Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (Text with EEA relevance.)

CHAPTER I

General provisions

Article 1

Scope

This Regulation shall apply to the free allocation of emission allowances under Chapter III (Stationary installations) of Directive 2003/87/EC as regards the allocation periods as from 2021, with the exception of transitional free allocation of emission allowances for the modernisation of electricity generation pursuant to Article 10c of Directive 2003/87/EC.

Article 2

Definitions

For the purposes of this Regulation, the following definitions apply:

(1) ‘incumbent installation’ means any installation carrying out one or more activities listed in Annex I to Directive 2003/87/EC or an activity included in the European Union Emissions Trading System (EU ETS) for the first time in accordance with Article 24 of that Directive, which obtained a greenhouse gas emission permit before or on: (a) 30 June 2019 for the period 2021-2025, (b) 30 June 2024 for the period 2026-2030;

(2) ‘product benchmark sub-installation’ means inputs, outputs and corresponding emissions relating to the production of a product for which a benchmark has been set in Annex I;

(3) ‘heat benchmark sub-installation’ means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production of measurable heat or the import of measurable heat from an installation covered by the EU ETS other than installations covered by the EU ETS only for the purposes of Articles 14 and 15 of Directive 2003/87/EC, or both, which is: (a) consumed within the installation’s boundaries for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling other than the consumption for the production of electricity; or (b) exported to an installation or other entity not covered by the EU ETS other than district heating with the exception of the export for the production of electricity;

(4) ‘district heating’ means the distribution of measurable heat for the purpose of heating or cooling of space or of production of domestic hot water, through a network, to buildings or sites not covered by EU ETS with the exception of measurable heat used for the production of products and related activities or the production of electricity;

(5) ‘district heating sub-installation’ means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation relating to the production, the import from an installation covered by the EU ETS, or both, of measurable heat which is exported for the purposes of district heating;

(6) ‘fuel benchmark sub-installation’ means inputs, outputs and corresponding emissions not covered by a product benchmark sub-installation, relating to the production of non-measurable heat, by fuel combustion or from electricity, for the primary purpose of the generation of heat, consumed for the production of products, for the production of mechanical energy other than used for the production of electricity, for heating or cooling other than the consumption for the production of electricity, and including safety flaring;

(7) ‘measurable heat’ means a net heat flow transported through identifiable pipelines or ducts using a heat transfer medium, such as, in particular, steam, hot air, water, oil, liquid metals and salts, for which a heat meter is or could be installed;

(8) ‘heat meter’ means a thermal energy meter (MI-004) within the meaning of Annex VI to Directive 2014/32/EU of the European Parliament and of the Council (¹) or any other device to measure and record the amount of thermal energy produced based upon flow volumes and temperatures;

(9) ‘non-measurable heat’ means all heat other than measurable heat;

(10) ‘process emissions sub-installation’ means greenhouse gas emissions listed in Annex I to Directive 2003/87/EC other than carbon dioxide, which occur outside the system boundaries of a product benchmark listed in Annex I to this Regulation, or carbon dioxide emissions, which occur outside the system boundaries of a product benchmark listed in Annex I to this Regulation, as a direct and immediate result of any of the following processes and emissions stemming from the combustion of waste gases for the purpose of the production of measurable heat, non-measurable heat or electricity, provided that emissions that would have occurred from the combustion of an amount of natural gas, equivalent to the technically usable energy content of the combusted incompletely oxidised carbon, are subtracted: (a) the chemical, electrolytic or pyrometallurgical reduction of metal compounds in ores, concentrates and secondary materials for a primary purpose other than the generation of heat; (b) the removal of impurities from metals and metal compounds for a primary purpose other than the generation of heat; (c) the decomposition of carbonates, excluding those for flue gas scrubbing for a primary purpose other than the generation of heat; (d) chemical syntheses of products and intermediate products where the carbon bearing material participates in the reaction, for a primary purpose other than the generation of heat; (e) the use of carbon containing additives or raw materials for a primary purpose other than the generation of heat; (f) the chemical or electrolytic reduction of metalloid oxides or non-metal oxides such as silicon oxides and phosphates for a primary purpose other than the generation of heat;

(11) ‘waste gas’ means a gas containing incompletely oxidised carbon in a gaseous state under standard conditions which is a result of any of the processes listed in point (10), where ‘standard conditions’ means temperature of 273,15 K and pressure conditions of 101 325 Pa defining normal cubic metres (Nm³) according to Article 3(50) of Regulation (EU) No 601/2012;

(12) ‘start of normal operation’ means the first day of operations;

(13) ‘safety flaring’ means the combustion of pilot fuels and highly fluctuating amounts of process or residual gases in a unit open to atmospheric disturbances which is explicitly required for safety reasons by relevant permits for the installation;

(14) ‘baseline period’ means the five calendar years preceding the time-limit for submission of data to the Commission pursuant to Article 11(1) of Directive 2003/87/EC;

