```
EUROPEAN COMMISSION
DIRECTORATE-GENERAL
CLIMATE ACTION
Directorate B – Carbon Markets & Clean Mobility
```
# Guidance on Interpretation of Annex I of the

# EU ETS Directive (excl. aviation and

# maritime activities)

# Update applicable from 2024

**EU ETS Guidance document No. 0,
Updated Version, 19 December 2023**

This document is part of a series of documents provided by the Commission ser-
vices for supporting the implementation of the EU ETS (the European Union
Emission Trading System).

The guidance represents the views of the Commission services at the time of
publication. It is not legally binding.

All guidance documents relating to the EU ETS can be downloaded from the
Commission’s website at the following address:
**https://climate.ec.europa.eu/eu-action/eu-emissions-trading-system-eu-
ets_en**


## Version History

```
Date Version status Remarks
18 March 2010 published Endorsed by the Climate Change Committee
Applicable from 2013 (Phase 3 of EU ETS)
19 December
2023
```
```
re -published Update following the review of the EU ETS Di-
rective by Directive (EU) 2023/959 (as part of
the “Fit for 55” package)
Applicable from 2024
```

## CONTENTS

4.5.2 Identifying installations which fall under the scope of EU ETS,

- 1 INTRODUCTION
- 1.1 Status of this Guidance
- 1.2 Scope of this Guidance
- 1.3 What is new in this guidance?
- 2 INSTALLATION
- 2.1 General aspects
- 2.2 Relation to other classifications of activities
- 2.3 Various questions
- 2.3.1 What is “stationary”?
   - 2.3.2 Installation boundaries and treatment of associated activities
- 2.3.3 Testing and research
- 2.3.4 Does an installation have to emit greenhouse gases?
- 2.3.5 What is an emission?
- 3 DEFINITION OF ANNEX I ACTIVITIES
- 3.1 Combustion activities
- 3.2 Combustion vs. more specific activities
- 3.2.1 Clause 4 of Annex I
   - rated thermal input exceeding 20 MW 3.2.2 Specific activities with capacity threshold expressed as total
- 3.3 Activity definitions applicable from
- 3.4 Various interpretation issues.............................................
- 3.4.1 What is “rated thermal input”
- 3.4.2 Interpretation of “production or processing” of metals
- 3.4.3 Waste incineration and co-incineration
- 3.4.4 Waste (co-)incineration units
- 3.4.5 Units using exclusively biomass............................................
   - threshold 3.5 Options for installations falling below the 20 MW
- 4 THE AGGREGATION RULE
- 4.1 Capacity
- 4.2 The aggregation clause
- 4.3 Reserve and backup units and parallel capacities
- 4.4 Definition of “Unit”
- 4.5 Step-by-step approach (until end of 2025)
- 4.5.1 Defining installations which fall under the scope of EU ETS
   - Article but could be excluded as "small installations" pursuant to


4.5.3 Identifying installations or units which could be excluded
pursuant to Article 27a .......................................................... 29
4.5.4 Examples ............................................................................... 29

**5 OTHER TOPICS ......................................................... 31**

**5.1 What are “bulk organic chemicals”? ................................ 31**

**5.2 Glyoxal and glyoxylic acid ................................................. 32**

**5.3 Nitric acid, adipic acid, glyoxal and glyoxalic acid .......... 32**

**5.4 Production of primary and secondary aluminium ........... 32**

**5.5 Definition of hospital .......................................................... 33**

**5.6 Flue gas desulphurisation .................................................. 33**

**6 MUNICIPAL WASTE INCINERATION – APPLICABLE
FROM 2024 ................................................................ 34**

**6.1 What are installations for the incineration of municipal
waste .................................................................................... 35**

**6.2 MWI-associated activities and aggregation clause ......... 38**

**6.3 Units for the incineration of hazardous or municipal
waste .................................................................................... 39**

**6.4 How to implement the inclusion for MRV only ................. 40**

**7 CHANGES APPLICABLE FROM 2026 ...................... 41**

**7.1 The biomass criterion from 2026 onwards ....................... 41**

7.1.1 Assessing the biomass criterion for incumbent installations. 42
7.1.2 Assessing installation not previously included in the EU ETS
............................................................................................... 44

