Communication from the Commission to the Council AND to the European Parliament on Commission Decisions of 20 October 2004 concerning national allocation plans for the allocation of greenhouse gas emission allowances of Belgium, Estonia, Finland, France, Latvia, Luxembourg, Portugal, and the Slovak Republic in accordance with Directive 2003/87/EC
Date: 2004-10-20
Institutions: European Commission
Subjects: Belgium, EU environmental policy, Estonia, Finland, France, Latvia, Luxembourg, Slovakia, environmental law, reduction of gas emissions, tradeable emission permit

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 20.10.2004 
COM(2004) 681 final 

COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL AND TO THE EUROPEAN PARLIAMENT 

on Commission Decisions of 20 October 2004 concerning national allocation plans  
for the allocation of greenhouse gas emission allowances of Belgium, Estonia, Finland, 
France, Latvia, Luxembourg, Portugal, and the Slovak Republic in accordance  
with Directive 2003/87/EC 

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1. 

INTRODUCTION 

Combating  climate  change  is  an  important  objective  of  the  European  Union.  The  EU  has 
decided  to  do  this  by  implementing  its  obligations  under  the  Kyoto  Protocol,  a  multilateral 
agreement  to  tackle  this  global  problem  through  multilateral  co-operation.  Working  closely 
with  Member  States,  industry,  civil  society  and  academia,  a  European  Climate  Change 
Programme (ECCP) has been developed to help the EU find cost-effective ways of meeting 
its Kyoto Protocol commitments. A key proposal from the ECCP was the creation of an EU- 
wide emission trading system to help the EU to reduce its emissions of greenhouse gases. In 
2003  the  Council  and  Parliament  adopted  Directive  2003/87/EC  providing  for  EU-wide 
emissions trading from January 2005.  

The first phase of EU emissions trading covers CO2 emissions from over 12,000 installations. 
Each  Member  State  has  to  draw  up  a  national  plan  for  allocating  tradable  allowances  and 
submit  it  to  the  Commission  for  assessment.  The  plans  shall  be  based  on  objective  and 
transparent criteria, including those listed in Annex III of the Directive. The Commission may 
reject the national plans, in whole or in part that do not comply with these criteria. In order to 
help  the  Member  States  prepare  their  plans,  the  Commission  has  adopted  guidance1  on  the 
implementation of the criteria set out in the Directive. 

This  Communication  builds  on  COM(2004)  5002  which  explained  the  grounds  for  the 
Commission’s  Decisions  on  the  National  Allocation  Plans  of  Austria,  Denmark,  Germany, 
Ireland,  the  Netherlands,  Slovenia,  Sweden  and  the  United  Kingdom,  and  sets  out  the 
Commission’s  assessment  of  a  further  eight  national  plans.  One  of  the  reasons  why  the 
Commission  was  given  responsibility  under  the  Directive  to  assess  the  national  allocation 
plans is to ensure that the Directive’s criteria have been correctly applied in the distribution of 
tradable  allowances  before  trading  starts.  In  a  single  EU  internal  market  and  a  single  EU 
emissions trading scheme it is important to guard against distortion of competition through an 
incorrect application of the Directive or Treaty provisions. This is the first time that the EU 
has engaged in EU-wide emissions trading and the first trading period, from 2005-2007, has 
been  designed  as  a  “learning  phase”.  It  is  in  the  interest  of  all  Member  States  that  this 
instrument contributes towards the EU’s climate change goals, and does so in a cost-efficient 
manner. However, if more allowances were issued by Member States than the likely quantity 
of actual emissions from the installations covered, little or no environmental benefit would be 
provided  by  the  Directive.  The  development  of  clean  and  new  technologies  would  be 
hampered, and the development of a dynamic and liquid market would be undermined. 

2. 

NUMBER OF NATIONAL ALLOCATION PLANS SUBMITTED 

As  at  14  October  2004,  22  Member  States  have  notified  a  national  allocation  plan  to  the 
Commission. Eight of these were assessed in July 2004 and a further eight (Belgium, Estonia, 

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Communication  on  guidance  to  assist  Member  States  in  the  implementation  of  the  criteria  listed  in 
Annex  III  to  Directive  2003/87/EC  establishing  a  scheme  for  greenhouse  gas  emission  allowance 
trading within the Community and amending Council Directive 96/61/EC, COM(2003) 830 final of 7 
January 2004. 
Communication on Commission Decisions of 7 July 2004 concerning national allocation plans for the 
allocation  of  greenhouse  gas  emission  allowances  of  Austria,  Denmark,  Germany,  Ireland,  the 
Netherlands, Slovenia, Sweden, and the United Kingdom in accordance with Directive 2003/87/EC. 

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Finland,  France,  Latvia,  Luxembourg,  Portugal,  and  the  Slovak  Republic)  are  sufficiently 
complete  to  allow  the  Commission  to  take  a  decision  on  their  compatibility  with  the 
Directive. These further eight plans represent about 15 % of the estimated overall quantity of 
allowances  for  the  first  trading  period,  bringing  the  total  to  close  to  60  %  of  the  expected 
volume in circulation. 

3. 

ASSESSMENT OF NATIONAL ALLOCATION PLANS 

Each national plan received has been assessed in a manner fully consistent with the Decisions 
adopted for the first eight Member States on 7 July 2004, and explained in COM(2004)500.  

