1. Introduction
1.1. The first part of the e-zine highlights the most important changes to the European framework governing the Emissions Trading Scheme. The second part will then provide an overview of the recent developments, which have taken place, in Belgium on the level of the three regions, in light of the implementation of the ETS Phase III.
2. European Level
A. ETS III: Field of application
2.1. Characteristic of the reviewed ETS regime is the fact that the scope has been broadened. Indeed, "combustion activities" are defined more broadly in Phase III than in Phase I and Phase II: "Any oxidation of fuels, regardless of the way in which the heat, electrical or mechanical energy produced by this process is used, and any other directly associated activities, including waste gas scrubbing". The inclusion of aviation activities in the legislative package represents another milestone in the emissions trading regime.
2.2. With regards to the field of application of ETS III, small emitters may be excluded from the scope of ETS III, following the fulfillment of certain conditions. However, despite their exclusion from the ETS, these small emitters still need to meet requirements with regards to monitoring and reporting of their emissions. It may also be noted that installations, which combust pure biomass, are excluded from the scope of ETS III.
B. Auctioning and free allocation rules
2.3. Auctioning will be the main method to allocate emission allowances in ETS phase III. However, "grandfathering" will still be allowed to a certain extent. In this regard, it should be noted that one of the growing pains of ETS I and II consisted out of the distortion of competition due to discrepancies in allocation rules at national level. Therefore the National Allocation Plans (NAPs) will be replaced by National Implementing Measures (NIMs). The Member States must submit their NIMs to the European Commission by 31 September 2011.
2.4. To determine the ratio between auctioning and free allocation in Phase III, a basic distinction is made between electricity generators and industrial installations. Generally speaking, electricity generators will be subject to full auctioning mechanisms. However, under certain conditions, countries may consider to invoke the "optional derogation clause" for the power sector.
2.5. With regards to industrial installations, the basis idea is auctioning as well. Member states should engage to 20 % auctioning as from 2013, amounting to 80% in 2020, resulting in a 100 % in 2027. In this regard, the Commission has issued a Decision 2011/287/EU determining transitional rules for harmonised free allocation of emission allowances. Annex VI of this Decision provides for factors on the basis of which the decrease of free allocation should be pursued. However, sectors or subsectors, which are included in the Commission Decision 2010/2/EU determining a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage, are given preferential treatment. The factors as included in Annex VI of Decision 2011/287/EU do not apply to these sectors or subsectors.
2.6. The framework for auctioning is provided by the Regulation on the Auctioning of Emissions Allowances 1310/2010/EG (the Auctioning Regulation). This Regulation provides for a common European-wide auctioning platform. However, Member States may opt to organise their proper platform. As to date and unlike Germany, the UK and Poland, Belgium has not notified the Commission that they intend to organise their own auctioning infrastructure.
C. One registry
2.7. By 2013, the national registries should be consolidated in the Union Registry. On 5 May 2011, the Commission has published a draft Regulation. The basic rules set out, the functioning of both the Union Registry and the European Union Transaction Log, the interaction with National Administrators and Competent Authorities, as well as rules concerning Kyoto credits. The provisions included in the Draft Regulations would cover the period starting from 1 January 2013, and as for aviation activities, also the period running from 1 January 2012 up to 31 December 2012.
2.8. Furthermore, the draft Regulation provides for enhanced security measures, by providing a layered authentication mechanism. Moreover, the Commission may instruct the Central Administrator to suspend all access to the Union Registry as well as acceptance by the European Union Transaction Log of processes originating from the Union Registry.
3. National Level (Belgium)
A. Flemish Region
a. Implementation
3.1. The Flemish Region is preparing for the launch of ETS III at full speed. The provisions that implement the EU ETS III legislation are issued through incorporation in the Energy Decree, the Flemish environmental permitting legislation (VLAREM), and through Ministerial Decisions.
3.2. In the run up to Phase III, the operators should submit "allocation request proposals" to the Benchmarking Verification Bureau of Flanders (BVBF) by 15 June 2011. The BVBF will then submit the verified data to the Flemish Government, who will in turn coordinate with the other regions and the federal government in light of the submission of the National Implementing Measures to the European Commission by 31 September 2011.
3.3. As to date, there is a lack of clarity as to what exactly constitutes a "GHG installation", and more precisely the manner in which the boundaries thereof are determined. The publication of legislation, which would shed more light on this issue, is soon to be expected.
b. Hiccups
3.4. On 2 March 2011, the Constitutional Court annulled the Decree of 8 May 2009 modifying the Renewable Energy Decree so as to extend the scope of the latter to the aviation industry.
3.5. The Court confirmed that the regions are competent to take measures reducing the emissions of greenhouse gases. However, the Court considered that the Flemish Region has exceeded her territorial competence. Indeed, considering the limited surface of the Flemish Region, the aviation activities have strong repercussions on the other Regions and on the marine areas.
3.6. The Court stated that the extension of the emissions trading system to aviation activities should take place through a cooperation agreement with the Federal government and the other Regions. To prevent legal uncertainty, the annulled Decree remains valid until 31 December 2011.
B. Walloon Region
3.7. The Walloon Region has issued its proper regional legislation package relating to the aviation sector, through i.a. the Decree of 6 October 2010 related to the emission trading scheme. By analogy with the Flemish Legislation, this Decree provides, amongst others, for the inclusion of aviation activities in the ETS legislation in the Walloon Region. This Decree has not been annulled by the Constitutional Court, as the action for annulment was limited to the Flemish Decree. However, the Judgment of the Constitutional Court of 2 March 2011 may have repercussions on the viability of the Decree.
3.8. The Walloon Government has further set out detailed rules related to monitoring, reporting and verification of GHG emissions and ton kilometre data resulting from aviation activities.
C. Brussels Capital Region
3.9. In the Brussels Capital Region, efforts are made to implement the Renewable Energy Directive 2009/28/EC. Indeed, in February 2011, through a new Ordinance eighteen new activities subject to the emissions trading legislation in Brussels are listed. However, as to date, this inclusion of the new activities remains theoretical, as none of the enterprises located on the territory of the Brussels Capital Region carry out such activities.
3.10. With reference to the Walloon Region and the Flemish Region, the Judgment of the Constitutional Court of 2 March 2011 is equally important to the Brussels Capital Region. Considering the fact that no airport is located on the territory of the Brussels Capital Region, the inclusion of aviation in its ETS implementing legislative package would principally not be an issue. However, following the statement of the Court, the governance of aviation activities should not be covered exclusively by the Region on which territory the airport is located. Therefore, the Brussels Capital Region shall likely be involved in a future cooperation agreement concluded between the Regions and the Federal Government.
