(1)

Commission Implementing Regulation (EU) 2018/2066 (2) provides detailed rules on determining ex ante the share of the released fuel amounts in an activity covered by Chapter IVa of Directive 2003/87/EC and therefore to avoid allowances being surrendered for emissions not covered by that Chapter. However, it might not always be possible to correctly identify the category of final consumers in all cases, especially if there is no direct supply connection between the regulated entity and the final consumer. Consequently, it can occur that allowances are surrendered for emissions not covered by Chapter IVa of that Directive and that carbon costs are passed on to final consumers for emissions from an activity not covered by that Chapter.

(2)

To address situations where double counting or surrender of allowances for emissions not covered by Chapter IVa of Directive 2003/87/EC cannot be avoided, rules on the provision of financial compensation of final consumers of fuels by Member States are to be laid down in accordance with that Directive. Rules should also be adopted on the reporting of data to adjust the Union-wide quantity of allowances issued under Chapter IVa of that Directive for allowances surrendered for emissions not covered by that Chapter.

(3)

The quantity of allowances financially compensated for by Member States at a level above zero is likely to be lower than the total number of allowances surrendered for emissions not covered by Chapter IVa of Directive 2003/87/EC for several reasons. Firstly, Member States may not give a positive level of compensation to all final consumers for emissions from an activity falling outside of the scope of Chapter IVa of that Directive. Secondly, when providing financial compensation, Member States may establish thresholds below which they do not give a positive level of compensation to limit the administrative burden. Thirdly, some final consumers may not request compensation that they could receive. Fourthly, Member States may lack information on cases where regulated entities have surrendered allowances for emissions of final uses not covered by Chapter IVa of that Directive.

(4)

Where a Member State has extended the scope of application of emissions trading to an activity not referred to in Annex III to Directive 2003/87/EC, in accordance with Article 30j of that Directive, this may significantly reduce the quantity of allowances surrendered for emissions not covered by Chapter IVa of that Directive. In that case, the quantity of allowances financially compensated for by that Member State at a level above zero is likely the most reliable estimate of the quantity of allowances that have been surrendered for emissions not covered by Chapter IVa of that Directive.

(5)

Where a Member State has not extended the scope of application of emissions trading to an activity not referred to in Annex III to Directive 2003/87/EC, the total number of allowances surrendered for emissions not covered by Chapter IVa of that Directive, corresponding to the total quantity of allowances compensated for by Member States at any level including zero, can be best estimated as the difference between the verified emissions reported under Chapter IVa of that Directive and the CO2 emissions corresponding to an activity covered by Chapter IVa of that Directive and reported in Member States national greenhouse gas inventories pursuant to Regulation (EU) 2018/1999 of the European Parliament and of the Council (3).

(6)

Under Article 30c(3) of Directive 2003/87/EC, the Union-wide quantity of allowances issued under Chapter IVa of that Directive is to be annually adjusted from 2029 for allowances surrendered for emissions not covered by that Chapter.

(7)

It follows that Member States should report information annually to the Commission to determine the Union-wide quantity of allowances surrendered for emissions not covered by Chapter IVa.

(8)

In accordance with Article 30f of Directive 2003/87/EC, Member States may compensate financially final consumers of fuels in cases where it was not possible to avoid surrender of allowances for emissions not covered by Chapter IVa of that Directive. To ensure the environmental integrity of the emissions trading system covered by Chapter IVa of that Directive, such compensation should be proportionate, non-discriminatory, and closely linked to the carbon costs incurred. Methods used by Member States to ensure that final consumers eligible for financial compensation have incurred carbon costs from double counting or unintended coverage should include checking that the relevant regulated entities use a default scope factor of 1 in their approved monitoring plans, requiring a default scope factor of 1 for the relevant fuel streams as set out in Article 75l(6) of Implementing Regulation (EU) 2018/2066, or requesting evidence from final consumers.

(9)

Member States should have flexibility in the method they use to determine the amount of CO2 emissions to be compensated so that they can adapt it to the activity in question and the type of eligible final consumers and limit the administrative burden, insofar as the method yields a reliable estimate of CO2 emissions.

(10)

Member States should determine the eligible period for financial compensation to adapt it to the activity in question and the type of final consumers. The eligible period could be monthly, quarterly or biannual, but should not exceed one calendar year to remain consistent with the annual cycle of the EU emission trading system and to limit the burden on final consumers in an activity not covered by Chapter IVa of Directive 2003/87/EC.

(11)

In accordance with Article 30f(5) of Directive 2003/87/EC, the calculation of the financial compensation for the final consumers of fuels is to be based on the average price of allowances in the auctions in the relevant reporting year. The carbon price used to determine the compensation should be the average price in the eligible period determined by the Member State in question when the fuel has been purchased by the final consumers. This means that Member States should use the average carbon price over the period during which they allow final consumers to apply for compensation, for example on a monthly, a quarterly or an annual basis.

(12)

To limit the burden for final consumers in an activity not covered by Chapter IVa of Directive 2003/87/EC, the financial compensation should be provided within the calendar year following the year of the eligible period.

(13)

For the Commission to monitor the application of Article 30f(5) of Directive 2003/87/EC and this Implementing Regulation, Member States should report annually on the financial compensation they have provided.

(14)

The measures provided for in this Regulation are in accordance with the opinion of the Climate Change Committee,

(1)

‘final consumer’ for the purposes of financial compensation, means any natural or legal person that is the end user of fuel as defined in Article 3(af) of Directive 2003/87/EC for an activity not covered by Chapter IVa of that Directive;

(2)

‘double counting’ means the surrender of allowances by regulated entities for the release for consumption of fuels for use in an activity referred to in Annex I to that Directive;

(3)

‘unintended coverage’ means the surrender of allowances by regulated entities for the release for consumption of fuels used in an activity referred to neither in Annex I nor in Annex III to Directive 2003/87/EC, nor subject to unilateral extension pursuant to Article 30j of that Directive;

(4)

‘financial compensation’ means compensation, at any level including zero, of a final consumer for carbon costs incurred in relation to allowances issued under Chapter IVa of Directive 2003/87/EC and surrendered in cases of double counting or unintended coverage;

(5)

‘eligible period’ means the period when fuel as defined in Article 3(af) of Directive 2003/87/EC was purchased and for which a final consumer can request a compensation, based on the frequency of application defined by the Member State, or, for an activity referred to in Annex I to Directive 2003/87/EC, the period when the fuel was used.