Statement to MOEW regarding the quantities of free quota allocated emissions

The Bulgarian Association of the Cement Industry (BACI) has already communicated to MOEW its opinion regarding the rules for adjusting the quantities of free allocation emissions due to activity level changes under Article 10a of Directive 2003/87/EC (Incoming Reference Number 48-00-445/18.06.2019), whereby to a large extent our position coincided with that of other concerned parties and the Ministry of Environment and Water. We regret to see that the European Commission has not taken into account the opinions presented so far and the draft regulation MOEW submitted to us on September 12, 2019, is still based on the step-by-step approach of adjustment of free allocation emissions in activity level changes, the so-called Belgian proposal. This is why we ask the MOEW and the Bulgarian Government to continue to insist on the following:

  • A linear adjustment of the free allocation of emissions in more than a 15% change of the average activity level calculated over a period of two consecutive years, against the historical activity level. The adjustment of the allocation should correspond to the precise percentage of change in the average activity level, whereby this rule should be applied in the first and each next adjustment of the allocation. The linear adjustment of the allocation will reduce the risk of under- or over-allocation.
  • Introducing rules of adjustment of free emission allocations in considerable changes in the capacity of incumbent installations, which are the result of technical changes. Such a change in capacity needs to be treated in the same way as “new entrants” to the ETS. The latest revision of the draft regulation again does not make a difference between incumbent installations that only use their free capacity to increase their activity levels, and incumbent installations that make considerable investments to increase their capacity. Reducing the carbon intensity of the European industry requires making considerable investments in incumbent installations, whereby this is the more likely path investors would take, instead of opening brand new “greenfield” productions, particularly so when these use specific raw materials. Otherwise, the investments would be made outside of the European Union. In an attachment we present an example that illustrates discriminatory treatment of incumbent installations with an increased capacity compared to new ETS entrants.

Regarding the discussion paper in connection with the upcoming amendment of the benchmarks for calculation of the free allowances, BACI welcomes the unified approach of the EC for collection of data and calculation of the benchmarks and the intention of the Commission to publish information related to the determination of the benchmarks. Taking into account the suggested options, BACI supports the second option, namely, publication of key parameters for updating the benchmark values and the benchmark curves for 2016/2017. This notwithstanding, we expect that the EC hold bilateral meetings with the industrial associations and provide sufficient information so that the benchmarks calculated by the EC are compared to those calculated by the separate industrial organizations on the basis of the data collected thereby. In order to have precise benchmarks, it is important that these bilateral meetings are held prior to finalizing and publishing the benchmarks.

We appreciate the efforts of the Bulgarian Government to contribute to the creation of rules that will provide incentives for growth, investment and decarbonisation of the European Union (EU) industry, and would be grateful if the MOEW takes into account our comments and again stands for linear dynamic allocation, fair treatment of capacity increases of incumbent installations, adjustments to allocated allowances as soon as activity levels are verified, and ensuring transparency and dialogue with the concerned parties in the calculation of product and fuel benchmarks.