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By Stephen Gardner
Dec. 23 — The European Commission is soliciting input through March 16, 2015, on the allocation and use of some of the carbon allowances that will be made available to participants in the European Union's emissions trading system after 2020.
In a consultation document published Dec. 19, the commission said comments should be provided on the continued distribution of free carbon allowances to ETS participants and on the diversion of some allowances into funds to provide finance for “low-carbon innovation” and modernization of energy systems in the EU's poorer countries.
EU leaders meeting in an October summit directed the European Commission, the EU's executive arm, to develop proposals on the distribution of free carbon allowances and on the low-carbon funds in preparation for the implementation of the 40 percent greenhouse gas emissions reduction to be achieved by 2030 compared to 1990.
To reach the overall target, participants in the ETS, which covers energy generation, heavy industry and airlines flying between EU airports, should reduce their emissions by 2.2 percent a year after 2020, contributing to a total ETS cut of 43 percent by 2030 compared to 2005, the EC said.
ETS participants are responsible for about 45 percent of the EU's total emissions and are subject to an emissions cap that drops 1.74 percent annually through 2020.
The Dec. 19 commission consultation document said responses would be used in the preparation of legislative proposals that would implement the “strategic guidance given by European leaders.”
The consultation document said comments should be provided on:
• the extent to which carbon allowances should continue to be given for free to ETS participants after 2020;
• the use of 400 million allowances to create a fund for renewable energy and carbon sequestration projects; and
• the use of 2 percent of allowances to finance energy efficiency and energy system upgrades in poorer EU countries.
In addition, the consultation document asked for general comments on the effectiveness of the ETS and if its costs were “proportionate.”
Under the current phase of the ETS, most carbon allowances are supposed to be distributed to participants through auctions held by EU member states. In practice, however, a large proportion of allowances continues to be given to participants for free, because of concerns the extra cost of allowances would put EU industry at a disadvantage compared to its international competitors. ETS participants with emissions that exceed their carbon caps must buy additional allowances on the carbon market.
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The European Commission consultation on revision of the EU emissions trading system is available at http://bit.ly/1zu4rXv.
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