AMENDMENTS EN United in diversity EN. European Parliament 2015/0148(COD) Draft report Ian Duncan (PE582.

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1 European Parliament Committee on the Environment, Public Health and Food Safety /0148(COD) AMDMTS Draft report Ian Duncan (PE v02-00) on the proposal for a directive of the European Parliament and of the Council amending to enhance cost-effective emission reductions and low-carbon investments (COM(2015)0337 C8-0190/ /0148(COD)) AM\ doc PE v02-00 United in diversity

2 AM_Com_LegReport PE v /131 AM\ doc

3 449 Eleonora Evi, Marco Affronte, Dario Tamburrano, Piernicola Pedicini Article 10b and Article 10c Articles 10b and 10c are replaced by the following: "Article 10b Measures to support certain energyintensive industries in the event of carbon leakage 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: (a) the extent to which it is possible for individual installations in the sector or sub-sectors concerned to reduce emission Articles 10b and 10c are deleted. AM\ doc 3/131 PE v02-00

4 levels or electricity consumption; (b) current and projected market characteristics; (c) profit margins as a potential indicator of long-run investment or relocation decisions. 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 4. By 31 December 2019, the Commission shall adopt a delegated act for the preceding paragraphs for activities at a 4-digit level (NACE-4 code) as concerns paragraph 1, in accordance with Article 23, based on data for the three most recent calendar years available. Article 10c Option for transitional free allocation for the modernisation of the energy sector 1. By derogation from Article 10a(1) to (5), Member States which had in 2013 a GDP per capita in at market prices below 60% of the Union average may give a transitional free allocation to installations for electricity production for the modernisation of the energy sector. 2. The Member State concerned shall organise a competitive bidding process for projects with a total amount of investment exceeding 10 million to select the investments to be financed with free allocation. This competitive bidding process shall: (a) comply with the principles of transparency, non-discrimination, equal treatment and sound financial management; (b) ensure that only projects which contribute to the diversification of their PE v /131 AM\ doc

5 energy mix and sources of supply, the necessary restructuring, environmental upgrading and retrofitting of the infrastructure, clean technologies and modernisation of the energy production, transmission and distribution sectors are eligible to bid; (c) define clear, objective, transparent and non-discriminatory selection criteria for the ranking of projects, so as to ensure that projects are selected which: (i) on the basis of a cost-benefit analysis, ensure a net positive gain in terms of emission reduction and realise a pre-determined significant level of CO2 reductions; (ii) are additional, clearly respond to replacement and modernisation needs and do not supply a market-driven increase in energy demand; (iii) offer best value for money; By 30 June 2019, any Member State intending to make use of optional free allocation shall publish a detailed national framework setting out the competitive bidding process and selection criteria for public comment. Where investments with a value of less than 10 million are supported with free allocation, the Member State shall select projects based on objective and transparent criteria. The results of this selection process shall be published for public comment. On this basis, the Member State concerned shall establish and submit a list of investments to the Commission by 30 June The value of the intended investments shall at least equal the market value of the free allocation, while taking into account the need to limit directly linked price increases. The market value shall be the average of the price of allowances on the common auction platform in the preceding calendar year. AM\ doc 5/131 PE v02-00

6 4. Transitional free allocations shall be deducted from the quantity of allowances that the Member State would otherwise auction. The total free allocation shall be no more than 40% of the allowances which the Member State concerned receives in the period pursuant to Article 10(2)(a) spread out in equal annual volumes over the period from Allocations to operators shall be made upon demonstration that an investment selected according to the rules of the competitive bidding process has been carried out. 6. Member States shall require benefiting electricity generators and network operators to report by 28 February of each year on the implementation of their selected investments. Member States shall report on this to the Commission, and the Commission shall make such reports public." 450 Gerben-Jan Gerbrandy, Jasenko Selimovic, José Inácio Faria Article 10b title Measures to support certain energyintensive industries in the event of carbon leakage Transitional measures to support certain energy-intensive industries in the event of carbon leakage PE v /131 AM\ doc

