Allocation and Related Issues for Post-2012 Phases of the EU ETS Page: 68
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Emissions Grandfathering Allocation
assignment of installations to sectors may be relatively straightforward in some cases, in
many cases it may not be. It also is necessary to establish a basis for setting sub-caps. This
may include various "adjustment" (or "compliance") factors, growth projections, or other
factors, as we discuss below.
6.2.4. Potential adjustment to simple grandfathering
One modification to simple emissions grandfathering is to modify historical information by
factors intended to account for expected developments of emissions.
6.2.4.1. Adjustment factors for expected growth
One factor taken into account in a number of NAPs is the expected future growth prospects of
installations and/or the sectors to which they belong. Projections can be carried out at a
sector level under a two-stage approach, motivated by the expectation that sectors will grow
at different rates.38
6.2.4.2. Adjustment factors for expected abatement potential
Allocations also can be modified by assessing the potential for abatement available from
sectors (or installations). Like with growth projections, the motivation is likely to be that
there are large expected differences in the potential for abatement among installations or
sectors.
6.2.4.3. Adjustment for benchmarked performance
Some allocation approaches combine emissions grandfathering with a benchmarking
approach. For example, historical emissions may be modified by a factor that accounts for
the output or input efficiency of the installation. Such "combined" approaches may be
motivated by a desire to compromise between the distributional features of emissions
grandfathering and benchmarked allocation based on other historical activity measures,
respectively.
6.2.4.4. Bonus and penalty factors
It also is possible to adjust allocations so that different stringencies apply to different
installations or sectors. This may take the form of applying "bonus" or "penalty" factors to
particular sectors, based on whether they are deemed to require a higher or lower allocation
(e.g., because they would be particularly adversely affected, or to reflect emissions benefits
of the associated technology).
A different way to achieve different stringency of allocation is to use a combination of top-
down and bottom-up approaches to calculate allocations. In a two-stage approach, the "sub-
caps" of some sectors may be calculated as the bottom-up sum of historical emissions
(potentially modified by any potential growth, abatement, or compliance factors), whereas the
other sector sub-caps would be calculated top-down as the "residual" allowances, which
38 It also is possible to use individual installation-level growth projections.NERA Economic Consulting
68
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Harrison, David, Jr.; Radov, Daniel & Klevnas, Per. Allocation and Related Issues for Post-2012 Phases of the EU ETS, text, October 22, 2007; [Brussels, Belgium]. (https://digital.library.unt.edu/ark:/67531/metadc29374/m1/74/: accessed April 17, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; .