The European Union Emissions Trading Scheme (EU ETS) cap for 2013 - the first year of the third trading period will be just under 1.927 billion allowances, the European Commission said on Friday.

It is 2.4% lower than the cap of 1.974 billion tonnes of CO2 proposed by the Commission in December 2008. Today's decision is part of the measures to implement major revisions to the EU ETS that will apply from the start of the 2013-2020 trading period.

The changes are the result of the revision of the Emissions Trading Directive which was undertaken as part of the 2009 climate and energy package of legislation. The revised directive obliges the Commission to publish the cap for 2013 by mid-2010.

The revised directive stipulates that the cap is to be reduced annually by 1.74% of the average annual total amount of allowances which have been or will be allocated in 2008-2012 through Member States' National Allocation Plans. The average annual total has been calculated at around 2.033 billion tonnes of CO2 and 1.74% of this comes to around 35.374 million tonnes of CO2. This last figure thus represents the linear reduction factor by which the cap will be lowered annually. Under the terms of the directive the linear reduction factor has to be applied from the mid-point of the 2008-2012 period, ie 2010. The figure of 35.374 million has thus been subtracted from the average annual total three times to get from 2010 to the cap for 2013.

The decision is not definitive.

The decision is based on Member States' National Allocation Plans for the period 2008 to 2012 and therefore reflects the current scope of the EU ETS. It will need to be revised to reflect the extended scope the system will have from 2013 when new sectors (eg aluminium) and gases (eg nitrous oxide) will be covered.
 
Due to the need to collect data on the new sectors and gases, the directive foresees a later date of publication of the revised cap. The Commission expects to publish its decision in September 2010.

Moreover, further marginal adjustments to the cap are likely to be needed over time, for the following potential reasons:

• Before the end of 2012 more new entrants may enter the market requesting allowances from the reserves for new entrants;
• Emission-reduction projects planned under the Kyoto Protocol's Joint Implementation (JI) mechanism (or in some cases under the Clean Development Mechanism) may not materialise and thus may not yield credits that can be used to offset emissions in the EU ETS. For this reason, allowances may be allocated from the so-called "JI set aside".

Final figures for the 2013 cap may thus not be available before 2013. However, in order to keep the public informed, the Commission will update the figures in 2011 or later. These updates, however, may only bring about marginal changes and are not supposed to affect the overall quantity of allowances prevailing from 2013 onwards.


Source: The European Commission