7 451 Bas Eickhout Articles 10b and 10c (6) Articles 10b and 10c are replaced by the following: 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. (6) Articles 10b and 10c are replaced by the following: 1. Sectors and sub-sectors in which the product exceeds 2,5 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries or subnational regions that are not implementing comparable carbon pricing or other measures in relation to the sector or subsector concerned plus the value of imports from third countries or subnational regions and the total market size for the European Economic Area (annual turnover plus total imports from third countries) that are not implementing comparable carbon pricing or other measures in relation to the sector or subsector concerned, by their emission intensity, measured in kgco2 divided by their gross value added (in EUR), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 90% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. Sectors and sub-sectors in which the product is below 2,5 but above 1.0 shall be deemed to be at medium risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 60% of that quantity. Sectors and sub-sectors in which the product is below 1,0 but above 0,2 shall be deemed to be at low risk of carbon leakage. Such sectors and sub-sectors AM\ doc 7/131 PE v02-00

8 shall be allocated allowances free of charge for the period up to 2030 at 30% of that quantity. The deletion of proposed Article 10c is linked to an amendment on the share of allowances dedicated to Modernisation Fund and should be put to vote together with that amendment. 452 Jytte Guteland, Matthias Groote, Jo Leinen, Seb Dance, Nicola Caputo, Gilles Pargneaux Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 1. To determine the exposure to the risk of carbon leakage for sectors and subsectors and in order to avoid windfall profits, their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), shall be multiplied by their emission intensity, measured in kgco2 divided by their gross value added (in EUR). The calculated emissions intensity of sectors and subsectors shall not increase for any sector beyond levels registered in the third trading period. If this product exceeds 2,5, these sectors and sub-sectors shall be deemed to be at high risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article PE v /131 AM\ doc

9 10a. If this product exceeds 1,0, these sectors and sub-sectors shall be deemed to be at medium risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 80% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. If this product exceeds 0,2, these sectors and sub-sectors shall be deemed to be at low risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 60% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. If this product is below 0,2, these sectors and sub-sectors shall be deemed to be at insignificant risk of carbon leakage and shall not be allocated allowances free of charge for the period up to Free allocation is a temporary exception to the rule of auctioning of allowances and it should only be eligible to sectors at significant risk of carbon leakage. A more precise allocation system, based on the varying exposure to the risk of carbon leakage, is fair and ensures that resources are used where needed the most so as to support the sectors at greatest risk, while minimising the likelihood of the application of the Cross-Sectoral Correction Factor. Model based on the targeted approach alternative in the Commission s IA. 453 Gerben-Jan Gerbrandy Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their 1. To determine the exposure to the risk of carbon leakage for sectors and sub- AM\ doc 9/131 PE v02-00

10 intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. sectors and in view of avoiding windfall profits, their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), shall be multiplied by their emission intensity, measured in kgco2 of direct emissions divided by their gross value added (in EUR). If this product exceeds 2,5, these sectors and sub-sectors shall be deemed to be at high risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. If this product exceeds 1,0, these sectors and sub-sectors shall be deemed to be at medium risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 80% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. If this product exceeds 0,2, these sectors and sub-sectors shall be deemed to be at low risk of carbon leakage and be allocated allowances free of charge for the period up to 2030 at 60% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. If this product is below 0,2, these sectors and sub-sectors shall be deemed to be at insignificant risk of carbon leakage and shall not be allocated allowances free of charge for the period up to PE v /131 AM\ doc

11 Better targeting of the carbon leakage list on those sectors genuinely and most exposed to carbon leakage will minimise, or even avoid, the need to apply the cross-sectoral correction factor (CSCF). The thresholds in this amendment are based on the "targeted" approach set out in the European Commission Impact Assessment accompanying the ETS reform proposal. 454 Peter Liese Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 1. The level to which sectors are exposed to the risk of carbon leakage shall be assessed by multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in EUR). Considering that some sectors and subsectors exposed to the risk of carbon leakage are able to pass on more of the cost of allowances in product prices than others, sectors and sub-sectors exposed to the risk of carbon leakage shall be allocated allowances free of charge for the period up to 2030 at the following percentages of the quantity determined in accordance with the measures adopted pursuant to Article 10a: (a) for sectors and sub-sectors where the result is equal to or exceeds 1,6, the percentage shall be 100%; (b) for sectors and sub-sectors where the result is below 1,6, the percentage shall be allocated exactly according to the AM\ doc 11/131 PE v02-00

