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Climate Action

On 14 July 2021, the European Commission adopted a series of legislative proposals setting out how it intends to achieve climate neutrality in the EU by 2050, including the intermediate target of an at least 55% net reduction in greenhouse gas emissions by 2030. The package proposes to revise several pieces of EU climate legislation, including the EU ETS, Effort Sharing Regulation, transport and land use legislation, setting out in real terms the ways in which the Commission intends to reach EU climate targets under the European Green Deal.

Auctioning is the default method for allocating emission allowances to companies participating in the EU emissions trading system (EU ETS). However, in sectors other than power generation, the transition to auctioning is taking place progressively. Some allowances continue to be allocated for free until 2020 and beyond.

The continuation of free allocation allows the EU to pursue ambitious emissions reduction targets while shielding internationally competing industry from carbon leakage.

Over the current trading period (2013–2020), 57% of the total amount of allowances will be auctioned, while the remaining allowances are available for free allocation.

Free allocation decreases each year


At the beginning of the current trading period, manufacturing industry received 80% of its allowances for free. This proportion will decrease gradually each year to 30% in 2020.

Power generators since 2013 in principle do not receive any free allowances, but have to buy them. However, some free allowances are available to modernise the power sector in some Member States.

Airlines continue to receive the large majority of their allowances for free in the period 2013-2020.


Power point presentations explaining the basic rules for applying the harmonised allocation rules in the 3rd trading period (including examples for specific cases)

During workshops in Member States (end March – end April 2011), a general presentation and 5 case-study presentations were given to explain in a practical way how the allocation rules should be applied.

When consulting these presentations, please always read the "Disclaimer and Copyright" mentioned on the 1st slide of each presentation.

Document description
General presentation on how the allocation rules will have to be applied
Installation producing chemical products
Installation producing hot metal (integrated steel mill)
Installation producing pulp and paper
Installation being part of heat distribution network
Installation producing nitric acid

Guidance documents, Data collection template and Methodology Report relevant for incumbents

The following guidance documents and templates were endorsed by the Climate Change Committee on 14 April 2011.

Document description
General guidance to the allocation methodology (GD1)
Guidance on allocation methodologies (GD2)
Data collection guidance (GD3)
Verification of NIMs Baseline Data Reports and Methodology Reports Verification of NIMs Baseline Data (GD4)
Guidance on carbon leakage (GD5)
Cross-boundary heat flows (GD6)
Waste gases and process emissions sub-installation (GD8)
Sector-specific guidance (GD9)
Data collection template (EN version, updated on 25 May 2011 to take into account the carbon leakage list revision, although the latter has not yet been adopted)
Please note that operators should always consult the competent authority of the Member State concerned before using this template.
Methodology report template
List of recent changes (20 December 2011)

In order to address some specific cases and complement the explanation contained in the template itself or in the data collection guidance document ("GD3"), complementary instructions have been developed.

Phase 4 (2021-2030): Guidance documents, Baseline Data Report and Monitoring Methodology Plan relevant for incumbents

The following guidance documents and templates are prepared for the implementation of the 4th trading period.

Document description
Update of benchmark values for the years 2021 –2025 of phase 4 of the EU ETS
General Guidance to the allocation methodology (GD1)
Guidance on determining the allocation at installation level (GD2)
Data collection guidance (GD3)
Verification of FAR Baseline Data Reports and validation of Monitoring Methodology Plans (GD4)
Guidance on Monitoring and Reporting in Relation to the Free Allocation Rules (GD5)
Cross-Boundary Heat Flows (GD6)
Guidance on allocation level changes (GD7)
Waste gases and process emissions sub-installation (GD8)
Sector-specific guidance (GD9)
Guidance on allocation for mergers and splits (GD10)
Baseline Data Report template
Monitoring Methodology Plan template
Verification report template
Best Practice Guidance for small installations - Article 27
Report template for allocation to new entrants, allocation level changes and cessations
Activity Level Changes (ALC) Verification Report template
Activity Level Changes (ALC) Frequently Asked Questions
FAR workshops and Frequently Asked Questions
M&R Training Event on Free Allocation issues (FAR and ALC)

Guidance documents and templates for new entrants and closures

Be aware that some other Guidance Documents mentioned above (for incumbents) remain valid and/or relevant for the new entrants and closures.

Document description
Guidance document on New Entrants and closures updated with Annex I (GD7)
Guidance document on allocation for mergers and splits (GD10)
Frequently Asked Questions on New Entrants & Closures Applications
New entrants and closures Template (NE&C template) (please always refer to the Member State to request the translated and Member State specific template) (updated 23/06/2015)
Example procedure for monitoring activity levels and significant capacity changes for the purpose of Article 24(1) of the CIMs: this is an example procedure, please always refer to the Member State where the installation is situated to learn about the national specificities)
Example procedure Template


Questions and Answers on the Commission Decision 2011/278/EU on free allocation rules for the ETS (26/02/2014)