5 Joint options for EU burden sharing and ETS allocation
5.1 Major types of joint options
In brief, the major types of joint options for EU burden sharing and ETS allocation beyond 2012 can be characterised as follows (see Figure 5.1):
1. Present system. As noted, the present system (up to 2012) is characterised by, firstly, sharing the EU Kyoto target (i.e. the EU assigned amount of GHG emissions) among the Member States and, subsequently, each Member State divides its national target (including eventual purchases of JI/CDM credits) between the ETS and non-ETS sectors. Finally, while national/sectoral policies are implemented in order to achieve the target for the non- ETS sectors at the MS level, the assigned amount of emission allowances for the ETS sectors is distributed further at the installation level by means of national allocation rules (subject to the allocation guidelines and judgement by the European Commission). In principle, this joint option of EU burden sharing and ETS allocation can also be used for the post-2012 period (with further guidelines and harmonisation of allocation rules by the EC). In short, with regard to the EU ETS allocation process (i.e. setting the top-down cap and the bottom-up allocation rules) this option is characterised by a high level of decision-making at the MS level.
2. EU burden sharing with ETS allocation at EU level. This option is characterised by (i) the distribution of the EU assigned amounts of GHG emissions between the ETS and other sectors (i.e. setting an overall, EU-wide cap for the ETS), (ii) the allocation of the cap to eligible installations based on EU uniform allocation rules, and (iii) the distribution of the EU emission target for the non-ETS sectors among individual Member States (based on a corresponding EU burden sharing agreement post 2012). In short, with regard to the EU ETS allocation process, this option is characterised by a high level of decision-making at the EU level. In principle, there is also another (version of this) option conceivable in which not only the ETS target and allocation rules are set at the EU level but also the achievement of the target for the non-ETS sectors is implemented or harmonised at the EU level, for instance by means of harmonised energy efficiency and renewables policies, CO2 technology standards for motorcars, etc. Although it may take some time before this option is realised, it would imply that an EU burden sharing agreement among its Member States will no longer be needed to achieve the overall EU mitigation target.
3. EU burden sharing with EU wide ETS cap and MS allocation for (a) both existing and new
installations (Type 3a) or (b) existing installations only (Type 3b). In terms of centralising or
harmonising EU decision-making on ETS allocation issues, option types 3a and 3b are less extreme than option type 2 (actually, they can be regarded as ‘intermediate’ or ‘transfer’ options between types 1 and 2). Similar to type 2, in these options the overall EU emission target is first divided between the ETS and the other sectors of the EU Subsequently, the assigned amount of emissions to the non-ETS sectors is further distributed among the Member States based on a corresponding burden sharing agreement. In contrast to type 2, however, the EU-wide ETS cap is not allocated straight to the eligible installations, based on EU-wide allocation rules, but first distributed among the Member States which are free to further allocate their national ETS cap to their eligible installations according to their own rules (within certain guidelines set by the European Commission). In addition, the major difference between option types 3a and 3b is that in option 3a the national allocation system refers to all eligible installations (i.e. both incumbents and newcomers), whereas in type 3b it applies only to existing installations while newcomers obtain their allowances from an EU- wide reserve based on EU-harmonised allocation rules.
Option 1: Present system: EU burden sharing with ETS allocation at national level
EU level
From EU total to countries
Country 27
National level
From national to sector/installation level
Country 1 National/sectoral policy ETS Non-ETS Country Installation n Installation 1 EU EU level
From EU total to countries
Country 27
National level
From national to sector/installation level
Country 1 National/sectoral policy ETS Non-ETS Country Installation n Installation 1 EU
Option 2: EU burden sharing with ETS allocation at EU level
EU level
From EU total to countries (non-ETS) and installations (ETS), based on EU wide allocation rules
National level
Only national policy for non-ETS sectors
Country 27 Non- ETS ETS EU Installation n Installation 1 Country 1 National/sectoral policy Country non-ETS EU level
From EU total to countries (non-ETS) and installations (ETS), based on EU wide allocation rules
National level
Only national policy for non-ETS sectors
Country 27 Non- ETS ETS EU Installation n Installation 1 Country 1 National/sectoral policy Country non-ETS
Option 3a: EU burden sharing with EU-wide ETS cap and MS allocation for all installations
EU level
From EU total to MS level for ETS versus non-ETS sectors with ETS allocation at MS level for
both incumbents and newcomers
National level
National allocation rules for ETS (including new entrants) and MS/sectoral policies for non-ETS
Country 27 Non- ETS ETS EU Country 1 National/sectoral policy Country non-ETS Country 27
Country 1 CountryETS
Installation n Installation 1
EU level
From EU total to MS level for ETS versus non-ETS sectors with ETS allocation at MS level for
both incumbents and newcomers
National level
National allocation rules for ETS (including new entrants) and MS/sectoral policies for non-ETS
Country 27 Non- ETS ETS EU Country 1 National/sectoral policy Country non-ETS Country 27
Country 1 CountryETS
Installation n Installation 1
Option 3b: EU burden sharing with EU-wide ETS cap and MS allocation for incumbents only
EU level
From EU total to MS level for ETS versus non-ETS sectors with ETS allocation at MS level for incumbents
National level
National allocation rules for ETS (excluding new entrants) and MS/sectoral policies for non-ETS
Country 27 Non- ETS ETS EU Country 1 National/sectoral policy Country non-ETS Country 27
Country 1 ETS (incumbents)Country
Installation n Installation 1 New entrants reserve
Incumbents
EU level
From EU total to MS level for ETS versus non-ETS sectors with ETS allocation at MS level for incumbents
National level
National allocation rules for ETS (excluding new entrants) and MS/sectoral policies for non-ETS
Country 27 Non- ETS ETS EU Country 1 National/sectoral policy Country non-ETS Country 27
Country 1 ETS (incumbents)Country
Installation n Installation 1 New entrants reserve
Incumbents
Purchases of JI/CDM credits
In each option type mentioned above, purchases of JI/CDM credits may be used to supplement assigned amounts of emissions at the EU, national, sector and/or ETS installation level. However, the use of these credits may be restricted by EU and/or national legislation. Moreover, whereas (the maximum limit of) using JI/CDM credits at the ETS installation level may vary significantly between Member States in option types 1 and 3a, it seems logical to apply an EU- wide maximum limit for purchasing these credits in option type 2 for (similar categories of) ETS installations and in option type 3b for new entrants.