EU carbon rules / Regulations / ETS Transitional Rules for Free Allocation
Industrial installation benchmarks, historical activity levels, conditional allocation (as amended by 2024/873)
This regulation applies to:
Amended by Delegated Regulation (EU) 2024/873 (adjusting the free allocation methodology for benchmarks for fuel/electricity interchangeable products, to avoid double counting with indirect cost compensation); and operates alongside the phase-out of free allocation for CBAM-covered sectors under Article 10a of the EU ETS Directive from 2026 (97.5% in 2026 → 0% in 2034).
The following provisions define its scope:
Article 1 — Scope
This Regulation shall apply to the free allocation of emission allowances under Chapter III (Stationary installations) of Directive 2003/87/EC as regards the allocation periods as from 2021, with the exception of transitional free allocation of emission allowances for the modernisation of electricity generation pursuant to Article 10c of Directive 2003/87/EC.
| Duty | Trigger | Evidence | Timing |
|---|---|---|---|
| Submit activity level data and an allocation application Apply for free allocation under the benchmark method and submit a verified baseline-year activity level report (HAR). | Installations eligible for free allocation | Verified activity level report, monitoring methodology documents | Each year of the allocation period (free allocation until 2030) |
| Comply with the monitoring and reporting requirements as amended by 2024/873 The free allocation rules are simplified, but product benchmarks must be monitored under the latest methodology. | Installations receiving free allocation | Updated monitoring methodology documents | After 2024/873 enters into force |
COMMISSION DELEGATED REGULATION (EU) 2019/331
Article 1 — scope (free allocation from 2021)
This Regulation shall apply to the free allocation of emission allowances under Chapter III (Stationary installations) of Directive 2003/87/EC as regards the allocation periods as from 2021, with the exception of transitional free allocation of emission allowances for the modernisation of electricity generation pursuant to Article 10c of Directive 2003/87/EC.
Article 2(1) — incumbent installation
‘incumbent installation’ means any installation carrying out one or more activities listed in Annex I to Directive 2003/87/EC ... which obtained a greenhouse gas emission permit before or on: (a) 30 June 2019 for the period 2021-2025, (b) 30 June 2024 for the period 2026-2030;
Article 4(1)–(2) — application for free allocation
The operator of an installation eligible for free allocation pursuant to Article 10a of Directive 2003/87/EC may submit to the competent authority an application for free allocation for an allocation period. That application shall be submitted before 30 May 2019 as regards the first allocation period and every five years thereafter. ... An application for free allocation submitted pursuant to paragraph 1 shall be accompanied by the following particulars: (a) a baseline data report verified as satisfactory ... containing each parameter listed in Annex IV ...; (b) the monitoring methodology plan which formed the basis for the baseline data report and the verification report ...; (c) a verification report issued ... on the baseline data report.
COMMISSION DELEGATED REGULATION (EU) 2024/873
Recital (17) — process-emissions multiplier reduced to 91 %
Free allocation for process emissions not covered by product benchmarks is based on the grandfathering of historical emissions. Since 2013 free allocation has been given at the level of 97 % of the historical emissions. To incentivise the reduction of such process emissions ... it is necessary to reduce the level of free allocation for process emissions not covered by product benchmarks to 91 %, equivalent to an annual reduction of 0,3 % ... The reduced multiplication factor should apply from 1 January 2028 ...
Recital (7) — no free allocation for CBAM-covered products; CN-code evidence
Directive 2003/87/EC provides that no free allocation shall be given in relation to the production of products covered by the Carbon Border Adjustment Mechanism (CBAM) ... with a gradual phase-out of free allocation during a transitional period. To ensure a harmonised implementation of this provision, operators should provide information and evidence, in particular based on Combined Nomenclature (CN) codes ... on the goods produced.
Recital (21) — conditionality on energy-efficiency measures
To provide further incentives to reduce greenhouse gas emissions a provision on conditionality of free allocation on implementation of energy efficiency improvement measures was introduced in Article 10a, third subparagraph, of Directive 2003/87/EC ... Operators of non-compliant installations facing the 20 % reduction of free allocation should provide verified evidence to the competent authority on the implementation of all recommended measures to ensure recovery of free allocation reduced due to conditionality.