The draft benchmarking decision sets the rules for allocating free emissions allowances to EU companies for the 2013-2020 trading period under the EU emissions trading scheme (EU ETS).
Benchmarking was part of the revision of the EU's flagship instrument for cutting greenhouse gas emissions, which sought to avoid the pitfalls of over-allocation and windfall profits for companies that have plagued the scheme in the past.
The Commission's climate action department has now identified some 50 product benchmarks covering around three quarters of relevant emissions, Hans Bergman of DG Climate Action told journalists. For other products, heat or fuel consumption will be used as the basis for benchmarking.
The benchmarks are identified for products such as cement, steel, lime, chemicals and glass.
These values will serve as thresholds for what installations get for free, the official explained. They are based on the average performance of the 10% most carbon-efficient installations in a given sector (based on 2007/08 data) and take into account the most efficient techniques.
The list is the first draft to be subjected to inter-service consultation within the EU executive. It was submitted for consultation yesterday.
The Commission did not want to give any details of individual benchmarks or values at this stage, but Bergman said that the products are practically all included in the list of sectors vulnerable to "carbon leakage".
The list includes 164 sectors which the EU executive reckons would be at risk of relocating their activities outside of the EU if they had to buy allowances for every tonne of CO2 they emit (EurActiv 21/09/09).
Sectors on the list will get 100% of the benchmarked allowances for free, while others will get 80% in 2013, declining to 30% in 2020.
The benchmarks do not concern the power sector, which for the most part will have to buy its permits at auction.
€100bn until 2020
The allocation decision is not insignificant, as the Commission estimates that the six billion or so allowances that will be allocated for the 2013-2020 trading period will add up to around €100 bn.
Once the Commission decision is out, member states will calculate by 30 September 2011 the amount of allowances to be allocated to individual installations based on the benchmark in question and historical production figures over a number of years.
Only the most efficient installations will be able to go without purchasing additional allowances, Bergman said.
Environmentalists have expressed concern that powerful industry lobbies will manage to bargain for high benchmarks, which would translate into subsidies for carbon-intensive sectors. EU businesses, on the other hand, say they will lose out to foreign competition if the benchmarks are set too harshly.
Bergman said that the benchmarks will become less challenging as 2020 approaches as a result of technological development. He claimed that the 50 draft benchmarks are "relatively uncontroversial".
One sticking point is free allocations for waste gases, which are mainly used by the steel industry to produce electricity. The industry wants 100% free allocations, arguing that anything else would discourage such efficient use of the gases, while environmentalists say this would be no more than a subsidy for heavy industry.
"We have taken the line that since there is no free allocation for electricity, they should not get completely free allocation for electricity production with waste gases but some kind of reduction," Bergman said.
He added that the steel industry would still get "probably quite a lot" for generating electricity, and the wrangling between the steel industry and the EU executive was mainly about the size of the free allowances.
A 'complicated, expensive waste of time'
Sanjeev Kumar of E3G, an environmental group, argued that the Commission's benchmarking exercise is "a complicated, expensive waste of time". He argued that if there are free allocations for waste gas emissions, this will subsidise big industry at the expense of smaller sectors like tile and brick-makers.
Bergman also cast doubt on the Commission's plan to set aside 800 million allowances for a 'technology accelerator' to support deployment of existing technologies and innovation in the sectors.
"If there are allowances left over […], some of the revenues could be used to support the best innovative technologies," the official said. But he added that at this point it is not possible to know whether the final amount of allowances will exceed the predetermined maximum amount, in which case all allowances would go to companies.
"It's only in a year and a half that we'll know if we really can go ahead with this," he said.
