Enigmatic cross-sectoral correction factor – worries about final allocation
Monday, 30 May 2011 07:00

 

In the case of installations being non-electricity generators, the final allocation could be determined only once the need and the value of the cross-sectoral correction factor is stipulated.

 

 

The intensive work on benchmarks’ methodology was carried out for many months past, a number of workshops took place, the Commission’s Decision determining transitional Union-wide rules for the harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of 27 April 2011 was issued, even a set of guidelines was published on the Commission’s website and notwithstanding all these efforts if somebody asked how many emission allowances his installation would be allocated for free as from 2013, the precise answer is – for legal reasons – impossible. And remains so for long – till the European Commission will establish the need and value for the cross-sectoral correction factor.

 

When does this happen? The date can’t be precisely identified at this stage. There could be only inferred from the Directive 2003/87/EC that this point in time should hypothetically occur between 30 September 2011 (deadline for publication and submission of National Implementation Measures by Member States) and 28 February 2013 (final date for issuance of the first quantity of free allowances of the third trading period to installations).

 

It follows that currently can’t be established even whether the very need to apply cross-sectoral correction factor will appear (not mentioning the concrete parameters).

 

A cross-sectoral correction factor could be needed to ensure that the total amount of free allocation to non-electricity generators does not exceed the maximum amount of free allocation pursuant to art. 10a(5) of the revised ETS Directive. The said factor stands between preliminary total allocation and the final one.


The preliminary annual number of allowances in the product benchmark approach (most common) is calculated by multiplying the benchmark value (set forth in the Annexes to the Decision of 27 April 2011) with the relevant historical activity level (for values for benchmarks relating to fallback approaches see Article 10(2)(b) of the Benchmark Decision).


It is useful to note that for installations not classified as “electricity generator” the final total annual amount of allowances in year k is determined by multiplication of the cross-sectoral correction factor in year k (if necessary) by the preliminary total allocation to the installation in the same year k.

 

The said equation for the application of the cross-sectoral correction factor is based on the provisions of the said Directive and Decision and expressly confirmed by the Guidance Document n°2 on the harmonized free allocation methodology for the EU-ETS

post 2012 (Guidance to the allocation methodology - Final version issued on 14 April 2011).

 

Another Guidance Document (n°1) points to some interesting observations not so obvious taking into account the very wording of the legislative texts.

 



 

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