Germany has notified the European Commission of its intention to voluntarily cancel EU carbon market allowances associated with the closure of electricity generation capacity at 14 installations covered by the EU Emissions Trading System (EU ETS) in 2024.

This is the latest step to ensure its coal phase-out translates into genuine emissions reductions rather than a surplus of tradeable permits.

The Commission received Germany’s initial notification in November last year and the process was completed roughly a month later, but information on the notification was published just this Tuesday.

Under Section 10(5) of Germany’s Greenhouse Gas Emissions Trading Act, the country is required to retract allowances linked to decommissioned plants to ensure that shutting down coal capacity leads to real emission reductions, rather than simply shifting higher emissions to other operators in the market.

Without cancellation, the freed-up credits could be used by other companies to emit more carbon dioxide (CO2), which would practically underline the environmental rationale of the coal phase-out.

The notification was made under Article 12(4) of the EU ETS Directive and follows the cancellation procedure set out in Article 25 of the Auctioning Regulation.

It includes the plants concerned, the methodology for calculating volumes to be cancelled, the maximum quantities, and the planned cancellation period.

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Germany must notify the Commission by May 31 of a given year of the exact number of allowances to be cancelled between September 1 and December 31 of that year.

The precise number of allowances to be cancelled will be determined based on future emissions reports and adjusted to account for volumes already absorbed by the EU ETS’s Market Stability Reserve, which automatically removes surplus allowances from circulation.

The move follows prior cancellations linked to German plant closures in 2022 and 2023, establishing a pattern of Berlin acting to protect the environmental integrity of the EU carbon market as it advances its managed exit from coal.

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