Article 10c(2) of the Directive 2003/87/EC - burdened with internal contradiction?
Friday, 02 July 2010 15:28

As a consequence of the Article 10c(2) of the Directive 2003/87/EC, the funds from auctioning meant for “greening” the economy and gathered at a State level, in these Member States that qualify for and make use of the derogation provided for in the Article 10c (for instance, highly dependent on coal) will be much smaller, than in countries, that already are “green”.

This is a paradox as regards the framework created by the said Directive.

 

In principle, the use of revenues from auctioning of emission allowances (EUAs) shall be determined by the Member States, but, according to the Article 10(3) of the Directive 2003/87/EC, circa 50 % of them (in new Member States more) should be used for  fiscal or financial support policies (in developing countries, or domestic regulatory policies) including inter alia to reduce greenhouse gas emissions, to adapt to the impacts of climate change, to develop renewable energies or other technologies contributing to the transition to a safe and sustainable low-carbon economy, to increase energy efficiency by 20 % by 2020; the environmentally safe capture and geological storage of CO2 and LULUCF projects. Important part of these efforts and policies should be to fund research and development in this area.

 

Generated in this manner stream of funds and cash was presumably intended to keep pace with other leading economies in the global race towards “green” technologies.

 

Paradoxically, the highly dependent on coal Member States (mainly the new members of the EU, like for instance Poland and Czech Republic) that gain in December 2008, during final negotiations of the Energy – Climate Legislative Package, an “advantage” formulated in the Article 10c of the 2003/87/EC Directive, placed themselves in much less competitive position in this race.

 

It is really the paradox because the logic point out that countries that are highly dependent on coal should spend much more money than others on the policies allowing the transition to the low carbon economy. Unfortunately, this is not the point taking into consideration the Article 10c(2) of the Directive at issue which states that transitional free allocations provided for in Article 10c shall be deducted from the quantity of allowances that the respective Member State would otherwise auction.

 

As a consequence of the said Article 10c(2), the funds from auctioning gathered at a State level, meant for the “greening” the economy, in these Member States that qualify for and make use of the derogation provided for in the Article 10c will be much smaller, than in countries, that already are “green”.

 

This legal mechanism created by the Directive is surprising. There are arguments that countries that are highly dependent on fossil fuels should spend much more money on policies enumerated in Article 10(3) of the Directive (especially on R&D), than other Member States, in order to modernise its economy and energy sources. Actual provisions of the Directive strengthen the differences appearing so far.


The Article 10c(1) of the Directive provides however that “The Member State concerned shall submit to the Commission a national plan that provides for investments in retrofitting and upgrading of the infrastructure and clean technologies. The national plan shall also provide for the diversification of their energy mix and sources of supply for an amount equivalent, to the extent possible, to the market value of the free allocation with respect to the intended investments, while taking into account the need to limit as far as possible directly linked price increases” but doubts arise whether the scope of this measure is exactly the same as in Art. 10(3).

In particular – what about R&D as regards “green” technologies – may they also be financed from investments provided for in the said national plan?


Additionally, the content and scope of the national plan at issue is uncertain, because it is subject to the Commission’s approval (see to that effect Article 10c(6)). On the contrary, the spending of the revenues from auctioning on the basis of Art. 10(3) doesn’t require any Commission approval - Member States only inform the Commission as to the use of revenues.


I don’t know, what the solution to this problem should be, the problem isn’t probably easy to resolve, but it seems that the existing legal framework in this area is not satisfactory from the perspective of cohesion and harmonious development.

 

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