Głowacki Law Firm

Benchmarks Decision of the Commission – rules on closures specified - Page 3
Friday, 04 February 2011 20:27


Partial cessation of operations of an installation - schedule
depending on the activity level


In Article 23(1) of the Decision the Commission, pursuant to the Article 10a(20) of the Directive, defined installations that partially cease to operate. An installation is deemed to have partially ceased operations, provided that one sub-installation, which contributes to at least 30 % of the installation's final annual amount of emission allowances allocated free of charge or to the allocation of more than 50000 allowances, reduces its activity level in a given calendar year by at least 50% compared to the activity level used for calculating the sub-installation's allocation in accordance with Article 9 or, where applicable, with Article 18 (hereinafter "initial activity level").

 

When such a situation occur the allocation of emission allowances to an installation shall be adjusted as of the year following the year during which it partially ceased operations or as of 2013, if the partial cessation took place before 1 January 2013, as follows:

If the activity level of the said sub-installation is reduced by 50% to 75% compared to the initial activity level, the sub-installation shall only receive half of the initially allocated allowances.

If the activity level of the said sub-installation is reduced by 75% to 90% compared to the initial activity level, the sub-installation shall only receive 25% of the initially allocated allowances.

If the activity level of the said sub-installation is reduced by 90% or more compared to the initial activity level, no allowances shall be allocated free of charge in respect of the sub-installation concerned.

 

The Decision also provides that if the activity level of the sub-installation referred to in paragraph 1 reaches an activity level of more than 50% compared to the initial activity level, the installation having partially ceased operations shall receive the allowances initially allocated to it as of the year following the calendar year during which the activity level exceeded the threshold of 50%. If, however, the activity level of the sub-installation referred to in paragraph 1 reaches an activity level of more than 25% compared to the initial activity level, the installation having partially ceased operations shall receive half of the allowances initially allocated to it as of the year following the calendar year during which the activity level exceeded the threshold of 25%.

 

The schedule provided for in Article 23(1) of the Decision undoubtedly will be of major importance when designing production plans and carrying out costs analysis (especially costs for emission allowances).

 

Editorial note: on 14 September 2011 the Guidance Document n°7 on the harmonized free allocation methodology for the EU-ETS post 2012 Guidance on New Entrants and Closures (Final version) that deals with the matter analysed in this post has been issued.

Some of the elements of the said Guidance Document n°7 are discussed in ‘Guidance Document n°7 on New Entrants and Closures – important clues on the definition of ‘physical change’ made in the installation in the context of free allocation of carbon credits’.



 

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