Allowances are distributed via free allocation and auction. Initially, most of the allowances will be distributed for free, as outlined in the regulation (and below).

FREE ALLOCATION:
Industrial Facilities: Facilities will receive allowances based on production intensity benchmarks based on data from the period 2014–2016. At the beginning of the year, 75% of the eligible emissions allowances will be distributed to the entities; the remaining 25% will be provided in the following year together with production-level adjustments after the submission of a verified emissions report.

The benchmark is based on historical facility emissions intensity, an assistant factor that varies between 1 (100%) for cement and 0.9 (90%) for pulp and paper and natural gas processing (the only defined industries).

A cap adjustment factor is also applied, declining from 1 in 2019 to about 0.88 in 2022. This means that an entity would receive about 12% less allowances based on the output from year 1.

Fuel Suppliers and Electricity Importers: Receive 80% of free allocation based on verified GHG reports for previous year’s emissions.

Nova Scotia Power Inc.: The utility will be allocated allowances based on a reduction from BAU projections; ~6.3 million allowances will be freely allocated to Nova Scotia Power Inc. in 2019, declining to just over five million in 2022.

AUCTIONING: The province will hold auctions two to four times per calendar year, starting in 2020. Minimum price: 5% plus inflation per year.

Auctioning in Nova Scotia has two particularities:

(1) The option for regulated entities to consign allowances to auction: minimize transaction costs for participants, regulated entities can consign their allowances to the government auctions. Allowances offered for sale through consignment are included in the government auctions and sold first, followed by emission allowances offered for sale by the province. 100% of the revenue from allowances sold on consignment is returned to the participants.

(2) The purchase of limits to secure market functioning: secure market functioning, bidders will be subject to purchasing limits that restrict how many allowances each participant can buy at any one auction. Purchasing limits are intended to mitigate the risk that one participant can manipulate the market by causing shortages and price spikes.

Purchasing Limits (for the 2019-2022 compliance period):

·         Fuel suppliers: 15% of the previous year’s verified GHG emissions per auction and 25% for the calendar year;

·         Industrial facilities: 3% of their previous year’s verified GHG emissions per auction and 5% for the calendar year; and

·         Nova Scotia Power Inc.: 5% of the allowances available for sale at each auction.

Nova Scotia’s cap-and-trade program is structured around compliance periods; trading periods are not defined separately. The first compliance period is 2019–2022.

FREE ALLOCATION: Emission-intensive sectors subject to international competition receive a portion of free allowances. Eligible sectors include: aluminum, lime, cement, chemical and petrochemicals, metallurgy, mining and pelletizing, pulp and paper, petroleum refining, and others (manufacturers of glass food containers, electrodes, gypsum products, and some agro-food products). Free allocation is generally based on benchmarks either for inputs of raw materials or for product-based benchmarks (output-based allocation).

First compliance period (2013-2014): Historical emission intensity adjusted for production level and by type of emission, with 100% allocation for process emissions, 80% for combustion emissions and 100% for emissions from other sources.

Second (2015-2017) and subsequent periods: Free allocation is based on increasingly strict intensity targets (declining emissions intensity per activity) and production levels. Since production volumes can vary, increasing intensity targets does not guarantee an absolute reduction in free allocation but incentive reductions of emissions intensity.

As of 2019, allocation of free allowances is made available to voluntary emitters (also known as opt-in covered entities) in alignment with what has been established for regulated entities.

Assistance factors: Assistance factors (AFs) for the 2021-2023 period vary between 1 (100%) and 0.6 (60%), with the lowest AFs for electricity and steam production and most industrial production having AFs of 1 (see Table 7 in the Appendix of the Regulation for details).

AUCTIONING: Generally, electricity and fuel distributors have to buy 100% of their allowances. Allowances are auctioned quarterly.

As of 1 January 2019, Québec had held a total of 21 auctions, 17 held jointly with California, of which two were also held jointly with Ontario.

Unsold allowances in past auctions are removed and will gradually be released for sale at auction after two consecutive auctions are held in which the sale price is higher than the minimum price.

In 2017, the latest year for which complete data are available, a little less than 70% of allowances were allocated by auction or destined to reserves. About 30% of allowances were allocated for free. Some allowances from future vintages are offered at each auction and may be traded but not used for compliance until the compliance date for the vintage year.

