(BN) EU Says CO2 Rules After 2012 Approved Without ‘Major Changes’


EU Says CO2 Rules After 2012 Approved Without 'Major Changes'
2010-12-17 00:00:00.3 GMT

By Ewa Krukowska
Dec. 17 (Bloomberg) -- European Union member states
approved a regulatory proposal without "major changes" for
giving away about 100 billion euros ($132 billion) of carbon
permits after 2012.
The EU's Climate Change Committee, with representatives
from national governments, gave the green light on Dec. 15 to
carbon-intensity benchmarks after the European Commission,
regulator for the 27-member bloc, introduced revisions to the
draft it presented on Oct. 22. The modified proposal includes 52
of the 53 originally proposed benchmarks. Five of them were
changed, and one scrapped, said Peter Zapfel, head of policy
coordination in the commission's climate department.
The EU, which has given away the majority of permits since
it started the world's biggest carbon-trading system in 2005,
will move toward auctioning in the eight-year phase through
2020. The allocation method was designed so that the most
efficient installations in a given industry won't need to
purchase more allowances, while those that emit more than the
benchmarks will need to buy permits or reduce emissions.
"There were also some minor, very technical changes
related to new plants that enter the emissions-trading system
and to capacity extension," Zapfel said. The EU is seeking to
balance the goal of reducing allowances in its carbon-trading
market with limiting cost increases for energy-intensive
industries. Refiners and other companies that face higher costs
tried to persuade the EU to put off plans until later this
decade to scale back free allowances.

Hot Metal

The benchmark for hot metal was set at 1.328 permits per
ton of product, in line with the commission proposal and below
the 1.475 allowances sought by the European steel lobby.
The benchmark for oil refiners is 0.0295 allowances per
unit of output, also unchanged from the commission draft. The
benchmark is based on a methodology that allows for the creation
of a single type of output from refineries, or the so-called CO2
Weighted Ton.
The CWT is calculated by multiplying the throughput of a
refinery unit by one of the 57 factors included in the EU
measure that reflect carbon intensity of processing.
The benchmarks, based on the average performance of
installations in the top 10 percentile for carbon efficiency in
2007-2008, will be multiplied by historical production figures
to determine the implied free allocations for industries.
EU nations agreed that the baseline period for calculating
historical production levels may be from 2005 to 2008 or 2009 to
2010, whichever is higher. The vote yesterday set up a three-
month scrutiny period in the EU council of ministers and the
European parliament, after which the measure will be adopted by
the commission.

Harmonizing the Rules

"Now it will be time for heavy technical work by member
states to implement and harmonize the rules," Zapfel said. "By
the end of September next year, we should get actual figures on
allocation per installation from national authorities. If the
number of permits sought exceeds the total cap for allowances to
be allocated for free, a reduction factor will be applied to all
To prevent businesses from shifting production elsewhere
because of emission restrictions -- a phenomenon known as
"carbon leakage" -- the EU agreed last year to grant 164
manufacturing industries a greater share than other companies of
free CO2 permits after 2012. Those industries will receive 100
percent of benchmarked allowances for free. The list will be
valid through 2014 and then revised based on unchanged criteria.
Manufacturers that aren't on the list will receive 80
percent of benchmarked allowances for free in 2013 and face an
annual decline in that share to 30 percent in 2020, while most
utilities will face 100 percent auctioning as of 2013.
As a result, the EU will auction around 60 percent of the
total number of permits in 2013, according to the commission
estimates, and the proportion will increase in coming years.
The cap for CO2 discharges for 2013 has been set at 2.04
billion tons, valued at about 30 billion euros at today's price.
This limit includes aluminum and chemical makers that join the
program in the third phase. An adjustment is also planned for
airlines that will become part of the system from 2012.

For Related News and Information:
Emission market news: NI ENVMARKET <GO>
Today's top energy stories: ETOP <GO>
European power-markets home page: EPWR <GO>

--Editors: Mike Anderson,

To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-2-237-4331 or

To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or