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New Entrant Allocation in the Nordic Energy Sectors

An Update

image of New Entrant Allocation in the Nordic Energy Sectors

This report presents an update of the findings of the TemaNord2006:516. The original report showed that phase I allocation plans can distort competition between fuels, technologies and member states. This update shows that there is little evidence of progress in phase II. The report concludes that competitiveness of member states, fuels and technologies is likely to be distorted by allocation methodologies for new entrants in the energy sector in phase II of the EU ETS. The recommendation for the future is to remove or at the very least significantly reduce free allocation to new entrants in the energy sectors.

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Introduction

This report presents an update of the findings presented in TemaNord report “Harmonising New Entrant allocation in the Nordic Energy Sectors - Current principles and options for EU ETS phase II” (Åhman & Holmgren, 2006). The scope of the project was limited to providing an overview on the allocation methodologies to new entrants in phase II of the EU Emissions Trading Scheme (EU ETS) and to making a brief comparative analysis of the allocation in the first and second trading periods. For a more comprehensive discussion on allocation methodologies, please refer to the original report.

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