**7.2 New step-by-step approach regarding aggregation of
combustion units ................................................................ 46**
7.2.1 Defining installations which fall under the scope of EU ETS 46

7.2.2 Identifying installations which fall under the scope of EU ETS,
but could be excluded as "small installations" pursuant to
Article 27 ............................................................................... 47
7.2.3 Identifying installations or units which could be excluded
pursuant to Article 27a .......................................................... 48

**8 ANNEX ....................................................................... 49**

**8.1 Glossary ............................................................................... 49**

**8.2 Annex I of the revised ETS-directive (excluding maritime
and aviation activities) ........................................................ 50**


## 1 INTRODUCTION

## 1.1 Status of this Guidance

This guidance was drafted by consultants in close cooperation with the European
Commission, taking into account input received from Member State experts. It
takes into account the discussions within the Technical Working Group on Moni-
toring, Reporting, Verification and Accreditation (TWG MRVA) and the Climate
Change Expert Group (CCEG) general and free allocation formations, as well as
written comments received from stakeholders and experts from Member States.
It was endorsed by the members of the TWG MRVA in a meeting on
15 December 2023.

```
The guidance reflects the status of the EU ETS Directive^1 , following 2023 re-
vision, as in force on 5 June 2023^2. The majority of the amendments applies
from 1 January 2024. The provisions related to the deletion of the concept of
electricity generators and the change of the criterion for excluding biomass
installations apply from 1 January 2026^3. They will have to be taken into ac-
count in the National Implementation Measures (NIMs)^4 notification in 2024,
which applies to the period 2026 to 2030.
Therefore, this document is structured as follows:
 Chapters 2 to 5 cover the current situation a nd will continue to apply, w ith
the exception of the biomass rules (sections 3.4.5 and 4.5) which apply until
end 2025.
 Chapter 6 deals with the obligation of installations for the incineration of mu-
nicipal waste to carry out Monitoring, Reporting and Verification (MRV) from
1 January 2024.
 Chapter 7 gives guidance to the rules on exclusion of biomass installations
and a “decision tree” for compiling the NIMs List in 2024 to be applied to
installations for the period 2026 to 2030.
```
Previous guidance documents provided by the Commission regarding the scope
of the EU ETS for installations are not applicable anymore.

The guidance represents the views of the Commission services at the time of
publication. It is not legally binding. O nly the European Court of Justice can give
definitive judgements concerning interpretation of the EU ETS Directive.

(^1) Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establish-
ing a system for greenhouse gas emission allowance trading within the Union and amending Coun-
cil Directive 96/61/EC
(^2) I.e. including the latest updates by:
Directive (EU) 2023/958 (for aviation), **[http://data.europa.eu/eli/dir/2023/958/oj](http://data.europa.eu/eli/dir/2023/958/oj)** , and
Directive (EU) 2023/959, **[http://data.europa.eu/eli/dir/2023/959/oj](http://data.europa.eu/eli/dir/2023/959/oj)**.
The consolidated version of the Directive is available from: **https://eur-lex.europa.eu/legal-con-
tent/EN/TXT/?uri=CELEX%3A02003L0087- 20230605**
(^3) Article 4 of Directive (EU) 2023/
(^4) Article 11(1) requires the Member States to notify “NIMs” (National Implementation Measures) to
the Commission, including a list of installations and free allocation levels for the next allocation
period. Deadline for this notification for the period 2026 to 2030 is 30 September 2024.
**_Development
Update Status 2023
Document structure_**


