Low Carbon Economy, 2013, 4, 137-145
Published Online December 2013 (http://www.scirp.org/journal/lce)
Open Access LCE
Allocation of Emission Allowances within the European
Union Emissions Trading Scheme to the Waste Sector
Nina Braschel, Alfred Posch, Vera Pusterhofer
Institute of Systems Sciences, Innovation and Sustainability Research, University of Graz, Graz, Austria.
Email: nina.braschel@uni-graz.at
Received July 12th, 2013; revised August 10th, 2013; accepted August 18th, 2013
Copyright © 2013 Nina Braschel et al. This is an open access article distributed under the Creative Commons Attribution License,
which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
The present study develops an approach explicitly to cover the waste sector under the Emissions Trading Scheme of the
European Union (EU ETS). The objective is to analyze various allocation possibilities and the resulting monetary bur-
dens for the waste sector. Three different allocation variants for allocating emission allowances and their financial bur-
den to the waste sector are developed. These variants support implementation within the EU ETS in the third trading
period from 2013 to 2020. The respective distributions of emission allowances to the Austrian waste sector are esti-
mated for each variant calculated. Allowances vary depending on specific industry, the relative share of free and pur-
chased allowances, and the relative costs entailed in additional purchase. Although the present paper focuses exp licitly
on the Austrian waste sector, in principle, the calculation procedure is applicable to waste sectors in other developed
countries as well.
Keywords: Allocation of Emission Allowances; Distribution of Free/Purchased Allowances; European Union
Emissions Trading Scheme; Financial Burden; Waste Sector
1. Introduction
As part of the Kyoto agreement in 1997, the European
Union (EU) committed itself to reducing by 2012 climate
effective emissions by 8 percent below the 1990 emis-
sions level. The Kyoto protocol defined three flexible
mechanisms for reaching the reduction targets: Joint Im-
plementation (JI), the Clean Development Mechanism
(CDM) and Emission Trading (ET) [1-5].
When using the trading of emission allowances as a
climate-policy instrument, a limit or cap is set for the
total amount of emissions allowed. This emissions limit
can then be reached by countries trading emission al-
lowances in a cost-effective and economically efficient
manner [1-7]. The basic idea is that one emission allow-
ance is needed for every ton of GHG emissions pro-
The Emissions Trading Scheme of the EU (hereafter
EU ETS) covered the sectors energy and industry in its
first (2005-2 007) and second (2008- 2012) trading period ,
but not the waste sector. While a few studies show how
the waste sector can contribute to climate protection, and
how the actors of the waste sector can generate economic
profits, mainly by participating in one of the two project-
based flexible mechanisms JI and CDM (see, e.g., [8]),
no existing study has yet described precisely how, and
under which circumstances, inclusion of the waste sector
in the EU ETS might be possible and what the conse-
quences might be. The present study takes the economic
model lying behind the emission allowance allocation
and develops three allocation variants in order to reflect
the different allocation possibilities available for the
waste sector (it is assumed here that the waste sector will
actually be included in the third EU ETS trading period
The objective is to analyze different allocation possi-
bilities and their respective monetary burdens so as to
assess the potential financial impact of an inclusion of
the Austrian waste sector.
While the data used and outcomes calculated are based
specifically on the Austrian waste sector, the concept can
be applied generally to assess the impact of waste sector
inclusion in other similar countries.
The paper is divided into four further sections. Section
2, provides basic information on the EU ETS. Section 3,
offers a suitable definition for th e term “waste sector”. In
Section 4, the basic economic model is described. This
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
section also contains explanations of related allocation
rules and variables, of parameters and assumptions, and
of the three allocation variants calculated. In addition,
data from the Austrian waste sector are applied to the
model in order to calculate different allocation possibili-
ties. The potential impact of waste sector inclusion on
emission allowance quantities and related fund ing is thus
made visible. The results for the different allocation pos-
sibilities and their respective financial burdens are re-
vealed in Section 5. The last section, Section 6, discu sses
the limitations of the approach and some conclusions are
drawn for future research.
2. The European Union Emissions
Trading Scheme
The EU ETS is the world’s biggest cap-and-trade system.
By enabling emission allowance trading among the 27
EU member states, plus Iceland, Liechtenstein and Nor-
way, it has created an economically cost-efficient means
for reaching Kyoto emission targets. To date, at the end
of the second trading period, the regulation system cov-
ers industrial sectors of energy conversion and energy
transformation, iron and steel production and processing,
the mineral industry (cement, lime, glass, ceramics, brick)
and other industrial branches (pulp, paper, board), the
sectors nitric acid, petrochemicals, ammonia and alu-
minium, as well as the aviation sector., The emissions
regulated by the EU ETS include CO2 and N2O from the
production of nitric, adipic and glyoxylic acids, as well
as PFCs from the aluminium sector [2,9-11].