12 level of the risk of carbon leakage calculated as a result from multiplying their intensity of trade with third countries by their emission intensity (according to a straight line). There is a problem when an industry gets 75% of free allowances instead of 100%, 50% instead of 75%, or 30% instead of 50%. As an alternative to tiering, allowances free of charge should be allocated to sectors and subsectors that are exposed to the risk of carbon leakage exactly according to their carbon risk level resulting from multiplying their intensity of trade with third countries by their emission intensity (according to a straight line).the difference between being in a different category is bigger than the difference of being on a slightly different position on a straight. 455 Mireille D'Ornano, Jean-François Jalkh, Sylvie Goddyn Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 1. Sectors and sub-sectors where the product exceeds 0,18 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. PE v /131 AM\ doc

13 456 Matteo Salvini Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 1. Sectors and sub-sectors where the product exceeds 0,15 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 457 Ivo Belet, Pilar Ayuso, Michel Dantin, Francesc Gambús, Jens Gieseke, Françoise Grossetête, Peter Liese, Alojz Peterle, Annie Schreijer-Pierik Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their AM\ doc 13/131 PE v02-00

14 intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at high risk of carbon leakage. Such sectors and subsectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. To ensure a level playing field for the production of hydrogen and syngas in refineries and chemical plants, hydrogen and syngas shall continue to be deemed to be at the same risk of carbon leakage as the refinery sector. 458 Andrzej Grzyb, György Hölvényi, Andrey Kovatchev, Miroslav Mikolášik Article 10b paragraph 1 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in ), shall be deemed to be at risk of carbon 1. Sectors and sub-sectors where the product exceeds 0.2 from multiplying their intensity of trade with third countries, defined as the ratio between the total value of exports to third countries plus the value of imports from third countries and the total market size for the European Economic Area (annual turnover plus total imports from third countries), by their emission intensity, measured in kgco2 divided by their gross value added (in EUR), as well as heat supplied from PE v /131 AM\ doc

15 leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. district heating systems, shall be deemed to be at risk of carbon leakage. Such sectors and sub-sectors shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 459 Bas Eickhout Articles 10b paragraph 1a (new) 1a. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated no allowances free of charge. The deletion of proposed Article 10c is linked to an amendment on the share of allowances dedicated to Modernisation Fund and should be put to vote together with that amendment. 460 Peter Liese Article 10b paragraph 1 a (new) 1a. After the adoption of the revision AM\ doc 15/131 PE v02-00

16 of the Directive 2012/27/EU of the European Parliament and of the Council*, the Commission shall reassess the share of emission reductions in the EU ETS and the Decision No 406/2009/EC of the European Parliament and of the Council**. Additional reductions by an increased energy efficiency target shall be used to protect industry at risk of carbon or investment leakage. * Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012 on energy efficiency, amending Directives 2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (OJ L 315, , p. 1). ** Decision No 406/2009/EC of the European Parliament and of the Council of 23 April 2009 on the effort of Member States to reduce their greenhouse gas emissions to meet the Community s greenhouse gas emission reduction commitments up to 2020 (OJ L 140, , p. 136). President Juncker supported a target of energy efficiency of at least 30%. The majority of the EP would even like to go further. This will of course lead to more emission reductions in the effort sharing. Therefore, the cap for the effort sharing should be reduced and the space should be used for protection of industry at risk of carbon leakage. 461 Marijana Petir Article 10 b paragraph 1 a (new) PE v /131 AM\ doc

17 1a. If a Member State on an EU external border with third countries proves that an individual sector on its territory is at risk of carbon leakage in accordance with the criteria set out in paragraph 1 of this Article, that sector and its sub-sectors in the above Member State shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. Or. hr When determining the risk of carbon leakage, geographical criteria must likewise be taken into account, since the fact that Member States lie on EU external borders might mean that more than one sector is vulnerable. 462 Andrzej Grzyb Article 10b paragraph 1 a (new) 1a. Sectors and sub-sectors with unavoidable process emissions shall be deemed to be at the highest risk of carbon leakage and shall be allocated free allowances for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. AM\ doc 17/131 PE v02-00

18 463 Jytte Guteland, Matthias Groote, Jo Leinen, Seb Dance, Pavel Poc, Christel Schaldemose, Nicola Caputo, Gilles Pargneaux Article 10b paragraph 2 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: (a) the extent to which it is possible for individual installations in the sector or sub-sectors concerned to reduce emission levels or electricity consumption; (b) current and projected market characteristics; (c) profit margins as a potential indicator of long-run investment or relocation decisions. deleted Qualitative assessment administrative burdensome and not needed when using the targeted approach to carbon leakage and its differentiation between sectors. 464 Gerben-Jan Gerbrandy Article 10b paragraph 2 PE v /131 AM\ doc

