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The application for free allocation

The application for free allocation before the beginning of a trading period

The application for free allocation of European emission allowances (EUA) can be submitted by any European operator whose plant does not exclusively produce electricity.
The calculation of the allocation amount is based on the principle of benchmarking. For industry sectors for which no benchmarks have been set, so-called fallback procedures apply instead, in which, for example, the amount of heat required for production is the benchmark. The amount of heat allocated for this purpose is then based on the actual demand of the company in so-called reference years. If the industry sector in which your company operates or the products you produce are on the Carbon Leakage List, the number of possible free allowances is significantly higher than for the rest of the industry.

In the 4th trading period, 43 % of the total number of allowances issued by the EU will be allocated free of charge, the larger remainder will be auctioned or kept in reserve for new plants.
The allocation application must always be submitted in good time before the start of a trading period.

  • For the 3rd trading period 2013-2020, the deadline for submitting an allocation application was 31.01.2012
  • For the first half (2021-2025) of the 4th trading period 2021-2030, the deadline for submitting an allocation application was 30.06.2019
  • For the second half (2026-2030) of the 4th trading period 2021-2030, the deadline for submitting an allocation application will probably be 30.06.2024
  • For the 5th trading period 2031-2040, there will in all probability be no more free allocations, but only auctions.

Applying for a free allocation in the EU ETS means a great deal of time for a plant operator as it requires about 10-20 working days of a specialised employee, depending on the complexity of the plant.
Under certain circumstances, applications for free allocations can also be submitted within a trading period if changes to plants are such that such an application can be justified.

Based on the application for free allocation, the EU decides on the allocation for several years. The first allocation period in the 4th trading period is five years. Consequently, the next application will cover the years 2026-2030.

For this reason, a carefully prepared application for free allocation, which uses all possibilities for securing the maximum quantity of free allowances, is essential. If you do not do this, you will lose cash and you will have to buy missing allowances at high prices on the market.

The complexity of an application for free allocation as well as its opportunities and risks lie in several adjustments which significantly determine the allocation amount. These are in particular:

  • The structuring of your plant/balance limits
  • The carbon leakage test, selection of the NACE code
  • The benchmarking for plants in the benchmark list
  • The fallback methods, especially those with heat equivalent based on historical heat consumption
  • The calculation of the capacity utilisation for the conversion of fuel into useful heat

If you, as the responsible operator, do not have a specialised and experienced employee who can deal with the work related to the application for 15-30 days, you should look for external help in time.

If you need concrete help in the period January-June 2024 with the preparation of your application for free allocation for the 4th trading period 2026-2030, because there are not enough experienced employees in your company for this complex work and you would also like to take advantage of your chances for a maximum free allocation, please contact Emissionshändler.com®, if possible until 31.10.2023, to request a corresponding offer for your plant.

Emissionshändler.com® will be happy to take over the preparation of your application for free allocation for the 2nd half of the 4th trading period for the years 2026-2030.

We review and check your last allocation application, your measuring instruments, your plant scheme, your organisational structure, prepare a complete method report for your plant, look at your balance limits, carry out a detailed carbon leakage check (determination of the NACE code), discuss with you the benchmarking requirements of your products or the use of fallback methods, determine the capacity utilisation of your plant, if necessary, and specify the allocation elements.

After entering all data and necessary document attachments into the Forms Management System (FMS) of DEHSt, we discuss the status of the application with your verifier and incorporate any change requests in several interaction rounds.

After handing over the processing right to the certifier, we take over the supervision of the further inspections within the auditing organisation selected by you, so that the approval of the second auditor required by law can be obtained. After his approval, the auditor hands over the certified application to you in a sealed form and you send the allocation application to the competent authority DEHSt via the virtual post office (VPS) by 30.06.2024 (probable date).

Emissionshändler.com® will be happy to provide you with an offer on a flat-rate basis for the above-mentioned activities from 30.09.2023. Please contact us!