The EU ETS was first launched in 2005 and has since
been divided into three trading periods. The first pilot
phase was from 2005 to 2007. The data gained during
this testing period was used as a basis for the second,
trading phase, which began in 2008, and which is due to
end in 2012. The third implementation phase will span
the years 2013 to 2020.
The basic principle of the EU ETS is that every opera-
tor of an industrial installatio n subject to EU ETS regula-
tion is required to have a permit for every ton of CO2
emissions emitted. Some energy-intensive industries
whose competitiveness was judged to be at risk and who
are therefore potentially prone to carbon leakage may be
exempted [7,12-15].
The initial allocation of the emission allowances in the
first two phases is covered in national allocation plans
(hereafter NAPs). For these two periods the EU member
states set their own individual caps on emissions allow-
ances. In addition to sectoral and branch allocations the
respective NAPs also determine allocations at the plant
level. Every member state NAP has to be confirmed by
the European Commission [2,10,11,16].
The vast majority of all allowances distributed during
the first and second trading periods were given out free
of charge. As various problems arose with this approach,
it was decided that from 2013 onwards auctioning would
form the basis for allocating allowances. A progressive
transition to auctioning is planned, starting with a 20
percent share of allowances distributed in 2013, and
reaching full auctioning in 2027 [4,5,13-15,17].
3. Definition of the Term “Austrian
Waste Sector”
No matter how often the topic “waste” is studied, defin-
ing the term “waste management”, “was te sector” or “wa-
ste industry” seems to become more, rather than less,
Obviously, before any meaningful discussion con-
cerning an incorporation of the waste sector into the EU
ETS can take place at all, a clear definition of what is
meant by the term is needed, e.g. which areas are to be
included and which excluded [18].
The objective in the present paper is to calculate the
different possibilities concerning inclusion of the Aus-
trian waste sector in the EU ETS. For this purpose, the
standard definition was considered adequate and was
adopted here. This definition covers four basic divisions
1) Solid waste disposal on land/landfills;
2) Wastewater treatment;
3) Waste incineration;
4) Other waste treatment (composting, mechanical-
biological treatment).
The decision to adopt the standard definition was
based on the following:
1) To date, the EU ETS only includes carbon dioxide
emissions (CO2). Two exceptions are Austria and the
Netherlands where nitrous oxide emissions (N2O),
caused by the production of nitric acid (HNO3), are now
considered in the second trading period (2008-2012).
Within the above four divisions only waste incineration
facilities cause CO2 emissions. However, for the present
study methane (CH4) and N2O also need to be consid-
2) The position of the European Parliament (EP) on
the improvement and extension of the trading scheme
says that “…the Community scheme should be extended
to other installations […] which are capable of being
monitored, reported and verified with the same level of
accuracy as that which applies under the monitoring,
reporting and verification requirements currently appli-
cable.” [23] Although the EP is pushing to extend the
scheme to other installations, it is debatable whether in-
stallations of the waste sector can fulfil the necessary
requirements [24].
3) The term “waste incineration facilities” covers in-
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
Open Access LCE
cineration plants for municipal waste and other thermal
waste treatment facilities. These facilities lead to CO2,
but are only respon sible for a small par t of all g reenh ou se
gas (hereafter GHG) emissions in the waste sector [21,
22,25]. Moreover, incineration plants with energy recov-
ery and co-combustion plants are classed as belonging to
the sectors energy and industry and are therefore already
included in the EU ETS. This results in a (seemingly)
relatively low level of emitted carbon within the waste
sector. For purposes of the present study, the fact that the
European Union Emissions Trading Scheme mainly ad-
dresses carbon dioxide emissions is reason enough to
include this subsector in the definition of the Austrian
waste industry.
European ETS.
4. Method
This section provides a basic description of the economic
model employed and includes explanations of the respec-
tive allocation rules, parameters and assumptions used in
calculating the three cases. The relationship between
allocation type (i.e. Variant 1, 2 or 3) and expected fi-
nancial burden upon inclusion of the waste sector, is also
4.1. Economic Model for Allocating
Emission Allowances
4) With regard to climate effective gases, CH4 com-
prises the majority of all GHG emissions in the waste
sector (80% in Austria in 2010). The main driver of CH4
emissions is solid waste disposal on land (with a share of
75% in Austria in 2010) [21]. Various council directives
and amendments governing landfill, e.g. 1999/31/EC,
regulation No. 1882/2003 and No. 1137/2008, and the
EU Waste Framework Directive 2006/12/EC. The dis-
posal restriction of waste containing more than five per-
cent organic carbon (in terms of mass) was the most im-
portant measurement to reduce CH4 from landfills [26,
Different kinds of allocation mechanisms are described
in the literature. The three most common are:
1) Grandfathering: this uses historical data on emis-
sions as a basis for the future allocation of emission al-
lowances [13,16,28].
