Next allocation phase of the EU emissions trading scheme: How tough will the future be?

The development of National Allocation Plans (NAPs) for the first phase 2005–2007 of the EU emissions trading scheme (EU-ETS) was accompanied by the stated concern of the industrial enterprises with installations that fall under the scope of the relevant Directive 2003/87, since the impacts of the allocation in their financial and technical modes of operation were judged to be severe. Thus, the intensity of the negotiations for the next allocation phase (i.e. 2008–2012), is expected to be heated. With a view to assisting enterprises, especially in the energy sector or for which energy use and its management is a crucial part of their activity, to incorporate in their business plans the impacts of the Directive in an informed manner, an attempt is made here to explore the constraints and the available options that will guide the coming EU-ETS potential allocations. In the analysis, the credits derived from the use of CDM are specifically taken into account. The results show that the next allocations would tend to be significantly more stringent than the current ones because of the combined effect of no inter-period transfer of allowances, the amount of CDM credits expected to be available compared to the amount of effort that would be required and the yield of emission reductions from existing or planned policies and measures. It becomes then crucial, if not imperative, for the enterprises involved as well as national governments to examine carefully means to address their obligations under the Directive.