Fossil fuel subsidies from Europe’s carbon market

From 2013 onwards, emission allowances are no longer granted for free to power companies under the EU’s Emissions Trading System (EU ETS). These companies instead have to buy all of their allowances through auctions. However, a provisional exemption was made for ten new Member States who can temporarily hand out allowances for free to their power installations. This provision in the EU ETS Directive is commonly referred to as “Article 10c”. Despite concerns from civil society that Article 10c has not had desired effects, the EU ETS proposal for the next trading round from 2021-2030 continues to allow lower-income states to give free allowances to their power sector. This policy brief looks at the planned investments and the experience with the current implementation of Article 10c and puts forward recommendations for the ongoing EU ETS revision for the post-2020 period based on the lessons learned.