2) Benchmarking: here, the best available technique is
used as the basis for emission allowance allocation
[13,14, 28].
3) Auctioning: under this procedure, instead of direct
allocation, emission permits are auctioned according to
demand [13,14].
In the first and second trading period of the EU, ETS
emission allowances were distributed based on the
grandfathering mechanism and subsequently on coun-
try-specific, independently d etermined NAPs [2,4,16,29 ].
In drawing up the initial NAP each country used the his-
torical CO2 emission data for the installations covered by
the EU ETS as a basis for calculation. Directive 2003/
87/EC defines the relevant criteria for establishing NAPs.
These are valid for all member states and are listed in
Annex III of the directive. Unfortunately, allocation
methods across countries still vary considerably, making
uniform emission comparison difficult [29].
5) Although recent restrictions on waste disposal are
rigorous, the waste deposited in earlier periods is still
there and still causing GHG emissions. However, so far,
CH4 emissions are still not considered in the EU ETS,
nor is there any direct evidence that they might be in-
cluded in the near future [12,23]. Nevertheless, this sub-
sector could not be taken out of account at all and has
therefore be considered in the present calculation.
6) While N2O emissions mainly arise from wastewater
treatment, they also occur in waste treatment facilities
such as composting plants. Hence, the present definition
includes both wastewater treatment and composting fa-
cilities. To aid understanding, the distribution methods used in
Austria are now stated below. The type of distribution is
first stated in terms of a standard equation, and is then
followed by a textual description (see [30,31]). Since
most of the parameters are used in more than one equa-
tion, a more detailed description of all individual pa-
rameters is also presented in a more comprehensible
form subsequent to the economic model in the next sec-
tion, Section 4.2.
The allocation variants calculated here are based on
theoretical assumptions. The intentio n is simply to gain a
better understanding of the future possibilities with re-
spect to the interface between the EU ETS and the waste
sector. Nonetheless, inclusion of the waste sector in the
EU ETS is a clear legal option. This is stated in th e orig-
inal directive 2003/87/EC and also in revised form in
2009/29/EC. Article 24 points out that subject to com-
mission agreement, and assuming specific criteria are
met, various activities and installations can be incorpo-
rated into the regulatory system at the national lev el. The
alternative would be a reconfiguration of the whole
When beginning a new trading period within the EU
ETS, an overall greenhouse gas emissions level, i.e. a cap
for the allowances to be distributed, first needs to be de-
Equation (1): Defini ng the total quant ity (emissi ons cap)
00 sector
TotalQuantityEmission Forecast1ClimateProtec tionContribution
ttn ttn
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
The total quantity of emission allowances allocated to
a country is obtained by taking the total from the emis-
sion forecast for the period (in the present study the pe-
riod 2013-2020), and then subtracting the sum of all
mandatory climate protection contribution factors for the
period for all sectors included.
Equation (2): Defining sectoral emission allowances
(see Equation (2)).
The quantity of emission allowances allocated to one
sector is given by finding the total of business-as-usual
forecasts for all industries (sub-sectors) in the sector, in
the present case all four industries of the waste sector,
and then subtracting the product of the climate protection
contribution for the respective sector, multiplied by the
relevant reserve factor (this was taken to be 1 percent in
the present study).
Equation (3): Defining amount of free allocation for
the sector
sector sector
Free AllocationAllocation
1Auctioning Share
To define the amount of emission allowances distrib-
uted free of charge to a specific sector, the auctioning
share per sector, in the present case a constant share of
20 percent, has to be deducted from the total quantity of
emission allowances allocated to the respective sector.
Equation (4): Defining amount of free allocation for a
specific industry (see Equation (4))
The quantity of emission allowances allocated free of
charge at the industry lev el is obtained by multiplying the
allocation base of the respective industry by the growth
factor of the industry’s emissions, by the potential factor
of the industry, and by the respective compliance factor
(this is the same for all industries within a single sector).
Equation (5): Defining growth factors for industry
industry industry
BusinessAs Usual
Growth FactorAllocation Base
The growth factor for an industry captures the ex-
pected development in the industry’s greenhouse gas
emissions. The business-as-usual forecasts are used as a
basis for determining the expected future growth rate of
the industry’s emissions.
4.2. Parameters and Assumptions
As far as the present analysis is concerned, the model
focus is placed on the sectoral and industry level. Each
allocation variant determines the number of emission
allowances distributed to the respective sector and its
industries. In the following calculations, apart from the
level of the climate protection contribution, all variables
are kept constant. The crucial difference in the three al-
location variants is therefore the assumption about the
level of the climate pro tection contribution factor.
Based on data from the Environment Agency Austria
the average expected GHG emissions up to 2020, as well
as an emission projection for the third trading period, are
calculated and presented in Table 1. This is the basis for
all three allocation variants calculated. The allocation
base and the growth factor for each industry are also
given in this table. The parameters and assumptions used
are now described below.
1) Allocation base: The allocation base, in the present
case of an industry, reflects an industry’s average emis-
sions level within the previous trading period or within
that of another stated period. In the present study the
emission levels of 2008 and 2009 were extrapolated to
obtain values for the period 2008 till 2012, which was
then used as the allocation base (see Table 1).
2) Auctioning share: Within the EU ETS 20 percent of
allowances are to be made available via auctioning in
2013, so this share was also adopted for the present study
[12]. An auctioning share of 20 percent means that 80
percent of the potential allo cation of emission allowances
in the Austrian waste sector are handed out for free and
20 percent have to be purchased via auctioning at the
beginning of the trading period.
3) Business-as-usual forecast: Business-as-usual fore-
casts calculate an industry’s future GHG emissions level,
assuming that certain factors remain constant. Historical
trends for production volumes or energy intensities are
extrapolated into the future in order to establish an in-
dustry’s potential demand for emission allowances. The
sum of business-as-usual forecasts for those industries
belonging to the respective sector leads to the expected
amount of GHG emissions at the sectoral level (see Ta-
ble 2).
4) Climate protection contribution factor: The climate
protection contribution is the amount by which GHG
emissions need to be reduced within a respective trading
period. This factor has a huge influence on the distribu-
tion of emission allowances and reflects the difference
between the amount of GHG emissions in a business-as-
usual scenario and the set target-value for a certain year.
sectorindustrysector sector
AllocationBusiness As Usual1Climate Protection Contribution1ReserveFactor 
industryindustry industrysector
Free AllocationAllocationBaseGrowthFactorPotential FactorCompliance Factor (4)
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector 141
Table 1. Allocation base (2008-2012), emission projection and growth factor (2013-2020).
Industry Annu al Em iss ion s i n bas e pe ri od 2 00 8-2 012
(derived as average of the past emissions of
2008, 2009) (Gg CO2-eq. per year)
Emission projection average annual emission
2013-2020 (derived as average of projected years
2010, 2015, 2020) (Gg CO2-eq. per year) Growth factor
Landfills 1517.1 995.4 0.656
Composting facilities 165.1 162.4 0.984
Incineration facilities 12.3 12.0 0.976
Wastewater handling 287.8 290.0 1.008
Total (waste sector) 1982.3 1459.8
Source: Own composition, partly based on [21,22].
Table 2. Business-as-usual projection for GHG emissions in 2010, 2015 and 2020.
Industry Gg CO2 equivalent 2010 Gg CO2 equivalent 2015 Gg CO2 equivalent 2020
Landfills 1348.2 951.3 686.7
Composting facilities 166.2 171.4 149.6
Incineration facilities 12.0 12.0 12.0
Wastewater treatment 286.6 289.7 294.8
Total (Gg) 1812.0 1424.4 1143.1
Source: Own composition, partly based on [22].
While the climate protection contribution factor has a
direct impact on allowance distribution, it also has a
marked influence on costs. To be more precise, the lower
the factor, the higher the amount of distributed emission
allowances in the initial phase of the allocation process,
and therefore the higher the costs for such allowances at
the beginning of the trading period. However, such cost
calculations do not take into account the additional costs
which may arise when more emission allowances are
needed than those distributed in the initial phase. In the
present study three climate protection contribution factor
levels were used: i.e. 0%, 5% and 10%. A climate pro-
tection contribution level of 5 percent means that the
business-as-usual emissions value in 2020 needs to be
reduced by 5 percent within the trading period 2013-
2020. In practice, the factor is set by the government of
each EU member state. For purposes of the present study,
this was the only factor which was allowed to vary. All
other model factors were held constant. The variant with
a 0% climate protection contribution factor was calcu-
lated to show that even without such a reduction target
the actors of the waste sector would still have to face and
cope with additional costs should the waste sector be
incorporated into the EU ETS.
5) Compliance factor: This factor is intended to ensure
that the free allocation of emission allowances to an in-
dustry is proportionate to the free allowances available at
the sectoral level. It is the same for all industries within
one sector. A compliance factor of e.g. 0.8 means that an
industry is called upon to reduce GHG emissions by 20
percent, e.g. by the introduction of cleaner technology,
within the trading period 2013-2020. [30,31,32]
6) Emission forecast: The emission forecast is the ex-
pected amount of GHG emissions of a certain period in
the absence of additional measures for GHG emission
mitigation. This then enables business-as-usual scenarios
to be estimated. These are then calculated for each indus-
try and summed in order to produce the overall emission
projection for the industry (Table 1).
7) Growth factor: The growth factor of an industry
shows how an industry’s emission level has grown across
trading periods. In the present case, the factor shows the
growth rate of the emission forecast for the 2013 to 2020
period compared to the emission level in the 2008 to
2012 period (see Table 1).
8) Potential factor for emission reduction: This factor
describes the technical GHG reduction potential of the
sector. A factor of 1 means no emission reduction poten-
tial is available, 0 indicates that technical possibilities
exist for reducing all GHG emissions to zero [30,31].
Obviously, this f actor is largely determined by the po ten-
tial for technical progress. Since specific information
concerning the reduction potential of individual installa-
tions or industries of the waste sector is not available,
and since the potential factor is the same for all four in-
dustries within the waste sector and has no impact on the
results calculated, in the present study the value for the
reduction potential factor is kept constant (=1) over all
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
three allocation variants calculated.
9) Reserve factor: Such a factor is assigned to every
sector participating in the EU ETS. In the present case,
the factor was set at 1%, i.e. 99% of a sector’s allow-
ances are distributed either free of charge or by auction-
ing. The residual 1 percent is reserved to express the po-
tential impact of new market entries. [32,33]
10) Cost calculation: The average price for the six
month period March to August 2011 was used here. This
was € 14.68 per ton of CO2. This figure is then multiplied
by the number of allowances (20% in each allocation
variant) which have to be purc hased via auctioning [34] .
4.3. Allocation Variants
The objective of the present paper is to compare various
allocation possibilities and calculate the resulting mone-
tary burden for the waste sector and its four industries.
This is needed in order to assess the impact of future in-
clusion of the Austrian waste sector in the EU ETS.
Three different allocation variants are covered (see Table
Variant 1 assumes a climate protection contribution
factor of 0 percent: The business-as-usual emissions val-
ue in 2020 need not to be reduced at all within the trad-
ing period 2013-2020. An auctioning share of 20%, a
reserve factor of 1%, a reduction potential factor of 1 and
a price per ton of CO2 emission of € 14.68 is assumed. In
order to make the calculation not too complex, a discount
rate for future costs of 0 is assumed.
Variants 2 and 3 assume respective climate protection
Table 3. Distribution of emission allowances and financial burdens for all three allocation variants for the period 2013-2020.
Total quantity of waste
sector’s emission
allowances distributed
Quantity of sector’s emission
allowances allocated free of
charge/via auctioning Waste sector’s IndustriesQuantity of industry’s
emission allowances Monetary burden
per industry
Landfills 6,306,854
Composting facilities 1,028,966
Incineration facilities 76,032
Allocated for free 9,249,504
Wastewater handling 1,837,651
Landfills 1,576,714 € 23,150,231
Composting facilities 257,242 € 3,776,972
Incineration facilities 19,008 € 279,087
Variant 1
Total allowances
Auctioning 2,312,376
(€ 33,951,657)
Wastewater handling 459,413 € 6,745,367
Landfills 5,991,512
Composting facilities 977,518
Incineration facilities 72,230
Allocated for free 8,787,029
Wastewater handling 1,745,769
Landfills 1,497,878 € 21,992,720
Composting facilities 244,380 € 3,588,123
Incineration facilities 18,058 € 265,132
Variant 2
Total allowances
Auctioning 2,196,757
(€ 32,254,074)
Wastewater handling 436,442 € 6,408,099
Landfills 5,676,169
Composting facilities 926,070
Incineration facilities 68,429
Allocated for free
8 324 554
Wastewater handling 1,653,886
Landfills 1,419,042 € 20,835,208
Composting facilities 231,517 € 3,399,274
Incineration facilities 17,107 € 251,178
Variant 3
Total allowances
Auctioning 2,081,138
(€ 30,556,491)
Wastewater handling 413,472 € 6,070,831
Source: Own composition.
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector 143
contribution factors of 5% and 10%. Thus, the respective
business-as-usual emissions value in 2020 needs to be
reduced by between 5% and 10% within the trading pe-
riod 2013-2020. All the other factors are held at the lev-
els stated for the first variant.
The remaining data needed for modeling, such as the
allocation base, the business-as-usual forecast, the emis-
sion projection and the growth factor, are calculated and
presented in Table s 1 and 2.
5. Results
The model results for all three allocation variants calcu-
lated (i.e. depending on the level of climate protection
contribution factor) are presented in Table 3. The mone-
tary value stated in brackets, directly below the amount
of emission allowances to be obtained via auction, is
based on the average price of € 14.68/t CO2 [34] for the
six month period from March to August 2011.
