Directive 2004/101/EC of the European Parliament and of the Council of 27 October 2004 amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community, in respect of the Kyoto Protocol's project mechanismsText with EEA relevance
Date: 2004-10-27
Institutions: Council of the European Union, European Parliament
Subjects: EU environmental policy, air quality, greenhouse gas, pollution control measures, reduction of gas emissions, tradeable emission permit

L 338/18

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Official Journal of the European Union

13.11.2004

DIRECTIVE 2004/101/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 27 October 2004

amending Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading
within the Community, in respect of the Kyoto Protocol’s project mechanisms

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EURO-
PEAN UNION,

(2)

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

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and
Social Committee (1),

After consulting the Committee of the Regions,

Acting in accordance with the procedure laid down in Article 251
of the Treaty (2),

Whereas:

(1)

Directive 2003/87/EC (3) establishes a scheme for green-
house gas emission allowance trading within the Commu-
nity (the Community scheme) in order to promote reduc-
tions of greenhouse gas emissions in a cost-effective and
economically efficient manner, recognising that, in the
longer-term, global emissions of greenhouse gases will
need to be reduced by approximately 70 % compared to
1990 levels. It aims at contributing towards fulfilling the
commitments of the Community and its Member States to
reduce anthropogenic greenhouse gas emissions under the
Kyoto Protocol which was
approved by Council
Decision 2002/358/EC of 25 April 2002 concerning the
approval, on behalf of the European Community, of the
Kyoto Protocol to the United Nations Framework Conven-
tion on Climate Change and the joint fulfilment of com-
mitments thereunder (4).

Directive 2003/87/EC states that the recognition of credits
from project-based mechanisms for fulfilling obligations as
from 2005 will increase the cost-effectiveness of achieving
reductions of global greenhouse gas emissions and shall be
provided for by provisions for linking the Kyoto project-
based mechanisms, including joint implementation (JI) and
the clean development mechanism (CDM), with the Com-
munity scheme.

(3)

(4)

Linking the Kyoto project-based mechanisms to the Com-
munity scheme, while safeguarding the latter’s environ-
mental integrity, gives the opportunity to use emission
credits generated through project activities eligible pursu-
ant to Articles 6 and 12 of the Kyoto Protocol in order to
fulfil Member States’ obligations in accordance with
Article 12(3) of Directive 2003/87/EC. As a result, this will
increase the diversity of low-cost compliance options
within the Community scheme leading to a reduction of
the overall costs of compliance with the Kyoto Protocol
while improving the liquidity of the Community market in
greenhouse gas emission allowances. By stimulating
demand for JI credits, Community companies will invest in
the development and transfer of advanced environmentally
sound technologies and know-how. The demand for CDM
credits will also be stimulated and thus developing coun-
tries hosting CDM projects will be assisted in achieving
their sustainable development goals.

In addition to the use of the Kyoto project-based mecha-
nisms by the Community and its Member States, and by
companies and individuals outside the Community
scheme, those mechanisms should be linked to the Com-
munity scheme in such a way as to ensure consistency with
the United Nations Framework Convention on Climate
Change (UNFCCC) and the Kyoto Protocol and subsequent
decisions adopted thereunder as well as with the objectives
and architecture of the Community scheme and provisions
laid down by Directive 2003/87/EC.

(1) OJ C 80, 30.3.2004, p. 61.
(2) Opinion of the European Parliament of 20 April 2004 (not yet pub-
lished in the Official Journal) and Council Decision of 13 September
2004 (not yet published in the Official Journal).

(5)

(3) OJ L 275, 25.10.2003, p. 32.
(4) OJ L 130, 15.5.2002, p. 1.

scheme,

certified emission reductions

Member States may allow operators to use, in the Commu-
nity
(CERs)
from 2005 and emission reduction units (ERUs) from
2008. The use of CERs and ERUs by operators from 2008
may be allowed up to a percentage of the allocation to

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Official Journal of the European Union

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each installation, to be specified by each Member State in
its national allocation plan. The use will take place through
the issue and immediate surrender of one allowance in
exchange for one CER or ERU. An allowance issued in
exchange for a CER or ERU will correspond to that CER or
ERU.

provisions relating to the outcome of the evaluation of
potential risks associated with the use of genetically modi-
fied organisms and potentially invasive alien species in
afforestation and reforestation project activities, to allow
operators to use CERs and ERUs resulting from land use,
land use change and forestry project activities in the Com-
munity scheme from 2008, in accordance with the deci-
sions adopted pursuant to the UNFCCC or the Kyoto
Protocol.

