Harmonising New Entrant Allocation in the Nordic Energy Sectors

The report analyses options for allocation of emission allowances to new entrants in the Nordic energy sectors, and give recommendations for harmonised allocation principles for use in the 2008-2012 NAPs of the Nordic countries. It contains quantitative comparisons of allocation to standard energy installations in northern European countries. The authors give specific recommendations on allocation to New Entrants, giving pros and cons of different options. The study finds that current allocation rules does have an impact on investment decisions, and can significantly distort competition if they remain unchanged. IVL recommends that the Nordic countries do not allocate free allowances to new entrants in the energy sector. This should be combined with adjusted rules on allocation to existing installations in order to avoid putting new installations at a disadvantage compared to existing installations. An important condition for this recommendation is that Germany and Poland also radically decreases its allocation to new entrants. If this will not be the case, free allocation should be considered in the Nordic countries as well. Options for this are described in the report. Finally, IVL recommend that the Nordic countries investigate what options are available to provide greater certainty in the allocation, for instance through allocating allowances for longer periods into the future.