Volume 27 (2004)

Volume 27 (2004) / Issue 1

Massimo Merola, Gloria Crichlow, 'State Aid in the Framework of the EU Position after Kyoto: An Analysis of Allowances Granted under the CO2 Emissions Allowance Trading Directive' (2004) 27 World Competition, Issue 1, pp. 25–51


This article examines the Community ``cap and trade'' system for greenhouse gas emissions allowance trading established under Directive 2003/87/EC from the perspective of the EC State aid rules. The scheme, which commences in 2005, will cover only CO2 emissions and initially, is limited to certain sectors. Each Member State must draw up a National Allocation Plan (NAP) to be notified to the European Commission, indicating how it proposes to allocate allowances to individual operators. It is foreseeable that Member States will have difficulties determining what constitutes aid and what are consistent and inconsistent forms of aid when drafting NAPs. It will be particularly difficult to assess whether an advantage is granted which favours certain undertakings or activities using State resources. The article points out pitfalls for Member States to avoid if NAPs are not to fall within the scope of Article 87(1) EC Treaty and eventual derogations under Article 87(3). It examines the impact of the scheme from the standpoint of companies and the choices open to them: limit output, invest in environmentally friendly technology capable of reducing emissions, purchase the allowances on the market or pay the penalty for not reducing emissions.

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ISSN: 1011-4548
ID: WOCO2004004