The Québec cap-and-trade system is structured around three-year compliance periods, except for the first period (see “Compliance” below). A cap trajectory until 2030 has been set (see “Cap”). Allowances are allocated and auctioned with calendar vintage years.

Free Allocation: Mainly free allocation through grandparenting based on emissions or emissions intensity in the baseline years (for 2017 allowances, the baseline years are 2009-2012 for stationary sources and 2013-2016 for mobile sources). Benchmarking is used for new entrants and entities with expanded capacity as well for the power sector.

Auctioning: Beijing could set aside up to 5% of allowances for regular and irregular auctions (see Market Stability Mechanisms). To date, the trigger price for auction has never been met.

2013-2018*

*In the short term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Free allocation through grandparenting based on historic emissions (highest number in period 2008-2012). If the sum of allocation for all enterprises exceeds the cap, a reduction factor is applied. Regulated companies submit their allocation quotas on a yearly basis, forming the basis of their free allocation. Ex-post adjustments based on output data are possible.

2013-2018*

*In the short-term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Benchmarking is applied to electricity, cement, aluminum, and plate glass sectors.

The other sectors are allocated allowances based on historical intensity. These entities can also apply for more allowances for early mitigation actions. 

Free allowances are also to be allocated to new entrants while they are only covered after 12 or 24 months of operation (depending on type of allocation methods). 

Auctioning: Auctioning may take place where considered appropriate by the ETS authorities (see Market Stability Provisions below) and may be introduced as a method for allowance allocation over time; up to 10% of the total cap is reserved for market intervention.

In order to increase market liquidity and price discovery, the Fujian DRC organized an auction in 2016 of discriminatory (non-uniform price) allowances. 50,000 allowances from the government reserve were auctioned, with the settlement prices ranging from CNY 26.50 (USD 4.01) to around CNY 30 (USD 4.53). To date, this is the only auction held in the province.

2016-2018*



*In the short term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium- to long-term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Mainly free allocation based on grandparenting, historical intensity, or benchmarking. Benchmarking is applied to coal and gas-fired electricity generators (including heating, as well as combined heat and power), as well as to some industrial processes in the aviation, cement, paper, and steel sectors. Ex-post adjustments based on real production data of the respective compliance year are also applied.

Auctioning: Guangdong auctions a small share of allowances as a way of allowance allocation. During the first compliance year (2013), entities were required to purchase allowances in auctions in order to become eligible to receive their freely allocated allowances. This requirement was terminated in 2014. Since 2014, free allocation percentages remain the same, i.e., 95% for the power sector and 97% for the remaining sectors. A total of two million allowances are available for auction annually. Quarterly auctions were held until the 2016 vintage while for 2017 and 2018, auctions were ad hoc. No auction took place in 2018.

2013-2018*

*In the short term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market once it is fully operational.

Free Allocation: Free allocation of 2017 vintage allowances through benchmarks for power, heat, co-generation, and cement (except the entities using outsourced clinker).

Historical emissions intensity for glass and other building materials, pulp and paper, and ceramics sectors; grandparenting based on previous three years’ historic emissions for all other sectors.

Ex-post allocation adjustments are possible, especially for those sectors that use benchmarks and emissions intensity.* 

The total cap also includes a New Entrants Reserve, as well as a government reserve for potential market stability measures.

*In this case, entities first receive half of the total allowance based on the previous year’s actual emission data or historical emission baseline; the actual production data is then used to update allocation ex-post.

2014-2018*

*In the short term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Free allocation based on sector-specific benchmarks (power, heat, manufacturers), historic emissions intensity (industry, aviation, car glass, ports, shipping, and water suppliers, generally based on 2014-2016 data), or historic emissions (buildings, commercial sector, industry with complex products or considerable change in emission boundary, and airports, generally based on 2014-2016 data). 

Ex-post allocation adjustments, e.g., on the basis of production data, are applied for those with historic intensity or benchmarking allocations.

