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Brussels, 29 April 2011

Emissions trading: Commission rejects Estonia's revised National Allocation Plan for 2008-2012

The European Commission today rejected a revised Estonian National Allocation Plan (NAP) for distributing carbon dioxide (CO2) emission allowances for the 2008-2012 trading period of the EU Emissions Trading System (EU ETS). The Commission rejected the plan on several grounds but in particular because the average total quantity of allowances Estonia proposed to allocate to its installations over the period was too high. The revised NAP was submitted following the Commission's decision of 11 December 2009 rejecting the initial plan.


In 2007 the Commission decided that certain aspects of the Estonian National Allocation Plan (NAP) were not compatible with the EU ETS Directive (see IP/07/613). Estonia brought an action for annulment against this decision before the Court of First Instance.

On 23 September 2009, the Court annulled the Commission's decision in its entirety. The Court's ruling primarily concerned the procedure and not the material assessment of the NAP carried out by the Commission. On 3 December 2009, the Commission appealed against the judgement on a number of legal grounds (see Questions and Answers relating to the Commission's appeals).This appeal is still pending before the European Court of Justice.

By decision of 11 December 2009, the Commission replaced the decision annulled by the Court and rejected the originally proposed level of allocation, while taking into account the Court's judgment.

This action put the onus on Estonia to prepare a new NAP. Estonia submitted the new plan to the Commission in February 2011.

Reasons for rejecting the revised plan

The Commission has rejected the new NAP because it considers that the plan contravenes several of the relevant criteria set out in the EU ETS Directive.1

In particular, the Commission considers that the proposed average total quantity of allowances per year for the period 2008-2012 is more than is likely to be needed, taking into account the most representative emissions figures, projected economic growth and carbon intensity improvements. The Commission also considers that the allocation proposed in the plan is not consistent with other EU legislative and policy instruments, in particular, the internal energy market, and may lead to distortions of competition.

As a result of today's decision, Estonia will have to submit an amended NAP to be assessed again by the Commission. See full text of the decision:

Assessment of national allocation plans

National allocation plans (NAPs) determine for each Member State the 'cap' or limit on the total amount of CO2 that installations covered by the EU ETS can emit, and set out how allowances will be allocated to individual installations.

The Commission's task is to scrutinise Member States' proposed NAPs against the 12 allocation criteria listed in the EU ETS Directive. The criteria seek, among other things, to ensure that plans are consistent with meeting the EU's and Member States' Kyoto commitments, with actual verified emissions reported in the Commission's annual progress reports and with technological potential to reduce emissions. Other criteria relate to non-discrimination, EU competition and state aid rules, and technical aspects. The Commission may reject a plan in part or in full.

As of 2013, auctioning of allowances will be the rule for allocation under the EU ETS. Member States will not be required to set up NAPs anymore. The 'cap' will be set EU-wide and transitional free allocation of allowances to industrial installations will take place according to EU-wide harmonised rules on the basis of benchmarks.

1 :

. Annex III to Directive 2003/87/EC, as amended by Directive 2004/101/EC.

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