19 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: (a) the extent to which it is possible for individual installations in the sector or sub-sectors concerned to reduce emission levels or electricity consumption; (b) current and projected market characteristics; (c) profit margins as a potential indicator of long-run investment or relocation decisions. deleted As the targeted approach will better differentiate sectors based on genuine exposure to carbon leakage an additional qualitative assessment is no longer necessary. Removing the qualitative assessment will also significantly reduce the administrative complexity of the ETS. 465 Bas Eickhout Article 10b paragraph 2 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: deleted AM\ doc 19/131 PE v02-00

20 (a) the extent to which it is possible for individual installations in the sector or sub-sectors concerned to reduce emission levels or electricity consumption; (b) current and projected market characteristics; (c) profit margins as a potential indicator of long-run investment or relocation decisions. 466 Massimo Paolucci, Renata Briano, Damiano Zoffoli, Simona Bonafè, Elena Gentile Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 467 Tibor Szanyi Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of 2. Sectors and sub-sectors may be included in the group referred to in PE v /131 AM\ doc

21 trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: paragraph 1, on the basis of a qualitative assessment using the following criteria: 468 Elisabetta Gardini, Massimiliano Salini, Antonio Tajani, Giovanni La Via, Adina-Ioana Vălean, Alberto Cirio, Krišjānis Kariņš Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 469 Matteo Salvini Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative 2. Other sectors and sub-sectors may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: AM\ doc 21/131 PE v02-00

22 assessment using the following criteria: 470 Mireille D'Ornano, Sylvie Goddyn, Jean-François Jalkh Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Other sectors and sub-sectors may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 471 Françoise Grossetête, Andrzej Grzyb, Angélique Delahaye, Michel Dantin Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is below 0,2 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment, based on a detailed impact assessment and taking into account sectors and sub-sectors at the relevant level, either at PRODCOM or NACE codes, using the following criteria: PE v /131 AM\ doc

23 Sectors and sub-sectors should be able to present their characteristics and ask for a possible qualification in the carbon leakage list. The current official procedure to decide whether this sector or sub-sector should be added to the carbon leakage list must then remain as it is. 472 Albert Deß Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0,12 based on public or sector specific data as well as sectors that were deemed at risk of carbon leakage between 2013 and 2020 and that have a trade intensity of at least 40%, may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 473 Ivo Belet, Pilar Ayuso, Francesc Gambús, Peter Liese, Alojz Peterle, Annie Schreijer- Pierik Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of 2. Sectors and sub-sectors where the product from multiplying their intensity of AM\ doc 23/131 PE v02-00

24 trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: trade with third countries by their emission intensity is above 0,12 as well as sectors that were deemed at risk of carbon leakage between 2013 and 2020 and that have a trade intensity of at least 40 %, may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 474 Jens Gieseke Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is below 0,2 or their emission intensity exceeds 12 % or their trade intensity exceeds 30% may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 475 György Hölvényi, András Gyürk Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of 2. Sectors and sub-sectors where the product from multiplying their intensity of PE v /131 AM\ doc

25 trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: trade with third countries by their emission intensity is above 0,12 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 476 Jadwiga Wiśniewska, Bolesław G. Piecha Article 10b paragraph 2 introductory sentence 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.18 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: 2. Sectors and sub-sectors where the product from multiplying their intensity of trade with third countries by their emission intensity is above 0.12 may be included in the group referred to in paragraph 1, on the basis of a qualitative assessment using the following criteria: Or. pl The 0.18 threshold would limit this opportunity to a small number of sectors. Although it is possible to understand the Commission's view that such an assessment would be exceptionally difficult for all sectors below 0.18, its scope should nonetheless be broadened. 477 Jadwiga Wiśniewska, Bolesław G. Piecha Article 10b paragraph 2 point a AM\ doc 25/131 PE v02-00

26 (a) the extent to which it is possible for individual installations in the sector or subsectors concerned to reduce emission levels or electricity consumption; (a) the extent to which it is possible for individual installations in the sector or subsectors concerned to reduce emission levels or electricity consumption without risking a loss of competitiveness in view of the associated growth in costs; Or. pl The assessment must take the issue of costs into account. 478 Jens Gieseke Article 10b paragraph 2 point a a (new) (aa) Sectors where a large majority of installations belong to small emitters, as defined in Article 27, shall be allocated allowances free of charge for the period up to 2030 at 100% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. Due to the disproportionately higher compliance and administrative costs borne by sectors composed mainly of SMEs and labour-intensive companies, sectors composed by large majority of small emitters shall be deemed as exposed to risk of carbon leakage. Their carbon leakage risk, when measures quantitatively, is underestimated. PE v /131 AM\ doc

