevant stake-
holders and adopted in accordance with the procedure referred to in Article 23(2).

Reporting of emissions

Each operator shall include the following information in the report for an installation:

A. Data identifying the installation, including:

— Name of the installation;
— Its address, including postcode and country;
— Type and number of Annex I activities carried out in the installation;
— Address, telephone, fax and email details for a contact person; and
— Name of the owner of the installation, and of any parent company.

B. For each Annex I activity carried out on the site for which emissions are calculated:

— Activity data;
— Emission factors;
— Oxidation factors;
— Total emissions; and
— Uncertainty.

C. For each Annex I activity carried out on the site for which emissions are measured:

— Total emissions;
— Information on the reliability of measurement methods; and
— Uncertainty.

D. For emissions from combustion, the report shall also include the oxidation factor, unless oxidation has already been

taken into account in the development of an activity-specific emission factor.

Member States shall take measures to coordinate reporting requirements with any existing reporting requirements in
order to minimise the reporting burden on businesses.

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ANNEX V

CRITERIA FOR VERIFICATION REFERRED TO IN ARTICLE 15

General Principles

1. Emissions from each activity listed in Annex I shall be subject to verification.

2. The verification process shall include consideration of the report pursuant to Article 14(3) and of monitoring
during the preceding year. It shall address the reliability, credibility and accuracy of monitoring systems and the
reported data and information relating to emissions, in particular:

(a) the reported activity data and related measurements and calculations;

(b) the choice and the employment of emission factors;

(c) the calculations leading to the determination of the overall emissions; and

(d) if measurement is used, the appropriateness of the choice and the employment of measuring methods.

3. Reported emissions may only be validated if reliable and credible data and information allow the emissions to be

determined with a high degree of certainty. A high degree of certainty requires the operator to show that:

(a) the reported data is free of inconsistencies;

(b) the collection of the data has been carried out in accordance with the applicable scientific standards; and

(c) the relevant records of the installation are complete and consistent.

4. The verifier shall be given access to all sites and information in relation to the subject of the verification.

5. The verifier shall take into account whether the installation is registered under the Community eco-management

and audit scheme (EMAS).

Methodology

Stra te g i c a nalysi s

6. The verification shall be based on a strategic analysis of all the activities carried out in the installation. This

requires the verifier to have an overview of all the activities and their significance for emissions.

Proc e ss a nalysis

7. The verification of the information submitted shall, where appropriate, be carried out on the site of the installation.

The verifier shall use spot-checks to determine the reliability of the reported data and information.

R i sk a na ly si s

8. The verifier shall submit all the sources of emissions in the installation to an evaluation with regard to the relia-

bility of the data of each source contributing to the overall emissions of the installation.

9. On the basis of this analysis the verifier shall explicitly identify those sources with a high risk of error and other
aspects of the monitoring and reporting procedure which are likely to contribute to errors in the determination of
the overall emissions. This especially involves the choice of the emission factors and the calculations necessary to
determine the level of the emissions from individual sources. Particular attention shall be given to those sources
with a high risk of error and the abovementioned aspects of the monitoring procedure.

10. The verifier shall take into consideration any effective risk control methods applied by the operator with a view to

minimising the degree of uncertainty.

R e p or t

11. The verifier shall prepare a report on the validation process stating whether the report pursuant to Article 14(3) is
satisfactory. This report shall specify all issues relevant to the work carried out. A statement that the report
pursuant to Article 14(3) is satisfactory may be made if, in the opinion of the verifier, the total emissions are not
materially misstated.

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M i n i mu m c ompe te nc y r eq u i r e men ts f or the v e r i f i e r

12. The verifier shall be independent of the operator, carry out his activities in a sound and objective professional

manner, and understand:

(a) the provisions of this Directive, as well as relevant standards and guidance adopted by the Commission

pursuant to Article 14(1);

(b) the legislative, regulatory, and administrative requirements relevant to the activities being verified; and

(c) the generation of all information related to each source of emissions in the installation, in particular, relating

to the collection, measurement, calculation and reporting of data.