Allowance allocation

How are allowances allocated?

The allocation of allowances is done in accordance with the requirements of the National Allocation Plan (NAP).  It follows a two-stage process. Firstly, the total quantity of allowances is distributed among sectors covered by the EU ETS, for example power stations, iron and steel, and paper and pulp businesses.

Distribution to these sectors is quantified on the basis of projected growth rates for the sectors, minus a contribution towards a reserve for new entrants. The reserve of allowances is set aside to ensure new installations and extensions to existing installations are not penalised in comparison to incumbent installations.

The power stations sector is contributing extra emission reductions in Phase 1, as it is more insulated from international competition than other sectors.

Allowances are allocated to most installations on the basis of its verified emissions data for 1998-2003. Installations receive a proportion of the sector total. Some installations receive an allocation of allowances based on specific allocation methodologies - where installations have undergone commissioning, rationalisation or changes during the baseline period.

How do I get an allocation of allowances?

Each installation covered by the scheme has been allocated allowances as set out in the NAP. In year 1 (2005) these were allocated in May, following the publication of the UK NAP. In years 2 and 3 they will be allocated in February.

An account on the registry is automatically opened for operators in the NAP. The registry is a secure web-based application that records:

• allowances that are allocated to and held in installation accounts
• annual verified emissions for installations
• the movement of allowances to and from accounts
• annual compliance status of installations.

To find out more about allowance allocations and how the National Allocation Plan affects your business visit: