Commission Delegated Regulation (EU) 2023/2830 of 17 October 2023 supplementing Directive 2003/87/EC of the European Parliament and of the Council by laying down rules on the timing, administration and other aspects of auctioning of greenhouse gas emission allowances

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas emission allowance trading within the Union and amending Council Directive 96/61/EC (1), and in particular Article 3d(3) and Article 10(4) thereof,

Whereas:

(1) Directive 2003/87/EC establishing a system for greenhouse gas emission allowance trading within the union (EU ETS) was revised and amended by Directive (EU) 2023/959 of the European Parliament and of the Council (2) to align it with Regulation (EU) 2021/1119 of the European Parliament and of the Council (3) setting a target of at least 55 % net emission reductions by 2030 compared to 1990.

(2) Since 2012, emission allowances have been auctioned in accordance with Commission Regulation (EU) No 1031/2010 (4) providing for rules on the timing, administration and other aspects of the auctioning of allowances under Directive 2003/87/EC, ensuring that the auctioning of allowances is conducted in an open, transparent, harmonised and non-discriminatory manner through a well-functioning process.

(3) Regulation (EU) No 1031/2010 needs to be changed to take account of the new rules and elements introduced in Directive 2003/87/EC, including the extension of the scope of the existing emission trading system to maritime transport and the introduction of a new and separate emissions trading system for buildings, road transport and industrial activities not covered by the existing emission trading system. It is also necessary to address changes in the auctioning of allowances for the Recovery and Resilience Facility (5) and the Social Climate Fund (6) introduced by Article 10e, Article 10a(8b) and Article 30d(3) and 30d(4) of Directive 2003/87/EC, as well as changes in the functioning of the Innovation Fund pursuant to Article 10a(8) of that Directive. In addition, it is appropriate to clarify and fine-tune existing provisions in Regulation (EU) No 1031/2010, based on the lessons learned from its implementation.

(4) The extent of the necessary changes to the current rules requires that a new regulation is adopted. Regulation (EU) No 1031/2010 should therefore be repealed.

(5) Article 10(4) of Directive 2003/87/EC lays down the principles for the auctioning of allowances. The auctioning should be predictable, in particular as regards the timing and sequencing of auctions and the estimated volumes of allowances to be made available. According to that Article, it is to be ensured that auctions are designed to ensure that small and medium-sized enterprises covered by the emissions trading system have full, fair and equitable access, that small emitters are granted access, that participants have access to information at the same time, that participants do not undermine the operation of the auctions, and that the organisation of and participation in the auctions is cost-efficient avoiding undue administrative costs.

(6) This Regulation should apply to the auctioning of all allowances covered by Directive 2003/87/EC.

(7) Article 10(1) of Directive 2003/87/EC requires Member States to auction allowances to stationary installations covered by Chapter III of that Directive not allocated free of charge. Thus, Member States must auction allowances not allocated free of charge. They may not use any other means of allocation, nor could they withhold or cancel allowances not allocated for free instead of auctioning them.

(8) From 2024, emissions from maritime transport will be included in the EU ETS. Directive 2003/87/EC provides that the rules on auctioning of allowances are to apply to maritime transport activities in the same manner as they apply to other activities covered by the EU ETS.

(9) The method for establishing the total quantity of allowances to be allocated for aviation, and the method for establishing the share of those allowances to be auctioned have been changed with a gradual phase out of free allocation for the aviation sector by 2026. Therefore, it is necessary to revise the specific rules to determine the volume to be auctioned each calendar year in respect to aviation in accordance with Directive 2003/87/EC.

(10) In Commission Delegated Regulation (EU) 2019/1122 (7), the definition of general allowances has been amended to include all allowances issued after 1 January 2025 pursuant to Chapter III of Directive 2003/87/EC, all allowances created for maritime transport activities pursuant to Article 3ga of that Directive and all allowances created for aviation activities pursuant to Article 3c and Article 3d of that Directive. It is therefore necessary to ensure that those allowances are jointly auctioned in the same bidding windows from 1 January 2025.

(11) From 2027, Directive 2003/87/EC provides for a separate emissions trading system for fuels used in buildings, road transport and additional sectors which correspond to industrial activities not covered by Annex I of Directive 2003/87/EC, such as the heating of industrial facilities. Specific rules need to be established for the auctioning of those allowances, in particular to ensure a smooth start of operations of the separate emission trading system.

(12) For reasons of simplicity and accessibility, allowances should be auctioned by way of a standardised electronic contract, made available for delivery within two trading days. Such short-term delivery deadlines limit any potential negative impact on competition between the auction platforms and trading places in the secondary market for allowances. Moreover, short-term delivery deadlines are simpler and encourage wide participation, thereby mitigating the risk of market abuse. They also ensure better accessibility for small and medium-sized enterprises covered by the system and for small emitters.