27 479 Jadwiga Wiśniewska, Bolesław G. Piecha Article 10b paragraph 2 point a a (new) (aa) possible market disruptions resulting from the differences in the level of allocations granted between sectors and subsectors; Or. pl A qualitative assessment must also take account of the consequences that granting allocations could have for the situation of sectors producing potentially competing products that do not receive the same level of allocations. 480 Ivo Belet, Michel Dantin, Francesc Gambús, Françoise Grossetête, Krišjānis Kariņš, Andrey Kovatchev, Peter Liese, Alojz Peterle Article 10b paragraph 2 point c (c) profit margins as a potential indicator of long-run investment or relocation decisions. (c) profit margins or the inability to pass on carbon costs as a potential indicator of long-run investment or relocation decisions. 481 Annie Schreijer-Pierik AM\ doc 27/131 PE v02-00

28 Article 10b paragraph 2 point c (c) profit margins as a potential indicator of long-run investment or relocation decisions. (c) profit margins or the inability to pass on carbon costs in a respective sectoral chain as a potential indicator of long-run investment or relocation decisions. 482 Jens Gieseke Article 10b paragraph 2 point c a (new) (ca) the extent to which undertakings operate in two or more sectors which may lead to insufficient data base because data collected in relation to those undertakings are not aligned in terms of the deemed risk of carbon leakage and subsequently a distortion of competition may arise. 483 Jadwiga Wiśniewska, Bolesław G. Piecha Article 10b paragraph 2 point c b (new) PE v /131 AM\ doc

29 (cb) exposure to competition due to the proximity of the Union's external borders, taking into account the geographical distribution of installations in a given sector or subsector. Or. pl A qualitative assessment should take account of the average exposure to competition due to the direct geographical proximity to installations that are not subject to analogous systems. 484 Marian-Jean Marinescu Article 10b paragraph 2 point c c (new) (cc) the extent to which distance from Union external borders affect installations; 485 Andrzej Grzyb, Andrey Kovatchev, Miroslav Mikolášik Article 10b paragraph 2 point c d (new) (cd) level of potential competition distortion among sectors and sub-sectors AM\ doc 29/131 PE v02-00

30 486 Matteo Salvini Article 10b paragraph 2 point c d (new) (cd) level of potential competition distortion among sectors and sub-sectors. 487 Tibor Szanyi Article 10b paragraph 2 point c d (new) (cd) level of potential competition distortion among sectors and sub-sectors. 488 Françoise Grossetête, Angélique Delahaye, Michel Dantin Article 10b paragraph 2 point c d (new) (cd) level of potential competition PE v /131 AM\ doc

31 distortion among sectors and sub-sectors 489 Jens Gieseke Article 10b paragraph 2 point c e (new) (ce) price taker, commodities which are traded on worldwide markets for a common reference price. Additionally to the two criteria trade and energy intensity a qualitative criteria "price taker" needs to be added for sectors that are commodities which are traded on worldwide markets for a unique reference price. This price taker criteria is already used to identify carbon leakage companies in the context of the environmental state aid guidelines EEAG and it helps to circumnavigate the methodological weakness of a trade and energy intensity indicator multiplication. The actual quantitative assessment is a multiplication of a non-linear factor (trade intensity) and a linear factor (emission intensity) which leads to a distortion of the carbon leakage risks. For price taker companies it is not possible to pass through regional costs to customers, therefore these costs have an immediate impact on their competitiveness. 490 Bas Eickhout Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of deleted AM\ doc 31/131 PE v02-00

32 the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. Sectors and sub-sectors that are not exposed to carbon leakage risk should not receive allowances free of charge. 491 Gerben-Jan Gerbrandy, José Inácio Faria Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall not be allocated allowances free of charge. There is no rationale to allocate free allowances to those sectors not deemed to be at risk of carbon leakage. These allowances should be made available for sectors genuinely exposed. 492 Jytte Guteland, Matthias Groote, Jo Leinen, Giorgos Grammatikakis, Seb Dance, Carlos Zorrinho, Pavel Poc, Kathleen Van Brempt, Massimo Paolucci, Damiano Zoffoli, Renata Briano, Elena Gentile, Christel Schaldemose, Nicola Caputo, Gilles Pargneaux PE v /131 AM\ doc