Auctioning: A small share of the annual cap could be auctioned. The purpose of auctions is not to allocate allowance but to provide compliance entities with additional supply to meet their compliance demand. Shanghai auctioned two million tonnes from the government reserve in July 2018, with a floor price set at two times the weighted on-exchange allowance price from 18 November 2016 to 30 July 2018—CNY 41.54 (USD 6.28). The auction cleared at the floor price and a total of 305,237 tonnes (15% of total auction volume). An auction of two million allowances was held in June 2017. 2% of allowances were sold, at the floor price of CNY 38.77 (USD 5.86).

Two trading periods: first period 2013-2015, second period 2016; no specific ending year.*

*In the short term, the existing Chinese regional carbon markets are expected to operate parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Allowances are largely distributed for free. Benchmarking is applied to the water, power, and gas sectors based on sectoral historical emissions intensity.

Grandparenting is applied to port and subway sectors, public buses, and other nontransport sectors based on the entity’s historical emissions intensity. Allowance allocation is adjusted ex-post based on output data.

Although the Interim Measure for the Administration of Carbon Emission Trading of Shenzhen states that at least 3% of allowances should be auctioned, this has not been implemented. So far, only one auction took place (in June 2014) in order to increase market supply.

2013-2018*

*In the short term, the existing Chinese regional carbon markets are expected to operate in parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

Free Allocation: Mainly free allocation through grandparenting based on 2009-2012 emissions or on emissions intensity. Benchmarking for new entrants and expanded capacity.

2013-2018*

*In the short term, the existing Chinese regional carbon markets are expected to operate parallel to the national Chinese carbon market. Over the medium to long term, they are expected to be integrated into the national market, once it is fully operational.

PHASE 1 (2005-2007): Allocation established through the Member State National Allocation Plans. Nearly 100% free allocation through grandfathering. Some Member States used auctioning and some used benchmarking.

PHASE 2 (2008-2012): Similar to Phase 1 with ~90% of allowances allocated for free. Some benchmarking for free allocation and some auctioning in eight Member States (Germany, United Kingdom, The Netherlands, Austria, Ireland, Hungary, Czech Republic and Lithuania), constituting ~3% of total allowances.

PHASE 3 (2013-2020): Over the entire trading period, 57% of allowances will be auctioned, while the remaining allowances are available for free allocation.

Electricity Sector: 100% auctioning with optional derogation for the modernization of the electricity sector in certain Member States. Those Member States whose GDP per capita was below 60% of the EU average in 2013 may continue to make use of this optional free allocation in phase 4.

Manufacturing Sector: Free allocation is based on product-based benchmarks. Benchmarks are based on activity levels in 2007-2008 and are set at the average of the 10% most efficient installations in the (sub)sector.

Subsectors deemed at risk of carbon leakage receive free allocation at 100% of the predetermined benchmarks. Subsectors deemed not at risk of carbon leakage have free allocation phased out gradually from 80% of the benchmarks in 2013 to 30% by 2020. In the event that free allocation exceeds the amount reserved for free allocation, a cross-sectoral correction factor is applied.

Carbon leakage risk is assessed against criteria of emissions intensity and trade exposure.

Aviation Sector: In 2012, 85% of allowances were allocated for free, based on benchmarks. In phase 3, 15% of allowances are auctioned and 82% allocated for free, based on benchmarks. The remaining 3% constitute a special reserve for new entrants and fast-growing airlines. As a consequence of the temporary derogation applying to flights with third countries, the allocation is adjusted to the intra-EEA scope.

Backloading: Taken as a short-term measure to address a growing surplus in the EU ETS, it was agreed to postpone the auctioning of 900 million allowances from 2014-2016 to 2019-2020. Auction volumes were reduced by 400 million allowances in 2014, 300 million in 2015, and by 200 million in 2016. In line with the decision to create an MSR, the back-loaded allowances will be placed in the MSR.

New Entrants Reserve: 5% of the total allowances are set aside to assist new installations coming into the EU ETS or covered installations whose capacity has significantly increased since their free allocation was determined.

PHASE 4 (2021-2030): One of the central components of the phase 4 revision package is to ensure that the declining number of free allowances is distributed in the most effective and efficient way. To this end, in phase 4:

·   Benchmark values will be updated twice during the phase to reflect technological progress in the different sectors.

