Proposal for a DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2003/87/EC clarifying provisions on the timing of auctions of greenhouse gas allowances
Date: 2012-07-25
Institutions: European Commission
Subjects: greenhouse gas, intra-EU trade, marketing standard, tradeable emission permit

EUROPEAN COMMISSION 

Brussels, 25.7.2012  
COM(2012) 416 final 

2012/0202 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

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

(Text with EEA relevance) 

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EXPLANATORY MEMORANDUM 

1. 

INTRODUCTION 

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

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

2. 

REGULATORY CONTEXT 

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

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

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

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3. 

LEGAL ELEMENTS OF THE PROPOSAL  

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

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2012/0202 (COD) 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

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

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to the proposal from the European Commission, 

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

Having regard to the opinion of the European Economic and Social Committee1,  

Having regard to the opinion of the Committee of the Regions2,  

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

Article 10(4) of Directive 2003/87/EC of the European Parliament and of the Council 
of  13  October  2003  establishing  a  scheme  for  greenhouse  gas  emission  allowance 
trading  within  the  Community  and  amending  Council  Directive  96/61/EC3  does  not 
specify how volumes of greenhouse gas emission allowances to be auctioned are to be 
distributed over the trading period.  

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

(3) 

Directive 2003/87/EC should therefore be amended accordingly,  

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3 

OJ C , , p. . 
OJ C , , p. . 
OJ L 275, 25.10.2003, p. 32. 

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HAVE ADOPTED THIS DECISION: 

Article 1 

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

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

Article 2 

This Decision is addressed to the Member States. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President 

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