Caution! Free allocation on the rise

6 December 2016
In October 2014, the EU Council opted to continue allocating free allowances to protect certain sectors from the assumed risk of carbon leakage in Phase 4 of the EU ETS. However, experience has shown that such decisions can lead to many highly emitting sectors receiving more free allocation at the start of Phase 4 than they receive at the end of Phase 3.
Here, we show that rebasing the cap secures greater environmental integrity to the overall system without significantly tightening free allocation from 2020 to 2021.