(15) ‘allocation period’ means the five-year period starting from 1 January 2021 and each subsequent period of five years;

(16) ‘uncertainty’ means a parameter, associated with the result of the determination of a quantity, that characterises the dispersion of the values that could reasonably be attributed to the particular quantity, including the effects of systematic as well as of random factors, expressed in per cent, and describes a confidence interval around the mean value comprising 95 % of inferred values taking into account any asymmetry of the distribution of values;

(17) ‘merger’ means a fusion of two or more installations already holding greenhouse gas permits provided that they are technically connected, operate on the same site and the resulting installation is covered by one greenhouse gas permit;

(18) ‘split’ means a division of an installation into two or more installations that are covered by separate greenhouse gas permits and are run by different operators.

Article 3

National administrative arrangements

In addition to designating a competent authority or authorities in accordance with Article 18 of Directive 2003/87/EC, Member States shall make the appropriate administrative arrangements for the implementation of the rules of this Regulation.

CHAPTER II

Application, data reporting and monitoring rules

Article 4

Application for free allocation by operators of incumbent installations

Member States may set an alternative time-limit for the submission of such applications, which, however, may not be later or earlier than one month compared to the time-limit provided for in the first subparagraph.

An application for free allocation submitted pursuant to paragraph 1 shall be accompanied by the following particulars:

(a) a baseline data report verified as satisfactory in accordance with measures adopted pursuant to Article 15 of Directive 2003/87/EC containing data for the installation, and its sub-installations as specified in Article 10 and Annexes I and II to this Regulation, taking into account, for the calculation of historical activity levels for specific product benchmarks, Annex III to this Regulation, containing each parameter listed in Annex IV to this Regulation and covering the baseline period relating to the allocation period to which the application relates;

(b) the monitoring methodology plan which formed the basis for the baseline data report and the verification report, in accordance with Annex VI;

(ba) where relevant, the climate-neutrality plan in accordance with Article 10a(1), fifth subparagraph, and Article 10b(4) of Directive 2003/87/EC;

(c) a verification report issued in accordance with measures adopted pursuant to Article 15 of Directive 2003/87/EC on the baseline data report.

Article 5

Application for free allocation by new entrants

Article 6

The operator of an installation, applying for or receiving free allocation pursuant to Article 10a of Directive 2003/87/EC shall monitor the data to be submitted as listed in Annex IV to this Regulation, based on a monitoring methodology plan approved by the competent authority.

Article 7

Monitoring principles

By way of derogation from paragraph 1, the operator may use other data sources in accordance with sections 4.4 to 4.6 of Annex VII, if any of the following conditions is met:

(a) the use of most accurate data sources pursuant to section 4 of Annex VII is technically not feasible;

(b) the use of most accurate data sources pursuant to section 4 of Annex VII would incur unreasonable costs;

(c) based on a simplified uncertainty assessment identifying major sources of uncertainty and estimating their associated levels of uncertainty, the operator demonstrates to the satisfaction of the competent authority that the associated level of accuracy of the data source proposed by the operator is equivalent to or better than the level of accuracy of most accurate data sources pursuant to section 4 of Annex VII.

Article 8

Content and submission of the monitoring methodology plan

Article 9

Changes to the monitoring methodology plan

The operator shall modify the monitoring methodology plan in any of the following situations:

(a) new emissions or activity levels occur due to new activities carried out or due to the use of new fuels or materials not yet contained in the monitoring methodology plan;

(b) the use of new measuring instrument types, new sampling or analysis methods or new data sources, or other factors, lead to higher accuracy in the determination of reported data;

(c) data resulting from the previously applied monitoring methodology has been found incorrect;

(d) the monitoring methodology plan is not, or no longer, in conformity with the requirements of this Regulation;

(e) it is necessary to implement recommendations for improvement of the monitoring methodology plan contained in a verification report.

The following modifications of the monitoring methodology plan of an installation shall be considered significant:

(a) modifications resulting from changes to the installation, in particular new sub-installations, changes to the boundaries of existing sub-installations or closures of sub-installations;

(b) a switch from a monitoring methodology laid down in sections 4.4 to 4.6 of Annex VII to another methodology laid down in those sections;

(c) the change of a default value or estimation method laid down in the monitoring methodology plan;

(d) changes requested by the competent authority to ensure conformity of the monitoring methodology plan with the requirements of this Regulation.

The operator shall keep records of all modifications of the monitoring methodology plan. In each record, the following shall be specified:

(a) a transparent description of the modification;

(b) a justification for the modification;

(c) the date of notification of the intended modification to the competent authority;

(d) the date of acknowledgement, by the competent authority, of the receipt of the notification referred to paragraph 3, where available, and the date of the approval or provision of information referred to in paragraph 4;

(e) the starting date of implementation of the modified monitoring methodology plan.

