The European Commission is to issue guidelines to European Union member states on how to interpret the emissions trading scheme law for the next round of national CO2 allowance allocation plans by end-2005, an EC official said Wednesday. Member states have to submit their NAPs for the second phase of the EU ETS by mid-2006-at the same time as the EC is to publish its review of the scheme, which started Jan 1, 2005. The review is to include an assessment of the impact of the ETS on companies’ competitiveness both indirectly, for example through higher power prices, and through direct costs, particularly for small emitters. It is also to look at the allowance allocation process, distortions and new rules for harmonization.
But given the timing the EC will not be able to change the ETS law to include its recommendations before the next phase starts in 2008. The aim of the guidelines is to incorporate the review’s ideas on improving allocation methods in time to encourage member states to take a more harmonized approach to their NAPs. But the guidelines are not binding, and the EC has to accept NAPs which meet the general criteria set out in the ETS law.