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NORTH EAST LAW REVIEW 175 10a that, in principle, the 10% most efficient producers in a certain sector should preliminarily receive all allowances they need. This section reviews the regulatory grounds of this allocation deficit and examines the individual factors causing the shortfall. The allocation deficit is also the starting point of the next inquiry: The ETS-Directive provides that one of the purposes of free allocation is to avoid undue distortion of competition. Therefore, it needs to be evaluated if the rules on free allocation create a level playing field between waste heat electricity, heat delivery, electricity from renewable energies and conventional grid power. 5.1 Allocation Deficit 5.1.1 Regulatory Derivation Operators of installations generating waste heat electricity receive free allowances according to the allocation method for type (c) process emissions. This method has to be understood in the context of Article 10a(1)(3) ETS-Directive, which provides that ‘[n]o free allocation shall be made in respect of any electricity production, except for (...) electricity produced from waste gases.’119 In its initial proposal, the Commission did not envisage such an exception;120 it was only inserted after various Members of Parliament pressed for an amendment of the proposed draft.121 It is unclear why waste heat electricity remained unmentioned even though the MPs were obviously informed by the respective stakeholders. They might have considered it a special form of waste gas electricity; the DG CLIMA, however, adopted a very narrow interpretation of what is to be considered waste gas, including only Gases which emerge from incomplete combustion or other chemical reaction in an EU- ETS installation and which comply with all of the following criteria: 1. Waste gases are not emitted without further combustion due to a significant content of incompletely oxidised carbon 2. The calorific value of waste gases is high enough for the waste gas to burn without auxiliary fuel input, or to contribute significantly to the total energy input when mixed with fuels of higher calorific value 3. The waste gas is produced as by-product of a production process.122 119 ETS-Directive (n 2), art 10a(1)(3). 120 Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 2003/87/Ec so as to improve and extend the greenhouse gas emission allowance trading system of the Community' COM(2008) 16 final, art 1(8). 121 European Parliament, ‘Report on the proposal for a directive of the European Parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading system of the Community' (Session Document) A6-0406/2008; European Parliament, ‘Amendments by Parliament to the Commission proposal for a Directive of the European parliament and of the Council amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading system of the Community’ A6-0406/180. 122 DG-CLIMA, Guidance Document 8 (2011) 4 (numbering added).PDF Image | ELECTRICITY PRODUCTION FROM INDUSTRIAL WASTE HEAT
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