Allocation Act 2012 enters into force
The Allocation Act 2012 (Zuteilungsgesetz 2012), which was adopted by the German Bundestag on 22 June 2007, enters into force tomorrow (Saturday). This Act regulates the basis for CO2 emissions trading in Germany in the second trading period. Furthermore, an ordinance will also enter into force in the coming week that regulates further details regarding the allocation procedure.
The Allocation Act 2012 sets an ambitious target for CO2 reductions from 2008 to 2012, creates the framework for the launch of auctioning and regulates the free-of-charge allocation primarily on the basis of fixed emission values for the manufacture of products with the most efficient technology (benchmarking).
Federal Environment Minister Sigmar Gabriel: "With this Act we have made emissions trading in Germany a powerful tool for climate protection. In particular for the energy sector there are now very strong incentives to modernise and replace old installations with new, highly efficient ones. In a European comparison we are setting standards for the launch of auctioning. Policymakers have done their work - now companies need to make their contribution to climate protection."
The quantity of allowances for 2008 to 2012 is around 37 million tonnes per year below the current emissions level of installations subject to emissions trading. This corresponds to an effective reduction in quantity of around 8 percent. Compared with the first allocation plan the reduction in the quantity of allowances equals 57 million tonnes per year.
Allocating allowances to energy installations will be switched to a benchmarking system that rewards efficient installations and burdens outdated technologies. This significantly accelerates the modernisation process in the German energy sector. The reduction demands placed on the manufacturing industry are lower than those for the energy sector. This differentiation between sectors takes account of the different competitive situations and potential for reductions. Furthermore, small emitters with less than 25,000 tonnes CO2 per year are completely exempt from the reduction contributions.
Around one-tenth of the total quantity of allowances, i.e. 40 million allowances per year, will no longer be allocated free-of-charge; instead they will be sold. Germany will therefore auction the EU-wide largest share of emissions allowances. In future additional revenues will thus be skimmed off that are currently gained by energy utilities in particular through the 'pricing in' of the value of allowances that were allocated free of charge into the electricity price. The net additional revenue for the Federation will be used for national and international climate protection measures and for promoting renewable energies in the heat sector.
Generous framework conditions are created for the use of the project-based Kyoto mechanisms JI and CDM. In total, German companies can use 90 million emission certificates per year from cost-effective climate protection projects abroad and at the same time can contribute to urgently needed transfer of technology and know-how in developing and newly industrialising countries.
The allocation process will now be implemented for the installations concerned by the start of the allocation period on 1 January 2008. The installation operators have to submit an allocation application to the German Emissions Trading Authority (DEHSt) at the Federal Environmental Agency (UBA) by mid-November. However, for more than 60 percent of the installations concerned the only data needed for allocating allowances has already been collected by the DEHSt. This reduces costs for operators and the administrative burden for the authority.