Głowacki Law Firm

Enigmatic cross-sectoral correction factor – worries about final allocation - Page 2
Monday, 30 May 2011 06:00


The first one is that cross-sectoral correction factor and the linear reduction factor are mutually exclusive (the former can be applied only for installations not classified as “electricity generator”).


Secondly, if applied, the cross-sectoral correction factor would be identical for all installations.


Thirdly, the need and value for the factor could differ for different years in the third trading period.


The need, and if applicable the value, for a cross-sectoral correction factor will be assessed by the Commission after receiving all NIMs (the final date for publication and submission by the Member States of National Implementation Measures is 30 September 2011 - Article 11(1) of the revised ETS Directive), on the basis of the preliminary free allocation, before application of the carbon leakage factor.


Cross-sectoral correction factor, the linear reduction factor, carbon leakage exposure factor – all this may sound complicated, especially for somebody hearing of all this for the first time.


Trying to simplify the issue a little, it could be summed-up in the following:


1) the final free allocation could be different from the preliminary free allocation that operators would receive on the basis of the National Implementation Measures,


2) the preliminary parameters for free allocation should be known by 30 September 2011 - i.e. after publication and submission by the Member States of National Implementation Measures,


3) final allocation could be determined only once the need and the value of the cross-sectoral correction factor is stipulated.


As was stressed in the Guidance Document n°1 the preliminary total annual amount of emission allowances allocated for free per installation as determined by the relevant competent authority could therefore be different from the final total amount of emission allowances allocated for free: for installations identified as non-electricity generator the cross-sectoral correction factor might apply, and for installations identified as electricity generators the linear factor applies.


But the fundamental question that should worry every installation being non-electricity generator is what precisely could be the difference between preliminary allocation based on benchmarks and the final allocation (after application of the cross-sectoral correction factor)? Are there any quantitative limits for this value? What range of correction should be taken into account? Could there be established any minimum and maximum levels?



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