Article 10

Division into sub-installations

For attributing the installation's inputs, outputs and emissions to sub-installations, the operator shall carry out the following steps in the descending order:

(a) if any of the products as specified for product benchmarks listed in Annex I are produced in the installation, the operator shall attribute the related inputs, outputs and emissions to the product benchmark sub-installations, as applicable, applying rules set out in Annex VII;

(b) if inputs, outputs and emissions qualifying for heat benchmark or district heating sub-installations are relevant at the installation, and do not qualify for any of the sub-installations referred to in point (a), the operator shall attribute them to heat benchmark sub-installations or to district heating sub-installation, as applicable, applying the rules set out in Annex VII;

(c) if inputs, outputs and emissions qualifying for fuel benchmark sub-installations are relevant at the installation, and do not qualify for any of the sub-installations referred to in points (a) or (b), the operator shall attribute them to fuel benchmark sub-installations, as applicable, applying the rules set out in Annex VII;

(d) if inputs, outputs and emissions qualifying for process emissions sub-installations are relevant at the installation, and do not qualify for any of the sub-installations referred to in points (a), (b) or (c), the operator shall attribute them to process emissions sub-installations, as applicable, applying the rules set out in Annex VII.

In addition, the operator shall clearly distinguish, based on CN codes, and provide evidence to the satisfaction of the competent authority, whether or not the relevant process serves the production of goods listed in Annex I to Regulation (EU) 2023/956.

For distinguishing measurable heat attributable to the district heating sub-installation, the operator shall provide evidence to the satisfaction of the competent authority that the measurable heat is exported to district heating.

In addition, where an installation included in the EU ETS has produced and exported measurable heat to an installation or other entity not included in the EU ETS, the operator shall provide evidence on the quantity of measurable heat used to produce goods listed in Annex I to Regulation (EU) 2023/956. Unless the operator provides such evidence to the satisfaction of the competent authority, that heat shall be considered as used to produce goods listed in Annex I of that Regulation.

By carrying out the division in accordance with paragraphs 1 and 2, the operator shall ensure all of the following:

(a) each of the installation's physical products is attributed to one sub-installation without any omission or double counting;

(b) 100 % of the quantity of all the installation's source streams and emissions as listed in the installation's monitoring plan approved in accordance with Regulation (EU) No 601/2012 are attributed to sub-installations without any omission or double counting, unless they relate to any process non-eligible for free allocation such as the production of electricity in the installation, flaring other than safety flaring which is not covered by a product benchmark sub-installation, or the production of measurable heat exported to other EU ETS installations;

(c) 100 % of the quantity of net measurable heat eligible for free allocation produced within the installation, or imported or exported by the installation, as well as quantities transferred between sub-installations, are attributed to sub-installations without any omission or double counting;

(d) for all measurable heat produced, imported or exported by sub-installations, it is documented whether the measurable heat was produced within an EU ETS installation, imported from other heat producing processes, imported from non-EU ETS entities or imported from EU ETS installations covered by the EU ETS only for the purposes of Articles 14 and 15 of Directive 2003/87/EC;

(e) where electricity is produced within the installation, the quantities produced within product benchmark sub-installations are attributed to these sub-installations without any omission or double counting;

(g) where a sub-installation has outputs of carbon containing materials in the form of exported fuels, products, by-products, feedstocks for other sub-installations or installations, or waste gases, those outputs are attributed to sub-installations without any omission or double counting, if not covered by point (b);

(h) CO2 emissions occurring outside the system boundaries of a product benchmark sub-installation resulting from processes listed in points (a) to (f) of Article 2(10) are assigned to a process emissions sub-installation to the extent that it can be demonstrated to the satisfaction of the competent authority that these emissions are direct and immediate results of any of the processes listed in Article 2(10) and that they do not result from the subsequent oxidation of incompletely oxidised carbon in a gaseous state under standard conditions;

(i) where CO2 emissions from the combustion of waste gas not serving the purpose of the production of measurable heat, non-measurable heat or electricity occur outside the system boundaries of a product benchmark sub-installation as a result of the processes listed in points (a) to (f) of Article 2(10), 75 % of the quantity of the carbon content of the waste gas shall be considered as converted to CO2, and assigned to a process emissions sub-installation;

(j) for avoiding any double counting, products of a production process returned into the same production process are deducted from annual activity levels, in line with product definitions laid down in Annex I.

Article 11

Control system

The operator shall make the risk assessment pursuant to the first subparagraph available to the competent authority upon request. The operator shall also make it available for the purposes of verification.

Control activities referred to in paragraph 2 shall include, where applicable:

(a) quality assurance of the relevant measurement equipment;

(b) quality assurance of information technology systems ensuring that the relevant systems are designed, documented, tested, implemented, controlled and maintained in a way that ensures processing reliable, accurate and timely data in accordance with the risks identified in accordance with paragraph 1;

(c) segregation of duties in the data flow activities and control activities, as well as management of necessary competencies;

(d) internal reviews and validation of data;

(e) corrections and corrective action;