Allocation and Related Issues for Post-2012 Phases of the EU ETS Page: 76
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Benchmarking Allocation
7. Benchmarking Allocation
7.1. Introduction and Background
In general, the term "benchmark" refers to a common standard that allows different cases to
be compared. In the context of the EU ETS, "benchmarking" refers to the use of a common
emission factor (or related factor, such as an energy efficiency factor) to determine emission
allocations. The benchmarking approach can be contrasted to an approach that allocates
based exclusively on historical emissions data. Under such an emissions-based approach,
often referred to as "emissions grandfathering" approach, facilities would receive allocations
based upon their emissions, rather than on the basis of their output or input plus some
emission rate or "benchmark." (Of course, both free allocation approaches can be contrasted
against auctioning.)
This chapter focuses only on the use of benchmarks to determine allocations to existing
installations using historical baseline data. Benchmarks potentially could be used for a
number of functions within an allocation process, including setting the overall cap,
distributing burdens between sectors, and allocating to new entrants. These issues, including
the potential role of benchmarks, are discussed in separate chapters. For the purposes of this
chapter, we consider allocations within a pre-determined cap.41
The structure of this chapter is as follows. First we consider options for benchmarking
including benchmark categories, benchmarking peer groups, and sources of benchmark
values. We then assess the different options against the agreed evaluation criteria.
7.2. Benchmarking Options
We identify three sets of issues relevant to the design of benchmarked incumbent allocations:
* First, there are several high-level categories of benchmark depending on the type of
installation-specific baseline activity (or other) data that are used to calculate allocations.
* Second, the benchmarking "peer group"-i.e., the group of installations using the same
benchmark-needs to be defined, including the number of benchmarks and the
differentiation of benchmarks between groups of installations. This could include
differentiation (or harmonisation) between Member States and between installations of
different ages.
* Third, there are many different potential sources of benchmark values, including
empirical methods, literature references, and pre-existing industry benchmarking
schemes.
We discuss each of these issues in turn.
41 Chapter 2 considers the use of benchmarks as one way of setting the overall cap and sector contributions to it within the
trading scheme.NERA Economic Consulting
76
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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/m1/82/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; .