(6)

(7)

(8)

(9)

6(1)

2003/87/EC and Article

The Commission Regulation for a standardised and secured
system of registries, to be adopted pursuant to Article 19(3)
of Directive
of
Decision No 280/2004/EC of the European Parliament and
of the Council of 11 February 2004 concerning a mecha-
nism for monitoring Community greenhouse gas emis-
sions and for implementing the Kyoto Protocol (1), will
provide for the relevant processes and procedures in the
registries system for the use of CERs during the period
2005 to 2007 and subsequent periods, and for the use of
ERUs during the period 2008 to 2012 and subsequent
periods.

Each Member State will decide on the limit for the use of
CERs and ERUs from project activities, having due regard
to the relevant provisions of the Kyoto Protocol and the
Marrakesh Accords, to meet the requirements therein that
the use of the mechanisms should be supplemental to
domestic action. Domestic action will thus constitute a sig-
nificant element of the effort made.

In accordance with the UNFCCC and the Kyoto Protocol
and subsequent decisions adopted thereunder, Member
States are to refrain from using CERs and ERUs generated
from nuclear facilities to meet their commitments pursu-
ant to Article 3(1) of the Kyoto Protocol and pursuant to
Decision 2002/358/EC.

Decisions 15/CP.7 and 19/CP.7 adopted pursuant to the
UNFCCC and the Kyoto Protocol emphasise that environ-
mental integrity is to be achieved, inter alia, through sound
modalities, rules and guidelines for the mechanisms, and
through sound and strong principles and rules governing
land use, land-use change and forestry activities, and that
the issues of non-permanence, additionality,
leakage,
uncertainties and socioeconomic and environmental
impacts, including impacts on biodiversity and natural
ecosystems, associated with afforestation and reforestation
project activities are to be taken into account. The Com-
mission should consider,
in its review of Directive
2003/87/EC in 2006, technical provisions relating to the
temporary nature of credits and the limit of 1 % for eligi-
bility for land use, land-use change and forestry project
activities as established in Decision 17/CP.7, and also

(1) OJ L 49, 19.2.2004, p. 1.

(10)

In order to avoid double counting, CERs and ERUs should
not be issued as a result of project activities undertaken
within the Community that also lead to a reduction in, or
limitation of, emissions from installations covered by
Directive 2003/87/EC, unless an equal number of allow-
ances is cancelled from the registry of the Member State of
the CERs’ or ERUs’ origin.

(11)

In accordance with the relevant treaties of accession, the
acquis communautaire should be taken into account in the
establishment of baselines for project activities undertaken
in countries acceding to the Union.

(12) Any Member State that authorises private or public enti-
ties to participate in project activities remains responsible
for the fulfilment of its obligations under the UNFCCC and
the Kyoto Protocol and should therefore ensure that such
participation is consistent with the relevant guidelines,
modalities and procedures adopted pursuant
to the
UNFCCC or the Kyoto Protocol.

(13)

In accordance with the UNFCCC, the Kyoto Protocol and
subsequent decisions adopted for their implementation,
the Commission and the Member States should support
capacity building activities in developing countries and
countries with economies in transition in order to help
them take full advantage of JI and the CDM in a manner
that supports their sustainable development strategies. The
Commission should review and report on efforts in this
regard.

(14)

Criteria and guidelines that are relevant to considering
whether hydroelectric power production projects have
negative environmental or social impacts have been iden-
tified by the World Commission on Dams in its November
2000 Report ‘Dams and Development — A New Frame-
work for Decision-Making’, by the OECD and by the World
Bank.

