Głowacki Law Firm

First come, first served – is this the best formula for the allocation of free emission allowances from the 5% reserve? - Page 3
Wednesday, 07 September 2011 05:38

 

It follows, moreover, that new investors have no certainty whether their investments will qualify for free emission allowances as of 2013, what places on their business plans another risk which is hard to manage. The above mentioned hypothetical high-efficient cogeneration plant, which will get free emission allowances from the said 5% reserve will achieve competitive advantage as compared to the similar plant, which in effect of the operation of the principle ‘first come, first served’ will not. Given the strong local character of the heat production and distribution, the distortion of competition as regards cogeneration plants will in the above-described case not be so significant as with regard to other industrial installations (not covered by the ‘carbon leakage’ list) with more extensive competition’s geographical area.

 

As a some sort of the remedy, I suppose, for the above threats, Article 19(6) was entered into the Decision. The said provision reads: ‘When half of the amount of allowances set aside for new entrants pursuant to Article 10a(7) of Directive 2003/87/EC, notwithstanding the amount of allowances available pursuant to Article 10a(8) of Directive 2003/87/EC, is issued or to be issued until 2020 to new entrants, the Commission shall assess whether a queuing system should be put in place to ensure that access to the reserve is managed in a fair way.’

 

It follows expressis verbis from that Article that the queuing system is dependent on the assessment of the Commission for a need for such a measure – it may, therefore, never materialise in practice. The specific rules governing the operation of such a queuing system also are not known at present.


In any case, the above-described provisions should be the subject of carefully consideration at the stage of outlining project projections and, furthermore, appropriately included in the investment feasibility study analyses.


Among the most important shortcomings of the process of allocation of emission allowances from a potential investor point of view seems to be the fact that at the start of the whole investment process and at the moment of taking of investment decision the said investor has no guarantee as to the future allocation – whether the investment qualifies in principle for free allocation as well as the exact number of carbon credits allocated. At the start of the investment in a hypothetically high-efficient cogeneration plant the investor has limited possibilities to assess whether in a few years perspective the 5% reserve wouldn’t be exhausted and this fact may influence on every business projections and investment financial arrangements.




 

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