Allocation process challenges

In this chapter we look at the first allocation round from the European perspective. We do this by outlining the allocation process and rules (Section 2), discussing the challenges faced in developing the first allocation plans (Section 3), describing the role of Commission guidance (Section 4) and reviewing the Commission s assessment of plans (Section 5). In Section 6 we describe the key factors that influenced and shaped the first round allocation process, followed by conclusions in the final section. 

The challenges discussed so far are predominantly of a technical nature. The EU greenhouse gas emission trading scheme is the first application of this environmental policy instrument at EU level and few Member States had previously implemented or considered the use of the instrument at national level.10 Therefore neither authorities charged with the task to develop the allocation plan nor stakeholders involved had much experience with an allocation process.11 This relative inexperience made the process design (see next point) even more challenging. In many cases know-how gaps had to be addressed as a first step towards... 

Because of these many challenges the allocation process embodied the Commission took an active role in the run-up to the allocation process to assist and guide Member States. Prior to the adoption of the... 

The theoretical approach that an aggregate emission ceiling should be determined first, followed by the allocation of allowances to the plants, has only been sketchily implemented in reality. Finally, the ratio between the allocation to individual installations and their historical or expected emissions formed the decisive indicator, towards which the decision-making processes were orientated. Thus, the increase of the emissions ceilings in reality perfectly correlated to the parameters with which additional allocation situations were compensated in their allocation effect. Even if the degree of freedom for such adaptations in the Kyoto period were to be reduced, an early fixing of the cap remains a central challenge for future allocation processes. 

Box 13.1 The challenge of data availability during the allocation process... 

At the level of installations technical issues dominate. Despite the theoretical merits of output-based and emissions-based allocations, in practice the complexity of production processes and the diversity of plant configurations often challenge their use. On the one hand, output types produced within the same sector may not be sufficiently homogeneous and make it difficult to apply straightforward emissions per unit of volume or weight methods. On the other hand, the different penetration of on-site power production within a sector complicates the task of developing benchmarks on emissions per unit of input or output. As a result allocation based on historical emission is often easier to use despite its lower efficiency and failure to reward early action. Data... 

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