EU Emission Trading - Economical Effects of Emission Auctions

image of EU Emission Trading - Economical Effects of Emission Auctions

In the third trading period (2013-2020) of EU ETS, around two thirds of the total European wide allocation will be auctioned on average. Allowances for auctioning will be allocated among the Member States according to a predefined formula. In order to prevent carbon leakage, i.e. migration of EU industries to other areas to avoid carbon costs, industries found to be exposed to high cost increases or industries with high trade intensity will still get free allowances, according to industry benchmarks. Free allocation reduces the number of allowances to be auctioned. The list of Industry sectors to be entitled to receive free allowances is going to be finally decided by the end of 2009. The report discusses the impact of allocation of free allowance for each of the Nordic countries, both in terms of free allocation to national industries and in terms of auctioning volume. Auctioning of emission allowances creates substantial revenues for the individual Member State. The EU ETS directive recommends that an amount equivalent to half of the income is earmarked for measures to combat climate change. The Nordic countries already spend more on climate combat than the recommendations require.



Carbon leakage and free allocation volumes

In this chapter we present the allocation of free allowances to the Nordic countries, and focus in particular on the implications of free allocation of allowances to industries which meet the criteria for being exposed to significant risk of carbon leakage. First we discuss which sectors are likely to be included, and then we assess the free allocation for these industries in the Nordic countries. A brief discussion about the implications of carbon leakage is included at the end of the chapter.


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