What is the cross sectoral correction factor?
The European Commission’s document Questions and Answers on the decision revising the cross-sectoral correction factor (CSCF) refers to the fact that according to the EU ETS Directive the total amount of allowances that can be handed out for free to industry (industry share) is limited.
Which sectors are covered by EU ETS?
Sectors and gases covered
- electricity and heat generation,
- energy-intensive industry sectors including oil refineries, steel works, and production of iron, aluminium, metals, cement, lime, glass, ceramics, pulp, paper, cardboard, acids and bulk organic chemicals,
- commercial aviation within the European Economic Area;
What are free allowances ETS?
• In the EU ETS, free allowance allocation is used to safeguard the competitiveness of the regulated industries and to avoid carbon leakage. In Phase I and II, most allowances were given for free. With Phase III, auctioning became the default method for allocation of allowances.
How the EU ETS works?
The EU Emissions Trading System (ETS) works on the principle of ‘cap-and-trade’. It sets an absolute limit or ‘cap’ on the total amount of certain greenhouse gases that can be emitted each year by the entities covered by the system. This cap is reduced over time so that total emissions fall.
Has the EU ETS worked?
We find that the EU ETS saved about 1.2 billion tons of CO2 between 2008 and 2016 (3.8%) relative to a world without carbon markets, or almost half of what EU governments promised to reduce under their Kyoto Protocol commitments. Emission reductions in sectors covered under the EU ETS were higher.
Is the EU ETS voluntary?
These voluntary crediting units can be used in regulated schemes, such as carbon taxes or ETS, if policymakers choose to give the regulated emitters an alternative means of compliance.
Where does EU ETS money go?
Revenues generated from pricing pollution and notably auctioning allowances in the European Emissions Trading System (EU ETS) may constitute a crucial source of designated funding for climate actions, including domestic and international mitigation and adaptation projects.
When does cross sectoral correction factor need to be applied?
If the sum of the annual amount of free allowances submitted by Member States and EEA EFTA states exceeds that limit, an annual cross-sectoral correction factor should be applied.
How does the CSCF work in the EU?
The CSCF pursuant to the EU ETS rules ensures t he limit set by Article 10a (5) of the EU ETS Directive on free allowances is not exceeded. The cross-sectoral correction factor applied, if necessary, on an annual basis, reduces the number of free allowances in all installations eligible for free allocation in a uniform manner.
When does the CSCF value change each year?
Pursuant to the said Decision, the CSCF values vary each year in the period 2013-2020. The exact figures are depicted in the table.