6. Discussion and Conclusion
The results show that the Austrian waste sector would
receive between 11.5 million and 10.4 million emission
allowances in total, depending on whether the climate
protection contribution is 0% or 10%. These amounts
consist of 9.2 to 8.3 million allowances, allocated free of
charge and 2.3 to 2.0 million allowances which would
have to be auctioned. Under the assumption of constant
prices, the additional purchase via auction would lead to
a financial burden of between € 33.9 million and € 30.5
Considering the relative proportions of emission al-
lowances to business-as-usual emissions in the current
energy and industrial sector in Austria in the first trading
period (i.e. 1:1.41 and 1:1.15 respectively), it can be seen
that the first two allocation variants have an similar pro-
portion (1:1.41 and 1:1.49) [22,31]. Thus it would make
sense to set the climate protection contribution between
0% and 5% for the Austrian waste sector, assuming the
distribution is to be in proportion to that of the energy
and industrial sectors. At such climate protection contri-
bution levels the Austrian waste sector would receive
between 11.5 million and 10.9 million allowances, lead-
ing to additional costs of € 33.9 million and € 32.2 mil-
lion, respectively, in the initial phase of the allocation
The present paper has attempted to provide some in-
sights into the economic modeling of allocating emission
allowances as well as into the interface between the Eu-
ropean Union Emissions Trading Scheme and the Aus-
trian waste sector.
Due to the fact that inclusion of the waste sectors in
the EU ETS has not yet been finalized, for the purposes
of the present calculation the underlying assumptions
were deliberately kept simple. The present analysis
serves merely to offer a tentative estimate regarding both
quantities of expected emission allowance allocations
and their respective financial burdens. Should inclusion
of the Austrian waste sector in the EU ETS move closer
to becoming a reality, several further points would then
need careful consideration.
One such point is that the calculation of the monetary
burden assumes an unchanging price for all additional
emission allowances purchased. Clearly, this is not real-
istic since prices are likely to fluctuate over time. While
the use of an average price for allowances goes some
way towards compensating for this effect, predicting
developments in the need for allowances still remains
somewhat problematic. (see, e.g., [3,5,7,11,35])
The marginal abatement costs (MAC) for waste sector
agents were not taken into account in the present analysis
or to put it more exactly, it was assumed that they were
higher than the price for emission allowances. Thus, in
order to compare the MAC with the CO2 price a separate
study would be necessary to determine the relative MAC
for the single industries and to assess the various treat-
ment techniques in the waste sector. However, ignoring
the MACs in the analysis above meant that it was possi-
ble to calculate expected financial burden simply on the
basis of the quantity of emission allowances allocated.
(see, e.g., [7,11,36]
A further aspect which was not taken into considera-
tion above is the potential need for further emission al-
lowance purchases in excess of the mandatory 20% auc-
tion share. However, it appears likely that under a more
auction-based allocation scheme, deviations between
additional emission allowance demand and overall al-
lowance allocation will tend to decline [6,13].
The question of how to deal with indirect emissions
also requires careful consideration. In the present context,
indirect emissions are those GHG emissions which are
avoided as a result of recycling of waste material, energy
recovery, and so on, and which are not accounted for in
the waste sector. They lead to lower GHG emissions
overall, mainly in sectors external to the waste sector.
For example, an increase in the use of secondary raw
material as a result of greater recycling would lead to
lower GHG emissions in other sectors as they replace
primary with secondary raw materials. [27] The main
difficulty here, at least in terms of emission classification,
lies in how the system boundaries and interfaces between
the waste sector and other economic sectors are to be
defined. While this question was largely ignored in the
present paper, further attention should be drawn on that
special area.
A last point worthy of note, relates to the fact that in-
clusion of the Austrian waste sector in the EU ETS might
lead to an increase in revenues as well as in costs, at least
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
for some players. If the waste sector causes fewer GHG
emissions than expected, the internal demand for emis-
sion allowances may decrease, leading to the possibility
of some agents gaining revenues by selling the superflu-
ous emission allowances to other EU ETS sectors and/or
players. Such a change in requirements would also affect
the market price for emission allowances (see, e.g.,
[6,7,35,37]. How and to what extent this interdependency
between internal emission reduction, supply and demand
of emission allowances and their market price would
affect the waste sector cannot be predicted and thus were
not part of the present paper.
Clearly, considerable further research is needed in or-
der to address all the points associated with inclusion of
the Austrian waste sector in the EU ETS.
7. Acknowledgements
This study is par t of a r esearch proj ect fund ed b y Altstoff
Recycling Austria AG and Saubermacher Dienstleistungs
AG. The authors wish to thank them both for their con-
structive ideas and support, especially Christoph Scharff,
Roland Pomberger, Dieter Schuch and Hannes Klampfl-
[1] United Nations (UN), “Kyoto-Protocol to the United Na-
tions Framework Convention on Climate Change,” 1998.