In  analysing  the  plans,  the  Commission  has  again  grouped  the  elements  it  has  found  to 
contravene  one  or  more  of  the  11  criteria  of  the  Directive  under  the  following  headings: 
consistency  with  each  Member  State’s  Kyoto  Protocol  commitments  (“the  path  to  Kyoto”); 
ex-post adjustments; transfer rules; the design and management of any new entrant reserve. In 
some of the plans included in this second set of Decisions, the Commission has furthermore 
identified  incompatibilities  with  assessments  under  Decision  280/2004/EC.  Each  of  these 
groupings is covered in the following sections. 

3.1. 

Consistency with assessments pursuant to Decision 280/2004/EC 

Pursuant  to  Decision  280/2004/EC3  the  Commission  undertakes  an  annual  assessment  of 
actual  and  projected  emissions  of  Member  States,  in  total  and  by  sector  and  by  gas.  These 
assessments are prepared in close cooperation with Member States. The Guidance Document 
states:  “Consistency  would  not  be  ensured  if  a  Member  State  intended  to  allocate  a  total 
quantity  of  allowances  in  excess  of  actual  or  projected  emission  of  covered  installations  as 
reported in the assessment for the relevant period.” 

The  Commission  finds  that  the  plans  of  Estonia,  Latvia  and  the  Slovak  Republic  are 
compatible with criterion (2) taking into account the reduced total quantity of allowances in 
the three plans. 

3.2. 

Consistency with a path to Kyoto 

In total, Belgium and Luxembourg intend to purchase a minimum of 56 million Kyoto units4. 
Portugal,  while  indicating  the  intention  to  purchase  Kyoto  units,  has  not  quantified  them  in 
the plan and so no account of the intention has been taken in assessing the plan. 

The Commission has based its assessment on the eight elements outlined in COM(2004) 500.  

Belgium intends to purchase a minimum of 41 million Kyoto units and has made substantial 
progress on the eight elements referred to COM(2004) 500. Notably it has committed at this 
stage financial resources of more than €120 million for the purchase of Kyoto units. Taking 
into  account  the  reduced  total  quantity  of  allowances,  the  Commission  does  not  find  the 
Belgian plan to contravene criterion (1). 

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Decision 280/2004/EC of the European Parliament and of the Council of 11 February 2004 concerning 
a  mechanism  for  monitoring  Community  greenhouse  gas  emissions  and  for  implementing  the  Kyoto 
Protocol, OJ L 49, 19.2.2004, p. 1. 
Luxembourg – 15 million, Belgium – at least 41 million.  

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Luxembourg  has  stated  the  intention  to  purchase  15  million  Kyoto  units.  The  Luxembourg 
authorities  notified  to  the  Commission  on  6  October  2004  the  commitments  to  establish  a 
legal base in the law transposing Directive 2003/87/EC and set up a special climate fund, to 
commit financial resources for the climate fund in the budget for 2005, and to establish and 
notify  to  the  UN  Climate  Secretariat  the  Ministry  of  the  Environment  as  the  designated 
national  authority.  Taking  into  account  the  above  described  changes  and  the  reduced  total 
quantity of allowances, the Commission does not find the plan of Luxembourg to contravene 
criterion (1).  

3.3. 

Ex-post adjustments 

Businesses need certainty in order to have the confidence necessary to make new investments. 
Ex-post adjustments undermine this confidence by creating uncertainty.  

Ex-post adjustments were disallowed wherever present in earlier national allocation plans in 
the  Commission  Decisions  on  national  allocation  plans  taken  on  7  July  2004.  Furthermore, 
some  Member  States  amended  their  plans  prior  to  those  Decisions  to  remove  ex-post 
adjustments, and other Member States have amended their plans likewise to remove ex-post 
adjustments before the adoption of the present Decisions. 

3.4. 

New entrant reserves 

The  Commission  notes  that  all  plans  assessed  foresee  the  establishment  of  new  entrant 
reserves.  

3.5. 

Issues specific to individual plans 

Finland’s plan does include a list of installations to be covered, but the list does not include 
the quantities to be allocated for each installation on the Ǻland Islands. The list required by 
criterion (10) is therefore incomplete. 

France  has  notified  that  it  will  include  about  800  further  installations  in  addition  to  those 
notified  originally.  Further  details,  including  the  number  of  allowances  to  be  allocated  to 
these installations, have not yet been notified and so the list is incomplete. The Commission 
finds  furthermore  that  a  share  of  the  allocation  intended  to  the  special  reserve  for  growth 
contravenes  criterion  (5)  as  it  is  based  on  over-estimated  growth  figures,  and  would  unduly 
favour certain undertakings and activities.  

Table  1  below  summarises  the  assessment  of  the  Commission  and  indicates  which  criteria 
have been contravened by individual plans. 

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Table 1 

Belgium 

Estonia 

Finland 

France 

Latvia 

Luxembourg 

Portugal 

Slovak 
Republic 

(1) Kyoto 

(2) Emissions development 

(3) Potential 

(4) Other legislation 

(5) Non-discrimination 

(6) New entrants 

(7) Early action 

(8) Clean technologies 

(9) Public consultation 

(10)  List  of 
with quantity for each one 

installations 

(11) Outside competition 

Article 10 

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REJECT 

REJECT 

REJECT 

5 
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