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(15)

Since participation in JI and CDM project activities is vol-
untary, corporate environmental and social responsibility
and accountability should be enhanced in accordance with
paragraph 17 of the Plan of implementation of the world
summit on sustainable development. In this connection,
companies should be encouraged to improve the social
and environmental performance of JI and CDM activities in
which they participate.

(16)

Information on project activities in which a Member State
participates or authorises private or public entities to par-
ticipate should be made available to the public in accor-
dance with Directive 2003/4/EC of the European Parlia-
ment and of the Council of 28 January 2003 on public
access to environmental information (1).

Article 1

Amendments to Directive 2003/87/EC

Directive 2003/87/EC is hereby amended as follows:

1.

In Article 3, the following points are added:

‘(k) “Annex I Party” means a Party listed in Annex I to the
United Nations Framework Convention on Climate
Change (UNFCCC) that has ratified the Kyoto Protocol as
specified in Article 1(7) of the Kyoto Protocol;

(17)

The Commission may mention impacts on the electricity
market in its reports on emission allowance trading and
the use of credits from project activities.

(l)

“project activity” means a project activity approved by
one or more Annex I Parties in accordance with Article 6
or Article 12 of the Kyoto Protocol and the decisions
adopted pursuant to the UNFCCC or the Kyoto Protocol;

(18)

(19)

Following entry into force of the Kyoto Protocol, the Com-
mission should examine whether it could be possible to
conclude agreements with countries listed in Annex B to
the Kyoto Protocol which have yet to ratify the Protocol,
to provide for the recognition of allowances between the
Community scheme and mandatory greenhouse gas emis-
sions trading schemes capping absolute emissions estab-
lished within those countries.

Since the objective of the proposed action, namely the
establishment of a link between the Kyoto project-based
mechanisms and the Community scheme, cannot be suffi-
ciently achieved by the Member States acting individually,
and can therefore by reason of the scale and effects of this
action be better achieved at Community level, the Commu-
nity may adopt measures, in accordance with the principle
of subsidiarity as set out in Article 5 of the Treaty. In accor-
dance with the principle of proportionality, as set out in
that Article, this Directive does not go beyond what is nec-
essary in order to achieve that objective.

(20) Directive 2003/87/EC should therefore be amended

accordingly,

HAVE ADOPTED THIS DIRECTIVE:

(1) OJ L 41, 14.2.2003, p. 26.

(m) “emission reduction unit” or “ERU” means a unit issued
pursuant to Article 6 of the Kyoto Protocol and the deci-
the
sions adopted pursuant
Kyoto Protocol;

to the UNFCCC or

(n)

“certified emission reduction” or “CER” means a unit
issued pursuant to Article 12 of the Kyoto Protocol and
the decisions adopted pursuant to the UNFCCC or the
Kyoto Protocol.’

2. The following Articles are inserted after Article 11:

‘Article 11a

Use of CERs and ERUs from project activities in the
Community scheme

1.
Subject to paragraph 3, during each period referred to
in Article 11(2), Member States may allow operators to use
CERs and ERUs from project activities in the Community
scheme up to a percentage of the allocation of allowances to
each installation, to be specified by each Member State in its
national allocation plan for that period. This shall take place
through the issue and immediate surrender of one allowance
by the Member State in exchange for one CER or ERU held
by the operator in the national registry of its Member State.

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Subject to paragraph 3, during the period referred to in
2.
Article 11(1), Member States may allow operators to use
CERs from project activities in the Community scheme. This
shall take place through the issue and immediate surrender of
one allowance by the Member State in exchange for one CER.
Member States shall cancel CERs that have been used by
operators during the period referred to in Article 11(1).

Until 31 December 2012, for JI and CDM project activi-
3.
ties which reduce or limit directly the emissions of an instal-
lation falling within the scope of this Directive, ERUs and
CERs may be issued only if an equal number of allowances is
cancelled by the operator of that installation.

