What is free allocation in EU ETS?
In the EU ETS, free allowance allocation is used to safeguard the competitiveness of the regulated industries and to avoid carbon leakage. In Phase I and II, most allowances were given for free. Sectors at risk of carbon leakage are identified based on carbon and trade intensity.
What sectors does the ETS cover?
Other. Ultimately, the Commission intended that the third trading period should cover all greenhouse gases and all sectors, including aviation, maritime transport, and forestry.
What is linear reduction factor?
The linear reduction factor (LRF) defines the annual decrease of allowances provided to the market either via free allocation or via auctions. These shares, however, are reduced, as allowances are required for other elements of the market such as funds, a reserve for new installations or the like.
Can phase 3 allowances be used in Phase 4?
Apart from this restriction, phase 3 and phase 4 allowances are both equally valid and can be surrendered to cover compliance obligations in phase 4 (starting from 30 April 2022).
What is included in EU ETS?
Sectors and gases covered
- electricity and heat generation,
- energy-intensive industry sectors including oil refineries, steel works, and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals,
- commercial aviation within the European Economic Area;
What does linear reduction mean?
In computer science, particularly the study of approximation algorithms, an L-reduction (“linear reduction”) is a transformation of optimization problems which linearly preserves approximability features; it is one type of approximation-preserving reduction.
Do EU ETS allowances expire?
EU ETS Directive foresees that the share of allowances to be auctioned will remain the same after 2020. EU leaders decided in October 2014 that free allocation shall not expire, but the share of allowances being auctioned will not reduce during the next decade.
Is the UK still part of the EU ETS?
When the Brexit transition period ended on 31 December 2020, the UK left the EU’s Emissions Trading Scheme – a key pillar of the EU’s policy to decrease greenhouse gas emissions across its member states as well as Iceland, Norway and Liechtenstein.
Which is better carbon tax or cap-and-trade?
Carbon taxes lend predictability to energy prices, whereas cap-and-trade systems aggravate the price volatility that historically has discouraged investments in carbon-reducing energy efficiency and carbon-replacing renewable energy. Carbon taxes can be implemented more quickly than complex cap-and-trade systems.