## 1.2 Scope of this Guidance

```
This guidance does not give instructions regarding the procedures that Member
States apply when issuing GHG emissions permits. T he approach to setting the
installation boundaries laid down in GHG emissions permits differ between Mem-
ber States. Therefore, no further guidance is given on the definitions of "operator"
and "site". In some Member States, industrial sites (e.g. in the chemical industry)
receive one overarching GHG emissions permit for the total site and are thus
regarded as a single installation, whereas in other Member States, the same site
could receive separate GHG emissions permits and thus be seen as more than
a single installation.
For example, industrial combined heat and power (CHP) installations in one
Member State will operate under a separate GHG emissions permit, while in other
Member States they will operate under an integrated GHG emissions permit to-
gether with the industrial installation to which this CHP plant delivers its heat. As
a result of these different approaches, a full harmonisation of permitting proce-
dures is outside the scope of this guidance.
```
```
This guidance only deals with the EU ETS scope with regards to stationary in-
stallations. For guidance on the scope regarding aviation activities, see Commis-
sion Decision 2009/450/EC^5 and MRR Guidance Document No. 2 (“General guid-
ance for Aircraft Operators”)^6. Out of scope of this document are furthermore
maritime transport activities and the activities covered by Annex III of the Directive
(i.e. the emissions trading system for buildings, road transport and additional sec-
tors (ETS2).
```
```
Note: All references to articles or annexes in this document refer to the EU
ETS Directive, unless other legal acts are explicitly specified.
See consolidated text: https://eur-lex.europa.eu/legal-con-
tent/EN/TXT/?uri=CELEX%3A02003L0087- 20230605
For the purposes of this Guidance Document, EU ETS refers to the emission
trading system for stationary installations ( i.e. installations covered by Chapter
III of the EU ETS Directive).
```
(^5) Commission Decision of 8 June 2009 on the detailed interpretation of the aviation activities listed in
Annex I to Directive 2003/87/EC of the European Parliament and of the Council.
(^6) **https://climate.ec.europa.eu/system/files/2023-05/gd2_guidance_aircraft_en.pdf**
**_Permitting
unchanged
Only stationary
installations
EU ETS Directive_**


## 1.3 What is new in this guidance?

This guidance has been updated in 2023 to take into account the review of the
EU ETS Directive by Directive (EU) 2023/959, and other issues (e.g. updating
references to legislation). The structure of the document has been kept to the
extent possible. New chapters or sections have been added to highlight specific
new elements as follows:

 From 1 January 2024, some new definitions of activities of Annex I apply. They
have been compiled in a new section 3.3.

 From 1 January 2024, installations for the incineration of municipal waste are
included in the EU ETS, but only for the purpose of monitoring, reporting and
verification, without an obligation to surrender allowances for the emissions
reported. Guidance on how to identify installations concerned is given in chap-
ter 6. However, as _co-incineration_ of waste was already fully included in the
EU ETS before 2024, the respective parts of the guidance (sections 3.4.3 and
3.4.4) are kept and supplement the new part of the document.

 From 2026, the rules on the exclusion from the EU ETS of installations using
predominantly biomass will be significantly changed, with a lower threshold
(95% instead of ‘exclusive’ use) and requiring that the biomass complies with
the sustainability and greenhouse gas savings criteria put forward by the RED
II (Renewable Energy Directive). Guidance on how to implement this new ap-
proach is given in section 7.1.

 The step-by-step approach given in section 4.5 for applying the “aggregation
clause” remains valid until end 2025. A new version of this “decision tree” is
presented in section 7.2 for application from 2026 onwards.

 The new version of Annex I of the EU ETS Directive is appended to this docu-
ment.


