Carbon Leakage Exposure Factor (CLEF)

The Carbon Leakage Exposure Factor (CLEF) under the European Union Emissions Trading Scheme (EU ETS) is involved with the catalogue of industrial sectors eligible for full free allocation of emission allowances.

The Carbon Leakage Exposure Factor (CLEF) is constant 100% or decreasing factor, depending on carbon leakage status.

All industry sectors will receive 80% of allowances up to their relevant benchmark for free in 2013 (this percentage then decreases annually to 30% in 2020).

However, sectors exposed to carbon leakage receive allowance allocation for free up to 100% of the relevant benchmark until 2020.

The catalogue of industrial sectors eligible for full free allocation of permits should, however, be read under the assumption that the phrase: "full free allocation" refers to benchmarked value of allowances (benchmarks reflect the average performance of the 10% most efficient installations (in terms of their greenhouse gas emissions) in a sector or subsector in the EU).

The full free allocation (in the above-defined meaning) is assigned to the so-called "carbon leakage sectors" (for the catalogue of these sectors see the attachment) and represents an exception in the period 2013 - 2020 in the European model as:

1) the general rule constitues an auctioning;

2) those allowances which are not auctioned and are not inscripted in the carbon leakage list are allocated for free for industrial sectors in the range of 80% of benchmarked allowances in 2013 decreasing annually to 30% in 2020.

"Full free allocation" consequently means that sectors which are deemed to be exposed to carbon leakage and included in the relevant carbon leakage list receive 100% of the benchmarked allowances for free (see table).

Carbon Leakage Exposure Factors (CLEF)
Year	2012	2014	2015	2016	2017	2018	2019	2020
Exposure factor for significant carbon leakage risk	1	1	1	1	1	1	1	1
Exposure factor for no significant carbon leakage risk	0.8000	0.7286	0.6571	0.5857	0.5143	0.4429	0.3714	0.3000

The carbon leakage exposure factor is applied at sub-installation level.

To calculate the amount of allowances for benchmarked products, the carbon leakage list is used - if the product is on the list (i.e. the NACE code or the PRODCOM code is on the list) the factor to use is 1, if not, the declining factor given in table above is to be used.

Hence, the preliminary allocation is: historical activity level x benchmark value for the product manufactured in the given sub-installation x CLEF.

In line with the guidance document, for carbon leakage factors applied to fall-back approaches (i.e. where the sub-installation at issue is not the product-benchmark sub-installation) the carbon leakage exposure factor to use depends on whether or not the heat, fuel or process emissions are associated with a process to manufacture a product included in the carbon leakage list.

In the case that a sub-installation exports heat to an ETS plant, the carbon leakage status of the heat-importing ETS plant is applied. This can be derived from the carbon leakage list depending on the product(s) that the importing plant manufactures. There is the needs to define the carbon leakage status of the installation receiving the heat because allowances are given to heat consumers, unless the importing installation is not in the ETS in which case the allowances are given to the producer of the heat.

If a sub-installation exports heat to a non-ETS plant, the carbon leakage status of the importing installation is assumed to be not at risk by default, unless the “at risk” status of the importing installation not in the ETS can be proven and the relevant documentation is included in the data collection report.

CLEF firmness

The list of secors eligible for full free allocation under the EU ETS rules (attached below) is subject to the following conditions:

1. The list has been determined by the European Commission in 2009 and new lists will be determined every 5 years.

2. The list attached below will apply until 2014.

3. Sectors can be added to the list in the period 2013 - 2020 on an an annual basis if they meet the relevant criteria.

4. Sectors cannot be removed from the list before 2014.

5. A new list of sectors will aply for the period 2014 - 2019.

6. Another list will apply for the year 2020.

7. Technical update of the allocation figures is done by the National Implementing Measures (NIMs) modification, which the Member States are required to resubmit to the European Commission within three months.

It follows, installations (strictly speaking sub-installations) benefiting from CLEF amounting to 1 have secured their favourable treatment only in the 2014 perspective as this is the year in which a new list will apply.