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Energy Socialism: EU Commission Hands Out More Free CO2 Allowances

The European Commission today authorised requests from Bulgaria, the Czech Republic and Romania for a continued free allocation of EU Emissions Trading System (EU ETS) allowances to their power sectors beyond this year. The Commission has taken these decisions under provisions which allow certain Member States exemptions from the general rule that, from 2013 onwards, the power sector must buy all its allowances at auctions or in the market. The Commission has already approved applications from Cyprus, Estonia and Lithuania.

Free allocation for power plants to fall annually

Under the revised EU ETS Directive1 adopted in 2009, 10 Member States were given the possibility to request temporary exemptions from the rule that full auctioning of EU ETS allowances will apply from 2013 in the power sector. In September 2011 eight2 of these Member States submitted applications for temporary free allocations. The Commission is obliged to assess these in accordance with the rules and conditions laid down in the Directive.

Following some modifications to the applications from Bulgaria, the Czech Republic and Romania, the Commission has today accepted them. In May the Commission authorised requests from Cyprus, Estonia and Lithuania.

In total, more than 268 million allowances will be allocated for free to power plants in these six countries in the period 2013 to 2019. The number will be reduced each year, reaching zero in 2020 (see Annex). The Member States will put in place strict monitoring and enforcement rules to ensure that the economic value of free allowances is at least mirrored, if not exceeded, by a corresponding amount of investments in modernising their electricity generation.

The decisions are without prejudice to a forthcoming state aid assessment by the Commission.

The Commission may reject an application or any aspect thereof but has the option to approve applications tacitly. For reasons of legal certainty the Commission adopts a decision on each application even if the applications are approved in their entirety.

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