National Allocation Plans

Bulow, J.I., Pfleiderer, P., 1983. A note on the effect of cost changes on prices. Journal of Political Economy 91, 182-185. Commission of the European Communities, 2000. Green Paper on Greenhouse Gas Emissions Trading within the European Union. Defra, 2004a. UK Announces Consultation on Draft National Allocation Plan for the EU Emissions Trading Scheme [available at www.defra.gov.uk]. 

Defra, 2004b. UK Draft National Allocation Plan for 2005-07 [available at www.defra.gov.uk]. 

The 25 national allocation plans (NAPs) established autonomously by the EU Member States (MSs) are central to the EU emissions trading scheme (ETS). According to Articles 9-11 and Annex III of the ETS Directive (2003/87/EC), NAPs must state how the total quantity of emissions allowances will be distributed to installations within their jurisdiction for each trading phase. The process of deciding the second phase allocation is currently under way. Each MS must submit their NAPs for 2008-2012 to the EU Commission by 30 June 2006. Over the subsequent 3-month period, these will be assessed by the Commission according to criteria outlined in the Directive. 

In all national allocation plans (NAPs), allowances are allocated for free to new entrants, although according to different formulae (Ahman et al., 2005). Furthermore, new entrants are defined extensively, including installations increasing their permitted production capacity ... 

All national allocation plans but two (Sweden and the Netherlands, cf. Ahman et al., 2005) state that if an installation is closed, it will stop receiving allowances, from the next year and thereafter.5... 

In the EU ETS Directive, there are consistent references to the need for the national allocation plans (NAPs) (under which allowances are allocated to operators of relevant installations) to respect the EC State aid rules - see, in particular, Article 11(3).8 This means that the Directive and its mechanisms do not operate, in and of themselves, as some kind of exception from the State aid rules. In turn, this means that the analysis of such NAPs in the light of the State aid... 

When searching for Commission State aid decisions when approving the national allocation plans (NAPs) submitted by the various Member States under the EU ETS, however, there is a significant dearth of material. 

National allocation plans will constitute State aid under Article 87(1) EC and will therefore have to be notified to the Commission for assessment under State aid rules. Competition policy procedural rules will apply in this respect. The Commission intends to take at the same time the two decisions legally required on the Plan as regards the assessment as required in the common position and the State aid assessment. 

The plan may accommodate early action and shall contain information on the manner in which early action is taken into account. Benchmarks derived from reference documents concerning the best available technologies may be employed by Member States in developing their National Allocation Plans, and these benchmarks can incorporate an element of accommodating early action. 

Commission of the EC, 2003. The EU Emissions Trading Scheme How to Develop a National Allocation Plan. Non-paper, 2nd Meeting of Working 3, Monitoring Mechanism Committee, 1 April 2003. 

The final traditional area of dispute concerns administrative costs. The phase I national allocation plans (NAPs) involved negotiation over allowances with a total asset value of almost 50 billion per year (assuming an average price of 20/tCO2). Political decisions on how to allocate these assets between sectors and individual installations naturally creates intensive lobby activity by all participants in order to obtain the maximum possible share of the rents.21 The time and energy devoted by companies, governments, and indeed consultancy and research sectors, to this enormous rent allocation process represents huge transactional costs.22... 

On price capping, see, e.g., Pizer (1997, 2002), Aldy et al. (2001), McKibbin and Wilcoxen (2002) and Jacoby and Ellerman (2004). The EU directive prohibits ex-post adjustment of national allocation plans hence national governments could not sell additional allowances after the submission of these plans. 

Article 3(h) states that new entrant means any installation carrying out one or more of the activities indicated in Annex I, which has obtained a greenhouse gas emissions permit or an update of its greenhouse gas emissions permit because of a change in the nature or functioning or an extension of the installation, subsequent to the notification to the Commission of the national allocation plan. 

Table 2.1 Overview of initial notification and assessment dates of National Allocation Plans...

European Commission 2003a. The EU emissions trading scheme how to develop a national allocation plan , non-paper by DG Environment, April. 

European Commission 2004b. Communication on Commission Decisions of 7 July 2004 concerning national allocation plans for the allocation of greenhouse gas emission allowances of Austria, Denmark, Germany, Ireland, the Netherlands, Slovenia, Sweden, and the United Kingdom in accordance with Directive 2003/87/EC , COM(2004) 500, July 2004. 

United Kingdom 2004. EU emissions trading scheme UK draft national allocation plan for 2005-2007 , consultation draft, January 2004. 

For an in-depth understanding of the development of the National Allocation Plan (NAP) in Germany some national circumstances should be considered ... 

As a result of the decisions of the German Federal Government and the Federal Environmental Ministry Conference, in March and May 2003 respectively, it was implicitly established that only the data for the years 2000 until 2002, the base period for the first National Allocation Plan, would be collected. Allocation on the basis of a very early base period (e.g. in the 1990s) as well as the determination of benchmarks on the basis of historical emissions from the 1990s were rendered invalid as a result of this decision. 

DIW (Deutsches Institut fur Wirtschaftsforschung), Oko-Institut and ISI (Fraunhofer-Institut fur Systemtechnik und Innovationsforschung) 2003. White Paper National allocation plan (NAP) overall concept, criteria, guidelines and fundamental organisational options . Berlin, Karlsruhe, 7 July 2003. 

This chapter presents lessons learnt in connection with the national allocation plan for Denmark (Ministry of Environment 2004). Section 1.1 outlines some particular features of the Danish energy sector and the historical CO2 emissions. Section 1.2 describes the previous experience with emissions trading in Denmark, and Section 1.3 describes the process and milestones in the production of the Danish National Allocation Plan (NAP). 

Ministry of Environment 2004. Danish national allocation plan , March 2004. www.mst.dk... 

Description of the National Allocation Plan process 1.2.1 Phases, timetables and actors... 

May 2003 The FlexMex2 Commission presented a report to the government on principles for allocation within the EU ETS. These principles had been developed through analyses of different allocation methods at sector level, using currently available emission data for about 450 installations (corresponding to about 90% of the emission volume in the Swedish National Allocation Plan (NAP)). In this proposal, allocation was based on historic emissions. For process emissions (metallurgy, cement, catalytic cracker), the projected increases were added to the allocation. An allocation scheme based on these principles at sector level was presented (SOU 2003). 

Although no explicit theoretical framework has been developed for analysing the National Allocation Plan (NAP) process in Spain, insights from the public choice and institutional path dependency approaches have been used in order to structure, organise and interpret the available information. 

European Commission 2004. Commission Decision of 27 December 2004 concerning the National Allocation Plan for the Allocation of Greenhouse Gas Emission Allowances notified by Spain in accordance with Directive 2003/87/EC of the European Parliament and of the Council , C(2004) 5285, Brussels. 

The rules regarding the preparation of a National Allocation Plan (NAP) were also prepared without considering the new Member States situation. In effect these rules were perceived by new Member States as not quite fair, particularly in respect to issues such as ... 

Source Polish National Allocation Plan for 2005-2007 calculations by EnergSys. 

This has occurred in part due to a lack of reliable information on historical emissions, intended to provide a starting point for allocations at the right level . The gathering and processing of emissions data was an enormous task for most Member States when designing their Phase 1 National Allocation Plans, and there were limited possibilities to check the quality of the submitted data. The EU Commission faced the same problem in its assessment of the NAPs, even though it was able to cut off almost 300 Mt from the initial allocation plans. 

---