(13) To ensure fairness and cost-efficiency and to address the need to mitigate the risk of market abuse, auctions should be carried out by means of a single-round, sealed-bid and uniform-price format. Moreover, tied bids should be resolved by means of a random process, as this generates uncertainty for bidders who could potentially collude on the price.

(14) In view of legal certainty and transparency, this Regulation should contain detailed provisions on other aspects of auctioning such as lot size, the possibility to withdraw or modify submitted bids, the currency used for bidding and for payment, the submission and processing of applications for admission to bid, as well as any refusal, revocation or suspension of admission.

(15) The auction clearing price can be expected to be closely aligned to the prevailing secondary market price. Where an auction clearing price is significantly under the prevailing secondary market price, it is likely to indicate a deficiency of the auction. Allowing such an auction clearing price to prevail could distort the carbon price signal and disturb the carbon market and it would not ensure that bidders pay fair value for the allowances. Therefore, it is necessary to determine a reserve price on the basis of the prevailing secondary market price during the bidding window. Where the reserve price is not cleared, the auction should be cancelled. However, providing for cancellation of auctions should not be applicable for the start of an auctioning system when a sufficiently liquid secondary market is not yet established, which is the case for the new emissions trading system for fuels used in buildings, road transport and additional sectors. Therefore, it is necessary to derogate from the requirement to determine a reserve price for the initial period of auctions of allowances covered by Chapter IVa of Directive 2003/87/EC until a sufficiently liquid relevant secondary market is established.

(16) In order to safeguard the integrity of the auctions, an auction platform should be able to cancel an auction when that auction may be disrupted. To avoid the accumulation of volumes in case several auctions are cancelled, it should be possible to distribute the cancelled volumes evenly over subsequent auctions that do not already include cancelled volumes from previously cancelled auctions.

(17) A relatively high frequency of auctions is desirable in order to limit their impact on the functioning of the secondary market, whilst ensuring that auctions are large enough to attract sufficient participation. Such high frequency reduces the risk of market abuse, as it decreases the value at stake for bidders in individual auctions and increases their flexibility to make use of later auctions to adjust their trading positions. For those reasons, the frequency should be at least weekly. Given the much smaller volume of allowances in respect of aviation, the appropriate frequency for auctions for such allowances should be at least once every two months. However, to ensure a smooth start of the auctions of allowances covered by Chapter IVa of Directive 2003/87/EC, it is necessary to allow for less frequent auctions at the start of the system. If this flexibility is used, it will result in a higher volume of allowances for each auction, which might be necessary to meet the initial demand for allowances on the spot market before a sufficiently liquid secondary market is established.

(18) As a rule, the volume to be auctioned in each calendar year should be equal to the volume of allowances attributed to that year. The auction volume is to be established each year in accordance with the relevant provisions of Directive 2003/87/EC.

(19) The allowances for the aviation sector, the maritime sector and the sector of stationary installations should be auctioned together from 1 January 2025. In 2024, the allowances for the maritime sector and for stationary installations are to be auctioned together. As the new emission trading system for buildings, road transport and additional sectors is established as a separate system, its allowances are to be auctioned separately from the allowances for the aviation sector, the maritime sector and the sector of stationary installations.

(20) To provide predictability to the carbon market, it is necessary to establish clear rules and procedures for determining, well before the beginning of each calendar year, a detailed auction calendar, with all relevant information for each individual auction. Any subsequent changes to the auction calendar should only be possible in certain situations. Any adjustments should be made in a manner which affects the predictability of the carbon market the least and the revised calendars should be published, when possible, well in advance of the date when the revision takes effect.

(21) Open access is required to encourage participation and, thereby, ensure a competitive auction outcome. Equally, confidence in the integrity of the auction process, in particular vis-à-vis participants seeking to distort the auctions by using them as a vehicle for money laundering, terrorist financing, criminal activity or market abuse is a pre-requisite for ensuring auction participation and a competitive auction outcome. To ensure the integrity of the auctions, access to the auctions should be subject to minimum requirements with regard to adequate know-your-customer and eligibility checks. To ensure the cost-effectiveness of such checks, eligibility to apply for admission to the auctions should be given to easily identifiable, well-defined categories of participants, notably operators of stationary installations, aircraft operators, shipping companies and regulated entities covered by the emissions trading system, as well as regulated financial entities such as investment firms and credit institutions. Business groupings of such operators and regulated entities should also be eligible to apply for admission to bid in the auctions.

(22) Participants should be able to choose whether to access the auctions directly via the internet or dedicated connections, or through authorised and supervised financial intermediaries. For that purpose, they should be able to choose other persons authorised by the Member States to bid on their own account or on behalf of clients of their main business, where their main business is not the provision of investment or banking services, subject to such other persons complying with investor protection measures and customer due diligence measures equivalent to those applicable to investment firms.

