The European Parliament adopted yesterday the EU's climate change package which aims to ensure that the EU will achieve its climate targets by 2020: a 20% reduction in greenhouse gas emissions, a 20% improvement in energy efficiency, and a 20% share for renewables in the EU energy mix. Ahead of the Parliament’s vote, MEPs had reached informal agreement with the European Council on the content of the package.
Full auctioning for power sector - derogations
Full auctioning of emission allowances will be introduced for the power sector for Phase 3 of the ETS (2013 onwards). However there will be a transitional free allocation of allowances for power plants in new Member States heavily reliant on fossil fuels. These Member States will be required to purchase only 30% of their required allowances through auctioning in 2013 and will only be required to purchase 100% of their required allowances from 2020.
Carbon leakage
Auctioning for the manufacturing sector will be phased in gradually. In 2013, that sector will receive a free allocation of 80% of allowances, decreasing to 30% by 2020 and leading to full auctioning in 2027. However, where there is a risk that EU ETS compliance costs may result in plants and jobs being relocated outside the EU in countries that do not have similar emission reduction targets (the so-called risk of “carbon leakage”) these sectors may receive up to 100% of their allowances free until 2020. The Commission will now have to carry out an analysis to determine which sectors may be at risk from carbon leakage and should be granted derogations.
Other decisions
Other decisions regarding the EU ETS include:
- Member States should use at least 50% of the EU ETS auction revenues for climate-related adaptation and mitigation purposes.
- 12% of the EU ETS revenues in Phase 3 will go into a so-called “solidarity fund”, to assist the EU’s poorer Member States to modernise their heavy industry.
- 300 million allowances will be set aside to help stimulate the construction and operation of up to 12 demonstration carbon capture and storage (CCS) projects. The value of this support mechanism will only be known once the CO2 is injected and stored, however it is anticipated that this could generate 6 – 9 billion Euros.
- Up to 50% of the proposed EU-wide reductions for the period from 2008 – 2020 will be realisable by purchasing emission reduction credits from clean energy projects in third countries, such as the Clean Development Mechanism projects that have been set up in recent years under the Kyoto Protocol.
- The treatment of the aviation sector remains unchanged, that is it will receive 85% of the allowances for free for the whole period.
To read our recent law-now on the Council’s adoption of the climate change package, please click here.
To read our law-now on the Commission’s original climate change proposals, please click here.
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