London (Platts)--28Jan2013/1210 pm EST/1710 GMT
The planned allocation of free EU carbon dioxide emissions allowances has been delayed beyond the expected time frame of late February, the European Commission said late Friday. Free EU Allowances are normally allocated each year in late February to around 12,000 power plants and factories across Europe, under the $148 billion per year EU Emissions Trading System. But this year's free allocation has been delayed as the EC seeks information from each member state government on its installation-level carbon allocation. The EC did not give an expected date for the free allocation to occur. The ETS Directive mandates the EC to scrutinize and ensure the correct application of harmonized benchmark-based rules for the first time in 2013. "To this end, Member States have drawn up national implementation measures (NIMs) which set out the amount of free allocation for each eligible installation operating on their territory for every year between 2013 and 2020," the EC said in a statement. The Directive includes a rule determining the maximum amount of allowances that may be handed out for free each year. "If the preliminary allocation through NIMs exceeds the maximum amount of allowances available, a 'cross-sectoral correction factor' will have to be applied," the EC said. "If this were to be the case, free allocation to all installations across the EU would be reduced by the same proportion to ensure equal treatment," it said. "In close cooperation with Member States, the Commission has made considerable progress in scrutinizing the NIMs and will in the coming weeks be able to determine whether a correction factor would need to be applied as of 2013," the EC said. "However, despite the good progress made, the process will not be concluded in time for installations to receive free allowances by the end of February. The Commission aims to conclude the overall process as soon as possible in order to provide industrial installations and all other market participants with certainty," it said. "The Commission recalls that, in contrast to other years, allowances handed out this year may not be surrendered in respect of 2012 emissions," the EC added. Europe's manufacturing industry will receive 80% of its allowances for free in 2013, with the proportion declining in a linear pathway each year to 30% by 2020, according to the EC. Installations that meet the benchmarks, and are thus among the most efficient in the EU, will in principle receive all the allowances they need. Those that do not reach the benchmarks will receive fewer allocations than they need and therefore will have to reduce their emissions, or buy additional allowances or credits to cover their emissions, or combine both those options, according to the EC. The benchmarks have been developed per product, to the extent possible, and are based generally on a value representing the average emissions of the 10% best performing installations in the EU producing each product. EUAs for December 2013 delivery fell to an all-time low of Eur4.15/mt at the close Friday amid signs that EU member states are bickering over whether to support measures proposed by the EC to curb the flow of new allowances entering an already flooded market.--Frank Watson, frank_watson@platts.com --Edited by Alisdair Bowles, alisdair_bowles@platts.com