·   Free allocation may be updated annually to mirror sustained changes in production (if the change is more than 15% compared to the initial level, on the basis of a two-year rolling average).

·  Carbon leakage rules will be more robust, as the number of sectors classified at risk of carbon leakage will be reduced, and the free allocation for other sectors will be discontinued by 2030 (except district heating). 

·  Carbon leakage will be assessed against a composite indicator of trade intensity and emissions intensity.

·   As an additional safeguard for industry, the agreement foresees a “free allocation buffer” of over 450 million allowances initially earmarked for auctioning, to be made available if the initial free allocation is fully absorbed (thereby avoiding or reducing a correction factor).

In addition, two new multi-billion Euro funds will be established to help the industry and the power sectors meet the innovation and investment challenges of the transition to a low-carbon economy (for more, see Use of Revenue).

Phase 1: 3 years (2005-2007)

Phase 2: 5 years (2008-2012)

Phase 3: 8 years (2013-2020)

Phase 4: 10 years (2021-2030)

The baselines for facilities are based on historical emissions, calculated according to the following formula: Base-year emissions x (1 - compliance factor) x compliance period (5 years).

Base-year emissions for the first compliance period are based on the average emissions of three consecutive years between FY 2002-2007, as chosen by each entity. Credits are issued to facilities whose emissions fall below the baseline.

Baselines for new entrants are based on past emissions or on emissions intensity standards.

FIRST PERIOD: 1 April 2012 to 30 September 2016
SECOND PERIOD: 1 April 2015 to 30 September 2021

Each of the above trading periods includes an 18-month adjustment period.

The baselines for facilities are based on historical emissions, calculated according to the following formula: Base-year emissions x (1 - compliance factor) x compliance period (5 years).

Base-year emissions for the first compliance period are based on the average emissions of three consecutive years between FY2002-2007, as chosen by each entity. Credits are issued to facilities whose emissions fall below the baseline.   

Baselines for new entrants are based on past emissions or on emissions intensity standards.

FIRST PERIOD: 1 April 2011 to 30 September 2016

SECOND PERIOD: 1 April 2015 to 30 September 2021

THIRD PERIOD: 1 April 2020 to 30 September 2026

Each of the above trading periods includes an 18-month adjustment period.

Free Allocation:

Phase 1 (2013): 100% free allocation based on emissions data from 2010, with a reserve of 20.6 MtCO2.

Phase 2 (2014-2015): Free allocation (0% and 1.5% below 2011/2012 average emissions), with a reserve of 18 MtCO2 in 2014 and 20.5 in 2015.

Phase 3 (2018-2020): Free allocation based on grandfathering or product-based benchmarking (by each company’s own choice). A reserve contains 35.27 million allowances to accommodate for new entrants, new stationary emission sources, and for changes in capacity in case of the choice of benchmarking.

Phase 1 (pilot phase): 2013

Phase 2: 2014-2015

Phase 3: 2018-2020

In 2016 and 2017, the system was temporarily suspended.

PHASE ONE (2015-2017):
Free Allocation: 100% free allocation. Most sectors received free allowances based on the average GHG emissions of the base year (2011-2013). Three sectors (grey clinker, oil refinery, and aviation) were allocated free allowances following benchmarks based on previous activity data from the base year (2011-2013).

During Phase One, ~5% of total allowances were retained in a reserve for market stabilization measures (14 MtCO2e), early action (41 MtCO2e), and other purposes including new entrants (33 MtCO2e). In addition, unallocated allowances and withdrawn allowances were transferred to the reserve.

PHASE TWO (2018-2020):
Free Allocation: 97% free allowances. Toward the end of phase II, the share of sector-specific benchmarking is set to reach 50%. 

Auctioning: <3% auctioned; in some subsectors entities have an obligation to get 3% of their compliance obligation from auctions. Auctioning is determined on the sub-sector level, with an obligation acquire 3% of allowances at auctions, with the exception of sub-sectors that have high trade intensity or high additional cost increases, considering international competitiveness and carbon leakage. Sectors that participate in auctions include, among others, entities from the electricity, domestic aviation, wooden product and metal foundry sectors. While auctioning was scheduled to start in 2018, it has been delayed to the beginning of 2019. Participation in auctions is subject to some limitations. Only companies that do not receive all their allowances for free will be eligible to bid, with a list of eligible bidders published by the Ministry of Environment. No one bidder can purchase more than 30% of the allowances of one auction. The auctions will be subject to a minimum price.