[2] European Commission (EC), “Directive 2003/87/EC of
13 October 2003 of the European Parliament and of the
Council Establishing a Scheme for Greenhouse Gas
Emission Allowance Trading within the Community and
Amending Council Directive 96/61/EC,” Brussels, 2003.
[3] D. Toke, “Trading Schemes, Risks and Costs: The Chase
of the European Union Emissions Trading Scheme and
the Renewables Obligation,” Environment and Planning
C: Government and Policy, Vol. 26, No. 5, 2008, pp. 938-
953. http://dx.doi.org/10.1068/c0728j
[4] F. Schuppert, “Climate Change Mitigation and Intergen-
erational Justice,” Environmental Politics, Vol. 20, No. 3,
2011, pp. 303-321.
[5] S. Goers and B. Pflüglmayer, “Post-Kyoto Global Emis-
sions Trading: Perspectives for Linking National Emis-
sions Trading Schemes with the EU ETS in a Bottom-Up
Approach,” Low Carbon Economy, Vol. 3, No. 3A, 2012,
pp. 69-79. http://dx.doi.org/10.4236/lce.2012.323010
[6] M. Grubb and K. Neuhoff, “Allocation and Competitive-
ness in the EU Emissions Trading Scheme: Policy Over-
view,” Climate Policy, Vol. 6, No. 1, 2006, pp. 7-30.
[7] D. C. Matisoff, “Making Cap-and-Trade Work: Lessons
from the European Union experience,” Environment:
Science and Policy for Sustainable Development, Vol. 52,
No. 1, 2010, pp. 10-19.
[8] E. Gentil, T. H. Christensen and E. Aoustin, “Greenhouse
Gas Accounting and Waste Management,” Waste Man-
agement and Research, Vol. 27, No. 8, 2009, pp. 696-
[9] European Commission (EC), “Directive 2008/101/EC of
19 November 2009 of the European Parliament and of the
Council Amending Directive 2003/87/EC so as to Include
Aviation Activities in the Scheme for Greenhouse Gas
Emission Allowance Trading within the Community,”
Brussels, 2008.
[10] S. Perdan and A. Azapagic, “Carbon Trading: Current
Schemes and Future Developments,” Energy Policy, Vol.
39, No. 10, 2011, pp. 6040-6054.
[11] A. Lepone, R. T. Rahman and J.-Y. Yang, “The Impact of
European Union Emissions Trading Scheme (EU ETS)
National Allocation Plans (NAP) on Carbon Markets,”
Low Carbon Economy, Vol. 2, No. 2, 2011, pp. 71-90.
[12] European Commission (EC), “EU Action against Climate
Change: The EU Emissions Trading Scheme,” Luxem-
bourg, 2008.
[13] E. Benz, A. Löschel and B. Sturm, “Auctioning of CO2
Emission Allowances in Phase 3 of the EU Emissions
Trading Scheme,” Climate Policy, Vol. 10, No. 6, 2010,
pp. 705-718. http://dx.doi.org/10.3763/cpol.2009.0055
[14] European Commission (EC), “European Commission
Website,” 2011. http://ec.europa.eu/clima/policies/ets
[15] PointCarbon, “Point Carbon’s OTC Price Assessments,”
2011. http://www.pointcarbon.com/
[16] B. Ander son and C. Di Ma ri a, “Abatement and Allocation
in the Pilot Phase of the EU ETS,” Environmental and
Resource Economics, Vol. 48, No. 1, 2011, pp. 83-103.
[17] European Commission (EC), “Directive 2009/29/EC of
23 April 2009 the of the European Parliament and of the
Council Amending Directive 2003/87/EC so as to Im-
prove and Extend the Greenhouse Gas Emission Allow-
ance Trading Scheme of the Community,” Brussels, 2009.
[18] M. Hiebel and H. Pflaum, “Recycling for Climate Protec-
tion—CO2-Emissions with the Utilisation of Secondary
Raw Material in Comparison to the Use of Primary Raw
Materials,” Müll und Abfall, Vol. 1, 2009, pp. 4-7.
[19] Intergovernmental Panel on Climate Change (IPCC),
“Climate Change 2007: Synthesis Report. Contribution of
Working Groups I, II and III to the Fourth Assessment
Report of the Intergovernmental Panel on Climate
Change,” Geneva, 2007.
[20] J. Bogner, R. Pipatti, S. Hashimoto, C. Diaz, K. Mareck-
ova, L. Diaz, P. Kjeldsen, S. Monni, A. Faaij, Q. Gao, T.
