Banking of EUA’s – is the Directive 2003/87/EC properly implemented?
Friday, 11 December 2009 15:14

Someone wishing to bank emission allowances from second to third trading period can be surprised by the relevant provisions of some national laws of the Member States.


Take for instance the Articles 28 and 29 of the Polish bill on the GHG and other substances emission allowances trading.


Despite unambiguous Community law and the European Commission’s guidance, the Polish law provides for additional legal preconditions for banking of emission allowances. Some authorizations are also required.





According to the Article 13 of the Directive 2003/87/EC (Validity of
allowances):


“1. Allowances shall be valid for emissions during the period referred to in Article 11(1) or (2) for which they are issued.

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 Four months after the beginning of the first five-year period referred to in Article 11(2), allowances which are no longer valid and have not been surrendered and cancelled in accordance with Article 12(3) shall be cancelled by the competent authority.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Four months after the beginning of each subsequent five-year period referred to in Article 11(2), allowances which are no longer valid and have not been surrendered and cancelled in accordance with Article 12(3) shall be cancelled by the competent authority.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

 

The exact, literal wording of the above mentioned Article 13 of the Directive leads the reader to the following conclusion: any surplus EUA’s issued for the period 2008 – 2012 shall be replaced with EUA’s valid in the third settlement period 2013 – 2020. So, current legal regime allows for banking in relation to emission allowances – as opposite to the rules regulating the transition from the first settlement period (2005-2007) to the second (2008-2012).


Also in the point 23 of the MEMO/08/796 of 17 December 2008 (Questions and Answers on the revised EU Emissions Trading System) the European Commission explained, that:


“sharp fall in the allowance price during the first trading period was due to over-allocation of allowances which could not be “banked” for use in the second trading period. For the second and subsequent trading periods, Member States are obliged to allow the banking of allowances from one period to the next and therefore the end of one trading period is not expected to have any impact on the price”.


It is important, that the European Commission in it’s communication used the words: “Member States are obliged to allow the banking of allowances from one period to the next” (the underlining by the author). Taking into account the text of the said Directive, as well as the above mentioned Commission explanations, we can take the well founded view, that Members States mustn’t prohibit the banking of the EUA’s in the national laws.

 


But there are some doubts, whether all the Member States correctly implemented these provisions. Take for instance Poland.


The Article 28 of the bill of 22 December 2004 on the greenhouse gas and other substances emission allowances trading (Dz.U. No 281, item 2784, as amended) makes the banking of allowances dependent on:

 

1) the approval of the authority, which issued greenhouse gas emission permit for the installation,

 

2) opinion of the KASHUE (The National Administration of the Emission Trading Scheme).


Additionally, Article 29 of the said bill makes delegation for Ministry of the Environment to issue a regulation, stating detailed conditions for banking of allowances.


So far, the Ministry did not use this competence, but it is obvious, that such a complicated legal preconditions for banking in Polish national law, cause severe legal uncertainties and adversely affect emission reduction strategies of Polish compliance entities.
In such a way, cost and burden of necessary emission reductions in Poland is higher – due to improper implementation of the Community law.




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