33 Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall not be allocated allowances free of charge for the period up to Sectors that are not at risk of carbon leakage should not receive free allocation. 493 Mireille D'Ornano, Sylvie Goddyn, Jean-François Jalkh Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Sectors and sub-sectors which do not fall under paragraphs 1 and 2 are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. AM\ doc 33/131 PE v02-00

34 494 Matteo Salvini Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Other sectors and sub-sectors not falling under paragraphs 1 or 2 are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 495 Ivo Belet, Francesc Gambús, Elisabetta Gardini, Krišjānis Kariņš, Giovanni La Via, Peter Liese, Massimiliano Salini, Antonio Tajani, Alojz Peterle, Annie Schreijer-Pierik Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices without losing market share, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. PE v /131 AM\ doc

35 496 Peter Liese Article 10b paragraph 3 3. Other sectors and sub-sectors are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. 3. Other sectors and sub-sectors at risk of carbon leakage are considered to be able to pass on more of the cost of allowances in product prices, and shall be allocated allowances free of charge for the period up to 2030 at 30% of the quantity determined in accordance with the measures adopted pursuant to Article 10a. There is no justification to allocate free allowances to all sectors if they are not at risk of carbon leakage, particularly in light of the limited amount of free allowances for Phase IV. 497 Peter Liese Article 10b paragraph 3 a (new) 3a. Any global agreement or measures which lead to global greenhouse gas emission reductions of the magnitude required to effectively address climate change, and which are monitorable, verifiable, and subject to mandatory enforcement arrangements shall also be taken into account when considering what measures are appropriate for the protection from the risk of carbon AM\ doc 35/131 PE v02-00

36 leakage. Reintroduction of Art10b, paragraph 1 of the ETS Directive, to take into account global efforts to reduce GHG emissions when discussing the risk of carbon leakage 498 Gerben-Jan Gerbrandy, Jasenko Selimovic, José Inácio Faria Article 10b paragraph 3 a (new) 3a. The Commission shall keep under review the development of carbon pricing mechanisms, or equivalent measures, outside the European Economic Area. The Commission may on this basis revise the carbon leakage provisions, or the list of third countries taken into account in the definition of exposure to the risk of carbon leakage. The Commission shall be empowered to adopt such changes in accordance with Article 23. A growing group of countries, including notably China, is using carbon pricing for achieving its climate objectives. At the same time, others have opted for taxation schemes or other more prescriptive approaches (e.g. carbon emission limits imposed by the Environmental Protection Agency in the United States). Future developments could significantly reduce the risk of carbon leakage for industrial installations participating in the EU ETS. 499 Ivo Belet, Francesc Gambús, Elisabetta Gardini, Giovanni La Via, Peter Liese, Massimiliano Salini, Alojz Peterle, Annie Schreijer-Pierik PE v /131 AM\ doc

37 Article 10b paragraph 4 4. By 31 December 2019, the Commission shall adopt a delegated act for the preceding paragraphs for activities at a 4-digit level (NACE-4 code) as concerns paragraph 1, in accordance with Article 23, based on data for the three most recent calendar years available. 4. By 31 December 2019, the Commission shall adopt a delegated act for the preceding paragraphs for activities at a 4-digit level (NACE-4 code) or activities which are at the relevant level of disaggregation based on public and sector specific data as appropriate to comprise those activities covered by the EU ETS, as concerns paragraph 1, in accordance with Article 23. The assessment of the intensity of trade shall be based on data for the three most recent calendar years available. For the calculation of the emission intensity the lowest value of kgco2 since the establishment of the EU ETS shall be used. 500 Soledad Cabezón Ruiz, José Blanco López, Clara Eugenia Aguilera García Article 10b paragraph 4 4. By 31 December 2019, the Commission shall adopt a delegated act for the preceding paragraphs for activities at a 4-digit level (NACE-4 code) as concerns paragraph 1, in accordance with Article 23, based on data for the three most recent calendar years available. 4. By 31 December 2019, the Commission shall adopt a delegated act for the preceding paragraphs in accordance with Article 23. As concerns paragraph 1, the product calculated shall be based on data for the three most recent calendar years available using for each sector or sub-sector the 4-, 6- or 8-digit level code (NACE-4, CPA or Prodcom), or the most appropriated level of disaggregation based AM\ doc 37/131 PE v02-00