Zhang, M. Abdelrafie Ahmed, R. T. M. Sutamihardja and
R. Gregory, “Mitigation of Global Greenhouse Gas
Emissions from Waste: Conclusions and Strategies from
the Intergovernmental Panel on Climate Change (IPCC)
Fourth Assessment Report. Working Group III (Mitiga-
tion),” Waste Management and Research, Vol. 26, No. 1,
2008, pp. 11-32.
Open Access LCE
Allocation of Emission Allowances within the European Union Emissions Trading Scheme to the Waste Sector
Open Access LCE
[21] Environment Agency Austria (EAA), “Austria’s National
Inventory Report: Submission under the United Nations
Framework Convention on Climate Change and under the
Kyoto Protocol,” REP-0308, Vienna, 2011.
[22] Environment Agency Austria (EAA), “GHG Projections
and Assessment of Policies and Measure s in Austria: Re-
porting Under Decision 280/2004/EC,” REP-0331, Vi-
enna, 2011.
[23] European Parliament (EP), “Position of the European
Parliament Adopted at First Reading on 17. December
2008 to Improve and Extend the Greenhouse Gas Emis-
sion Allowance Trading System by the Community,”
Consolidated Legislative Document, 2008.
[24] W. Winiwarter and K. Rypdal, “Assessing the Uncer-
tainty Associated with National Greenhouse Gas Emis-
sion Inventories: A Case Study for Austria,” Atmospheric
Environment, Vol. 35, No. 32, 2001, pp. 5425-5440.
[25] Environment Agency Austria (EAA), “Austria’s National
Inventory Report: Submission under the United Nations
Framework Convention on Climate Change and under the
Kyoto Protocol,” REP-0265, Vienna, 2010.
[26] S. Manfredi, D. Tonini, T. H. Christensen and H. Scharff,
“Landfill of Waste Accounting of Greenhouse Gases and
Global Warming Contributions,” Waste Management and
Research, Vol. 27, No. 8, 2009, pp. 825-836.
[27] C. Rootes, “Environmental Movements, Waste and Waste
Infrastructure: An Introduction,” Environmental Politics,
Vol. 18, No. 6, 2009, pp. 817-834.
[28] M. Adam, H. Hentschke and S. Kopp-Assenmacher,
“Handbuch des Emissionshandelsrechts” [Handbook of
the Emissions Trading Law], Springer-Verlag, Berlin,
[29] D. Demailly and P. Quirion, “CO2 Abatement, Competi-
tiveness and Leakage in the European Cement Industry
under the EU ETS: Grandfathering versus Output-Based
Allocation,” Climate Policy, Vol. 6, No. 1, 2006, pp. 93-
113. http://dx.doi.org/10.1080/14693062.2006.9685590
[30] Federal Ministry for Agriculture, Forestry, Environment
and Water Management, “National Allocation Plan for
Austria Pursuant to Art.11 of the EZG,” Vienna, 2004.
[31] Federal Ministry for Agriculture, Forestry, Environment
and Water Management, “Austria’s National Allocation
Plan Pursuant to Art.11 of the EZG for the Trading Period
2008-2012,” Vienna, 2007.
[32] Legal Information System of the Republic of Austria,
Emissionszertifikategesetz (EZG), Bundesgesetzblatt für
die Republik Österreich, 46. Bundesgesetz [Austria’s
Emissions Allowance Trading Act, BGBl. I Nr. 46/2004,
1-16] Vienna, 2004.
[33] Legal Information System of the Republic of Austria,
Zuteilungsverordnung 2. Periode, Bundesgesetzblatt für
die Republik Österreich, 279. Verordnung [Austria’s Or-
dinance on the Distribution of Emission Allowances for
the Second Trading Period, BGBl. II Nr. 279/2007, 1-12]
Vienna, 2007.
[34] European Energy Exchange (EEX), “EU Emission Al-
lowances,” 2011. www.eex.com
[35] W. Lise, J. Sijm and B. F. Hobbs, “The Impact of the EU
ETS on Prices, Profits and Emissions in the Power Sector:
Simulation Results with the COMPETES EU20 Model,”
Environmental and Resource Economics, Vol. 47, No. 1,
2010, pp. 23-44.
[36] A. D. Ellerman and B. K. Buchner, “Over-Allocation or
Abatement? A Preliminary Analysis of the EU ETS
Based on the 2005-06 Emissions Data,” Environmental
and Resource Economics, Vol. 41, No. 2, 2008, pp.
267-287. http://dx.doi.org/10.1007/s10640-008-9191-2
[37] S. Monjon and P. Quirion, “A Border Adjustment for the
EU ETS: Reconciling WTO Rules and Capacity to Tackle
Carbon Leakage,” Climate Policy, Vol. 11, No. 5, 2011,
pp. 1212-1225.