KETS held its first auction in January 2019. Seven companies participated with the bidding price ranging from KRW 23,100 (USD 20.99) to KRW 27,500 (USD 24.98). Four companies successfully bid for all available allowances (550,000 KAUs) for a settlement price of KRW 25,500 (USD 23.17). A total of 7.95 million tonnes are set to be auctioned on monthly basis this year, with 550,000 offered in the first, third and fourth quarters; a million tonnes per auction will be offered in the second quarter.

PHASE THREE (2021-2025):
Free Allocation: less than 90% free allowances. Increasing use of sector-specific benchmarking set to reach 70%.  
Auctioning: more than 10%.

Energy-intensive and trade-exposed (EITE) sectors will receive 100% of their allowances for free in all phases. EITE sectors are defined along the following criteria:
(1) Additional production cost of >5% and trade intensity of >10%; or
(2) Additional production cost of >30%; or
(3) Trade intensity of >30%.

PHASE ONE:  3 years (2015-2017)

PHASE TWO: 3 years (2018-2020)

PHASE THREE: 5 years (2021-2025)

Free Allocation:
EITE Activities: Intensity-based allocation for 26 eligible activities. Highly EITE activities (over 1,600 tCO2e/NZD 1 million of revenue [USD 0.69 million] receive 90% free allocation. Moderately EITE activities (over 800 tCO2e/NZD 1 million of revenue [USD 0.69 million] receive 60% free allocation. 6.9 million NZUs were issued from June 2017 to June 2018.

Post-1989 Forestry Sector and Other Removal Activities: NZUs are granted to participants that voluntarily register in the scheme for removal activities, as outlined below. There is no limit on the number of units that can be granted for removal activities.

Forestry Removal Activities: Participants are entitled to receive one NZU per tonne of CO2 removed for registered post-1989 forest land. If the forest is harvested or deforested, units must be surrendered to account for the emissions, and if the participant chooses to deregister from the scheme, NZUs equivalent to the number received must be returned. 18.3 million NZUs were issued for forest removal activities from June 2017 to June 2018.

Other Removal Activities: Participants are entitled to receive one NZU per tonne of removal from recognized industrial processes, including export of products that embed carbon and export of HFCs and PFCs. 2.2 million NZUs were issued for other removal activities from June 2017 to June 2018.

Forestry and Fisheries Sectors: Owners of pre-1990 forest land, as well as owners of fishing quotas, received a one-off free allocation of NZUs when the NZ ETS was implemented to partially compensate for the impact of the ETS.

Auctioning: In 2018 the government decided to develop and introduce an auctioning mechanism, within an overall cap on non-forestry sectors. The first auctions are expected in 2020.

For most sectors the NZ ETS has annual surrender obligations.

For post-1989 forestry participants, annual reporting of emissions and removals is optional, with five-year mandatory reporting periods. As a result, unit entitlement transfers and surrender obligations for these participants correspond to when they choose to report their emissions.

VOLUNTARY PHASE (2008-2012):
Free Allocation: Each participant was granted free allocation of allowances covering emissions up to their own entity-specific emissions target.

MANDATORY PHASE (2013-2020):
Free allocation: Free allocation is based on industry benchmarks using a similar methodology to the EU ETS. Free allocation for sectors not exposed to the risk of carbon leakage will be phased out gradually: in 2013, such entities received 80% free allocation whereas in 2020 the share of free allocation will be reduced to 30%.

An overarching correction factor is applied given the benchmarked allocation exceeds the overall emissions cap.

Auctioning: Allowances that are not allocated for free are auctioned. Auctions take place two or three times a year, depending on available auction volumes.

5% of the allowances are set aside in a reserve for new entrants and significantly growing operators.

VOLUNTARY PHASE: 2008 - 2012
MANDATORY PHASE: 2013 - 2020

Allowances are distributed via auction and/or free allocation.