3.
All CERs and ERUs that are issued and may be used in
accordance with the UNFCCC and the Kyoto Protocol and
subsequent decisions adopted thereunder may be used in the
Community scheme:

(a)

except that, in recognition of the fact that, in accordance
with the UNFCCC and the Kyoto Protocol and subse-
quent decisions adopted thereunder, Member States are
to refrain from using CERs and ERUs generated from
nuclear facilities to meet their commitments pursuant to
Article 3(1) of the Kyoto Protocol and in accordance
with Decision 2002/358/EC, operators are to refrain
from using CERs and ERUs generated from such facili-
ties in the Community scheme during the period referred
to in Article 11(1) and the first five-year period referred
to in Article 11(2);

and

(b) except for CERs and ERUs from land use,

land use

change and forestry activities.

Article 11b

Project activities

4.
Until 31 December 2012, for JI and CDM project activi-
ties which reduce or limit indirectly the emission level of
installations falling within the scope of this Directive, ERUs
and CERs may be issued only if an equal number of allow-
ances is cancelled from the national registry of the Member
State of the ERUs’ or CERs’ origin.

5.
A Member State that authorises private or public enti-
ties to participate in project activities shall remain responsible
for the fulfilment of its obligations under the UNFCCC and
the Kyoto Protocol and shall ensure that such participation
is consistent with the relevant guidelines, modalities and pro-
cedures
the
Kyoto Protocol.

to the UNFCCC or

adopted pursuant

In the case of hydroelectric power production project
6.
activities with a generating capacity exceeding 20 MW, Mem-
ber States shall, when approving such project activities,
ensure that relevant international criteria and guidelines,
including those contained in the World Commission on
Dams November 2000 Report “Dams and Development —
A New Framework for Decision-Making”, will be respected
during the development of such project activities.

7.
Provisions for the implementation of paragraphs 3 and
4, particularly in respect of the avoidance of double count-
ing, and any provisions necessary for the implementation of
paragraph 5 where the host party meets all eligibility require-
ments for JI project activities shall be adopted in accordance
with Article 23(2).’

3. Article 17 is replaced by the following:

1. Member States shall take all necessary measures to
ensure that baselines for project activities, as defined by sub-
sequent decisions adopted under the UNFCCC or the
Kyoto Protocol, undertaken in countries having signed a
Treaty of Accession with the Union fully comply with the
acquis communautaire, including the temporary derogations
set out in that Treaty of Accession.

‘Article 17

Access to information

2.
Except as provided for in paragraphs 3 and 4, Member
States hosting project activities shall ensure that no ERUs or
CERs are issued for reductions or limitations of greenhouse
gas emissions from installations falling within the scope of
this Directive.

Decisions relating to the allocation of allowances, informa-
tion on project activities in which a Member State partici-
pates or authorises private or public entities to participate,
and the reports of emissions required under the greenhouse
gas emissions permit and held by the competent authority,
shall be made available to the public in accordance with
Directive 2003/4/EC.’

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4.

In Article 18 the following subparagraph is added:

8. Article 30 is amended as follows:

‘Member States shall
in particular ensure coordination
between their designated focal point for approving project
activities pursuant to Article 6 (1)(a) of the Kyoto Protocol
and their designated national authority for the implementa-
tion of Article 12 of the Kyoto Protocol respectively desig-
nated in accordance with subsequent decisions adopted
under the UNFCCC or the Kyoto Protocol.’

5.

In Article 19(3) the following sentence is added:

‘That Regulation shall also include provisions concerning the
use and identification of CERs and ERUs in the Community
scheme and the monitoring of the level of such use.’

6. Article 21 is amended as follows:

(a)

in paragraph 1 the second sentence is replaced by the
following:

‘This report shall pay particular attention to the arrange-
ments for the allocation of allowances, the use of ERUs
and CERs in the Community scheme, the operation of
registries, the application of the monitoring and report-
ing guidelines, verification and issues relating to compli-
ance with the Directive and the fiscal treatment of allow-
ances, if any.’

(b) paragraph 3 is replaced by the following:

‘3.
The Commission shall organise an exchange of
information between the competent authorities of the
Member States concerning developments relating to
issues of allocation, the use of ERUs and CERs in the
Community scheme, the operation of registries, moni-
toring, reporting, verification and compliance with this
Directive.’

