EU ETS: free allocation adjustments due to production changes in Phase 4
The recent revision for the fourth phase of the EU ETS extended the use of transitional free allocation for the period 2021 – 2030. Moreover, the revision introduced some new rules for free allocation and adjustments to free allocation due to production changes. While these new rules set out the main criteria, the European Commission has the mandate to adopt more detailed implementation rules and requirements.
According to the indicative planning of the European Commission, the current free allocation rules will be updated in a new delegated act, expected to be adopted in Q4 2018. Moreover, an implementing act is expected to be adopted in Q3 2019 which will set out the provisions for the adjustments of the levels of free allocation based on changes in production levels.
While some of the main rules for free allocation adjustments due to production changes are clearly included in the phase 4 revision (e.g. the 15% threshold calculated on a rolling average of two years), a number of issues for discussion and clarification remain. For example, the preambles of the phase 4 amendments include the vision for the Commission to ‘consider further measures to put in place, such as the use of absolute thresholds regarding the changes of allocations’.
This meeting gives the opportunity for stakeholders to discuss this important issue with each other and with policymakers. The objective is to take an open approach to the issue by looking at examples from other emission trading systems and discussing the (dis)advantages, for specific sectors and the EU as a whole, of different ways free allocation adjustments can be organised.