Głowacki Law Firm

First come, first served – is this the best formula for the allocation of free emission allowances from the 5% reserve? - Page 2
Wednesday, 07 September 2011 05:38


It should be noted, however, that the notification by the Member State to the European Commission constitutes only the last element of the sophisticated procedure leading to the allocation of free allowances for a ‘new entrant’.


For the simplification purposes the said process could be structured as follows:

 

division in sub-installations → continuous 90-day period → start of the normal operation →  verification → initial installed capacity established → one year deadline (for a submission of the application to the competent authority) observed (the term starts its running with the beginning of the installation’s normal operation) → standard capacity utilisation factor determined and published by (the European Commission) → activity level established.

 

In principle, preliminary annual number of emission allowances allocated free of charge for a given year is calculated by the Member State and corresponds to the activity level multiplied by the value of the benchmark.

 

The significant observation is that the investor (‘new entrant’) has little possibility to directly influence on the exact date of the notification made by the Member State to the European Commission regarding the preliminary total annual amount of emission allowances allocated free of charge, while the said date is decisive in that regard for the order of precedence of investments.

The Decision only mentions that the said notification should be made ‘without delay’ but the potential instruments at the disposal of investors when the term overruns could be problematic.

 

Such an arrangement for the whole process places unmanageable risks on potential new entrants and consequently could rise the risk premium charged.

 



 

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