Free Allocation: Industrial facilities: Facilities receive free allowances for transition assistance and to prevent leakage. The amount is determined by specific benchmarks, production volumes, general cap adjustment factor, and an assistance factor based on assessment of leakage risk.

Leakage risk is measured through emissions intensity and trade exposure and used to define assistance factors until 2018. From 2018, assistance factors are set at 100% for all sectors receiving free allocation.

For the post-2020 period, AB 398 specifies an assistance factor of 100%, meaning there will be no differentiation based on leakage risk for sectors receiving free allocation. Recent regulatory changes also set third compliance period assistance factors to 100% for all sectors. There is no cap on the total amount of industrial allocation.

Free allocation is provided for transition assistance to public wholesale water entities, legacy contract generators, universities, and public service facilities.

Consignment: Electrical distribution utilities and natural gas suppliers: Utilities receive allowances on behalf of their ratepayers. All natural gas and electrical utilities must use the allowance value for ratepayer benefit and for emissions reductions.

Auctioning: In 2018, about 75% of allowances were available through auction, including both allowances owned by CARB (about 50%) and allowances consigned to auction by utilities (about 25%). The revenue from consignment allowances is mandated to benefit the ratepayers. The remainder of allowances was allocated for free.

The California Cap-and-Trade Program is structured around compliance periods (see “Compliance” below). A cap trajectory until 2030 has been set (see “Cap” above).

Allowances are allocated and auctioned with calendar year vintages. Some allowances from future vintages are offered at each auction and may be traded but not used for compliance until the compliance date for the vintage year.

Auctioning: From 2019 onwards, allowances are partially auctioned, with 25% auctioned in 2019, 50% in 2020, and 100% from 2021 onwards.
One to four auctions will be held each year.
The first auction took place in December 2018.

Free Allocation: Until 2021, remaining allowances will be freely allocated proportionally based on historical (2013-2015) generation.

The system has an annual compliance deadline of 1 March for the prior year’s emissions. A linear cap trajectory until 2050 has already been set (see “Cap”).

Auctioning: CO2 allowances issued by each RGGI state are distributed through quarterly, regional CO2 allowance auctions using a “single-round, sealed-bid uniform-price” format. Auctions are open to all parties with financial security, with a maximum bid of 25% of auctioned allowances per quarterly auction.

RGGI is structured around “control” (or compliance) periods. A cap trajectory until 2030 has been set (see “Cap” above).

FIRST CONTROL PERIOD: 2009-2011
SECOND CONTROL PERIOD: 2012-2014
THIRD CONTROL PERIOD: 2015-2017*
FOURTH CONTROL PERIOD: 2018-2020*


*RGGI introduced an interim control period with the 2014 revisions. An affected source must cover 50% of its emissions with allowances in each of the first two years of a control period.  The affected source must cover 100% of the remaining emissions at the end of the three-year control period.

The ETS competent authority will develop detailed allocation rules in cooperation with energy sector authorities.

Free Allocation: Free allocation is expected to be based on subsector benchmarks with ex-post adjustments for changes in actual production.

In 2017, draft allocation plans for power, cement, and electrolytic aluminum were developed and trial allocation work was carried out in two provinces. Further sector-based trial allocation is expected to be carried out in the first half of 2019 in order to refine and finalize the benchmarks.

First Phase (~a year as of 2018): Development of market infrastructures

Second Phase (~another year as of 2019): Simulation trading

Third Phase (~from 2020 on): Expanding sectoral coverage and deepening and expanding

PHASE ONE (2021-2025): The government will start with a fixed price on CO2 emissions by issuing allowances for EUR 10/tCO2 (USD 11) in 2021. This price will double in 2022 to EUR 20/tCO2 (USD 22) and rise EUR 5/tCO2 per year afterwards, reaching EUR 35/tCO2 (USD 38) in 2025.

In case the allocation of allowances within the national ETS exceeds the available German emissions budget set out in the EU Effort Sharing Regulation (ESD), allowances for emissions reductions will be acquired through inter-member state trade, as allowed under the ESD.

PHASE TWO (from 2026): From 2026 onwards, a cap on emissions will replace the fixed price and decline each year. Allowances will be allocated through auctions, and the cap will be based on Germany’s reduction targets for the non-EU ETS sectors as defined in the ESD.