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The EU Court of Justice finds that the cap on free allowances might have been set too high by the Commission. Allowances will need to be recalculated in the next 10 months.

The judgement is a blow for several Italian, Dutch and Austrian oil and gas companies, who had claimed the number of free allowances they received under the ETS third phase (2013-2020) was too low.

According to the ruling, the Commission accepted member states’ data on emissions from aluminium and chemical facilities from before 2013 when setting a limit for free allowances for the 2013-2020 period. However, such data should have been excluded as the ETS Directive required that only the post-2013 emissions be counted for those sectors.

Point Carbon analysts estimated that the European Commission would need to take out 105Mt in free allowances for the whole 2013-2020 period.

This may also effect the ETS post-2020 revisions as calculations on how many allowances will be freely given and auctioned in the ETS fourth phase are based on data from the third phase.

Imke Lübbeke, head of climate and energy at WWF European Policy Office, hailed the Court’s decision as a confirmation that the ETS system “needs to be reformed” so that free allowances are “phased out” and polluters “stop getting paid”.

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