(23) In order to ensure equal and transparent access to the auctions, it should not be possible to make admission to the auctions dependent on becoming a member of or a participant in the secondary market organised by the auction platform or any other trading place operated by the auction platform or by any third party. However, participants in the secondary market organised by an auction platform that are otherwise deemed eligible should be admitted to auctions without further admission requirements. An auction platform should refuse or revoke access to auctions in certain well-defined circumstances that may affect the integrity of the auctioning system.

(24) Each Member State should appoint an auctioneer, who is to be responsible for the auctioning of allowances on behalf of the appointing Member State. It should be possible for the same auctioneer to be appointed by more than one Member State. The auctioneer should be responsible for auctioning the allowances on the auction platform and for receiving and disbursing the auction proceeds. It is important that agreements between the Member States and their auctioneers are compatible with the agreements between the auctioneer and the auction platform, and in case of any conflict the agreements between the auctioneer and the auction platform should prevail.

(25) It is essential to ensure the integrity of the auctioneers. Therefore, when appointing the auctioneer, Member States should consider with priority candidates with the least risk of conflict of interest or market abuse having regard in particular to their activities on the secondary market, if any, and their internal processes and procedures to mitigate the risk of conflict of interest or market abuse, without affecting their ability to fulfil their tasks, in a timely manner, in accordance with the highest professional and quality standards. In order to comply with the rules against market abuse, Member States should be expressly prohibited from sharing any inside information regarding the auctions with their auctioneer. Contravention of that prohibition should be subject to effective, proportionate and dissuasive sanctions.

(26) Directive 2003/87/EC provides for the auctioning of allowances for the Innovation Fund to support innovation in low-carbon technologies, for the Modernisation Fund to improve energy efficiency and to modernise the energy systems of certain Member States, and for the Recovery and Resilience Facility to foster independence, security and sustainability of the Union’s energy supply. Those allowances should be auctioned on the auction platform appointed by the Commission and the Member States participating in the joint action to appoint that platform (‘common auction platform’) in accordance with the principles and modalities of the auctioning process. To this end, the European Investment Bank (EIB) should be the auctioneer for those funds without becoming part of the joint procurement procedure for the common auction platform. The relevant volumes of allowances should be auctioned at the same auctions as the volumes auctioned by the Member States participating in the joint action to procure the common auction platform.

(27) For the volume of allowances to be auctioned for the Innovation Fund and for the Recovery and Resilience Facility, it is necessary to take into account the objectives set by Directive 2003/87/EC for the respective funds, the resources available and the revenue already raised. In order to ensure transparency and predictability for market participants, a minimum annual volume to be auctioned for the Innovation Fund before any transfer to the Recovery and Resilience Facility should be established. Since Directive 2003/87/EC establishes for the Recovery and Resilience Facility overall auction revenue targets, initial annual volumes to be auctioned for that facility should also be established. It is also necessary to establish a procedure for revising the auction volumes in case the auction revenues are considered insufficient to meet the revenue target set in Directive 2003/87/EC. In case the auction volumes are not sufficient, it should be possible to adjust the auction calendars to schedule additional volumes to be auctioned for the Recovery and Resilience Facility. If the targeted auction revenue is accumulated earlier, the auctioning of allowances for the Recovery and Resilience Facility should be suspended in accordance with the relevant provisions of Delegated Regulation (EU) 2019/1122, and the auction calendar should be revised in due course.

(28) A Social Climate Fund established by Regulation (EU) 2023/955 of the European Parliament and of the Council (8) will provide dedicated funding to Member States to support the most affected vulnerable groups, especially households in energy or transport poverty affected by the inclusion of the emission from the fuels used in the buildings and road transport sector in Directive 2003/87/EC. The Social Climate Fund will be funded from the auctioning of allowances from the existing EU ETS and of allowances from the new emissions trading for the buildings, road transport and additional sectors.

(29) To ensure transparency and predictability for market participants, initial annual volumes to be auctioned for the Social Climate Fund in 2027 should be established. Initial annual auction volumes should not be established for the period 2028-2032 in view of the commitment taken to incorporate the Social Climate Fund in the Union budget from the post-2027 Multi-annual Financial Framework. For reasons of efficiency, the Commission should serve as auctioneer for the allowances to be auctioned for the Social Climate Fund. To ensure that sufficient revenue is raised from the auctioning of allowances to meet the annual amount to be allocated to the Social Climate Fund, the annual volumes of allowances under Article 30d(3) and 30d(4) of Directive 2003/87/EC to be auctioned for the Social Climate Fund should be distributed between January and August of each year. Since Directive 2003/87/EC determines auction revenues targets for the Social Climate Fund, it is necessary to establish a procedure for revising the auction volumes where the targeted auction revenues are reached before the set period or where they are insufficient. The auction calendar should be revised to include additional allowances to be auctioned between September to December in the case of a shortfall of revenue. If the targeted auction revenue is accumulated earlier, the auctioning of allowances for the Social Climate Fund should be suspended in accordance with Delegated Regulation (EU) 2019/1122 and the auction calendar should be revised.