7. The following Article is inserted after Article 21:

‘Article 21a

Support of capacity-building activities

In accordance with the UNFCCC, the Kyoto Protocol and any
subsequent decision adopted for their implementation, the
Commission and the Member States shall endeavour to sup-
port capacity-building activities in developing countries and
countries with economies in transition in order to help them
take full advantage of JI and the CDM in a manner that sup-
ports their sustainable development strategies and to facili-
tate the engagement of entities in JI and CDM project devel-
opment and implementation.’

(a)

in paragraph 2, point (d) is replaced by the following:

‘(d)

the use of credits from project activities, including
the need for harmonisation of the allowed use of
ERUs and CERs in the Community scheme;’

(b)

in paragraph 2 the following points are added:

‘(l)

the impact of project mechanisms on host coun-
tries, particularly on their development objectives,
whether JI and CDM hydroelectric power produc-
tion project activities with a generating capacity
exceeding 500 MW and having negative environ-
mental or social impacts have been approved, and
the future use of CERs or ERUs resulting from any
such hydroelectric power production project activi-
ties in the Community scheme;

(m) the support for capacity-building efforts in develop-
ing countries and countries with economies in
transition;

(n)

the modalities and procedures for Member States’
approval of domestic project activities and for the
issuing of allowances in respect of emission reduc-
tions or limitations resulting from such activities
from 2008;

(o)

technical provisions relating to the temporary
nature of credits and the limit of 1 % for eligibility
for land use, land-use change and forestry project
activities as established in Decision 17/CP.7, and
provisions relating to the outcome of the evaluation
of potential risks associated with the use of geneti-
cally modified organisms and potentially invasive
alien species by afforestation and reforestation
project activities, to allow operators to use CERs
and ERUs resulting from land use, land-use change
and forestry project activities in the Community
scheme from 2008, in accordance with the deci-
sions adopted pursuant to the UNFCCC or the Kyoto
Protocol.’

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(c) paragraph 3 is replaced by the following:

‘3.
In advance of each period referred to in Article
11(2), each Member State shall publish in its national
allocation plan its intended use of ERUs and CERs and
the percentage of the allocation to each installation up
to which operators are allowed to use ERUs and CERs in
the Community scheme for that period. The total use of
ERUs and CERs shall be consistent with the relevant
supplementarity obligations under the Kyoto Protocol
and the UNFCCC and the decisions adopted thereunder.

Member States shall, in accordance with Article 3 of
Decision No 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 (*),
report to the Commission every two years on the extent
to which domestic action actually constitutes a signifi-
cant element of the efforts undertaken at national level,
as well as the extent to which use of the project mecha-
nisms is actually supplemental to domestic action, and
the ratio between them, in accordance with the relevant
provisions of the Kyoto Protocol and the decisions
adopted thereunder. The Commission shall report on
this in accordance with Article 5 of the said Decision. In
the light of this report, the Commission shall, if appro-
priate, make legislative or other proposals to comple-
ment provisions adopted by Member States to ensure
that use of the mechanisms is supplemental to domestic
action within the Community.

(*) OJ L 49, 19.2.2004, p. 1.’

9.

In Annex III the following point is added:

obligations under the Kyoto Protocol and decisions
adopted pursuant
the Kyoto
Protocol.’

to the UNFCCC or

Article 2

Implementation

1. Member States shall bring into force the laws, regulations
and administrative provisions necessary to comply with this
Directive by 13 November 2005. They shall forthwith inform the
Commission thereof.

When Member States adopt these measures, they shall contain a
reference to this Directive or be accompanied by such a reference
on the occasion of their official publication. The methods of mak-
ing such reference shall be laid down by the 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 3

Entry into force

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

Article 4

Addressees

This Directive is addressed to the Member States.

Done at Strasbourg, 27 October 2004.

‘12. The plan shall specify the maximum amount of CERs
and ERUs which may be used by operators in the Com-
munity scheme as a percentage of the allocation of the
allowances to each installation. The percentage shall be
consistent with the Member State’s supplementarity

For the European Parliament
J. BORRELL FONTELLES
The President

For the Council
A. NICOLAI
The President