EU sets 2013 cap under emissions trading scheme

Greenhouse gas emissions from industrial installations covered by the EU’s emissions trading scheme (EU ETS) will be capped at just under 1.927 billion allowances for 2013, the European Commission said on Friday (9 July).

The Commission’s decision determines the maximum amount of emissions from around 11,000 industrial installations and power plants regulated by the EU ETS in 2013. The companies will have to surrender an allowance for each tonne of carbon they emit.

In the course of the third trading phase, which runs from 2013 to 2020, the cap will be lowered annually by 1.74%, taking as a basis the average cap in the second trading phase (2008-2012). This amounts to a reduction of around 35,374,181 allowances per year, the EU executive calculated.

The Commission said, however, that it would revise the cap in September to take into account the extension of the scheme’s scope post-2012. At present, it does not account for new sectors such as aluminium or gases like nitrous oxide, for instance.

Further adjustments will be made later if new entrants join the market or if emissions-reduction projects planned under the Kyoto Protocol fail to produce credits for companies to offset their emissions with, according to the Commission.

“Final figures for the 2013 cap may thus not be available before 2013,” the EU executive said. It will update the figures in 2011 or later to keep the public informed, but expects only marginal changes, it added.

Moreover, the cap would be further shrunk if the EU decides to increase its emissions reduction target to 30% below 1990 levels by 2020, as it has promised to do should other industrialised countries make similar commitments during UN negotiations on a new climate treaty, the Commission said.

The decision taken now is based on the EU’s current legal obligation to cut greenhouse gas emissions to 20% below 1990 levels by 2020. This will translate into emission reductions from ETS installations of 21% by 2020 compared to 2005 levels, according to the directive revising the scheme.

The revision of the EU ETS in 2008 sought to tighten the cap for the post-2012 period after overly generous allocation had brought down allowance prices and left companies with windfall profits.

The recession has further contributed to the excessive number of permits by bringing down industrial production, leading to concerns that if banked into the next trading phase, these unused allowances will continue to suppress prices even after the economy has picked up.