Allocation process periodic nature

The periodic nature of the allocation in the EU scheme may have simplified the process in the sense that the distributional stakes were lower with sharing out allowances for three years rather than for a longer period or on a permanent basis. The fact that a new round would take place may also have helped to overcome some of the technical issues, as any solution that was adopted could be road-tested and, if considered necessary, changed after a few years. The downside of periodic allocation is that companies may adopt strategic behaviour in order to maximise the number of free allowances to be allocated in future rounds rather than being guided by the invisible hand to the cost-minimum outcome in terms of emissions abatement. 

The only certain factor at this stage is that a second allocation round will take place with notification of allocations plans to the Commission by 30 June 2006. Beyond the second allocation round many options are possible. As part of the review of the Directive launched in mid-2006 the legal framework may be changed substantially. So one will have to see to what extent the periodic and decentralised nature of the allocation process will exist beyond 2012. One thing is for sure however that the allocation of allowances in the EU greenhouse gas emission trading scheme will continue to stimulate a lot of debate and deliver rich material for books like this one. 

The main characteristics of the allocation rules are the ex-ante nature, the periodic decision-making, a wide delegation of tasks to the national level (decentralised process) and strong central control by the Commission. 

---