## 2 INSTALLATION

## 2.1 General aspects

```
The EU ETS Directive refers in several instances to "installations". The term “in-
stallation” is defined in Article 3(e) as:
‘installation’ means a stationary technical unit where one or more activities
listed in Annex I are carried out and any other directly associated activities
which have a technical connection with the activities carried out on that site
and which could have an effect on emissions and pollution;
Member States shall ensure that no installation carries out any activity listed in
Annex I unless its operator holds a GHG emissions permit (Article 4)^7 , or the
installation has been excluded from the EU ETS pursuant to Articles 27 or
27a(1)^8.
The GHG emissions permit must contain a description of the activities and emis-
sions from the installation as well as a monitoring plan. Changes in installation
boundaries laid down in existing permits or new GHG emissions permits could be
necessary as a consequence of the changes to Annex I in the EU ETS Directive.
Accordingly, also changes in the monitoring plan or new monitoring plans may
have to be submitted to competent authorities for approval.
To avoid changing the GHG emissions permit too frequently due to changes
within the monitoring plan, Member States may allow operators to change the
monitoring plan without changing the permit (Article 6(2)(c)). Furthermore, Arti-
cles 15 and 16 of the Monitoring and Reporting Regulation (MRR^9 ) provide rules
on updating monitoring plans (see also section 5.6 of MRR GD1^10 ).
Where several installations are operated by the same operator at the same site,
these installations may be covered by one GHG emissions permit (Article 6(1)).
It should be noted that in applying the Union-wide rules for transitional harmo-
nised free allocation under Article 10a, it might have several advantages to define
installations boundaries as broadly as possible. Especially in the case of several
installations at the same site transferring heat one to another, application of the
Union-wide rules will become simpler if there is a common GHG emissions per-
mit.
The competent authority decides whether an “associated activity” is to be in-
cluded in the installation’s boundaries. For combustion units, there is a specific
clause in Annex I of the EU ETS Directive (see section 2.3.2) for this purpose.
```
(^7) For installations for the incineration of municipal waste included from 2024 for MRV purposes only,
there is no obligation for Member States to issue a permit. For details, see section 6.4.
(^8) For small installations excluded from the EU ETS pursuant to Articles 27 and 27a(1), and in order
to ensure that monitoring and reporting arrangements in accordance with Article 14 still apply for
those installations, a Member State may also require that small installations hold a GHG emissions
permit, even when excluded from the EU ETS.
(^9) Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on the monitoring and
reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parlia-
ment and of the Council and amending Commission Regulation (EU) No 601/2012, consolidated
version: **[http://data.europa.eu/eli/reg_impl/2018/2066/2022-08-](http://data.europa.eu/eli/reg_impl/2018/2066/2022-08-) 28**
(^10) MRR Guidance Document No.1 (“General guidance for installations”), **https://climate.ec.eu-
ropa.eu/system/files/2023-03/gd1_guidance_installations_en.pdf**
**_Installation
definition
Relationship of GHG
emissions permit
and monitoring plan
Advantage of broad
installation
boundaries
Associated activity_**


Furthermore, the criteria given by the definition of “installation” (see above) for
defining directly associated activities are:

 The directly associated activity has a technical connection to the activities
listed in Annex I; and

 There could be an effect on the (GHG) emissions of the installation.

If there cannot be an impact on the GHG emissions or there is no technical con-
nection, the associated activity should not be included in the permit/monitoring
plan. I f there could be GHG emissions, the criterion of having a “technical con-
nection” requires further considerations, like for example:

 Is the associated activity a necessary part of the production process otherwise
covered by an Annex I activity? If the production is not possible without the
associated activity (e.g. if it concerns the supply with necessary inputs (pres-
surised air) or if the product is not saleable without the associated activity (e.g.
packaging of products), this is a confirmation that the associated activity is part
of the installation.

 Technical connections involve but are not limited to all kinds of (stationary)
conveyors and pipeline for transporting materials and goods, fuels, heat media
etc. between technical units. Cables for the transport of electrical energy and
information may also be considered technical connections if their interruption
would lead to a necessary stop of the production process.

One installation can have only one operator. For being part of the installation, it
is therefore a requirement that the associated activity is under the control^11 of the
same operator. Where there are two different operators, the parts operated by
each operator must be identified as separate installations. The mere ownership
of an installation or unit within an installation is not the decisive criterion. In this
regard, units of different ownership that are technically connected and are effec-
tively run by one operator with decisive economic power over the technical func-
tioning of these units should be included under the same GHG emissions permit.

All directly associated activities identified here will have to be taken into account
for the purpose of clauses 3 and 5 of Annex I (see section 4.2 and the step-by-
step approach in sections 4.5 and 0).

## 2.2 Relation to other classifications of activities

When determining the coverage of the EU ETS (and compiling the full list of in-
stallations covered), the activities listed in Annex I of the EU ETS Directive are
the only relevant criteria.

However, it may be useful to consult other lists of installations based on other
classifications like NACE or Annex I of the Industrial Emissions Directive (IED)
with some reservations.

While NACE is used for identification of the sectors or subsectors exposed to a
significant risk of carbon leakage, NACE can only give a first rough estimate
where to find EU ETS installations. Most installations covered by t he EU ETS will

(^11) The EU ETS Directive, Article 3(f) defines: “ _‘operator’ means any person who operates or controls
an installation or, where this is provided for in national legislation, to whom decisive economic power
over the technical functioning of the installation has been delegated”._
**_One installation,
one operator
Activity is not a
sector classification_**


```
be found in the NACE categories^12 B (Mining and quarrying), C (Manufacturing)
and D (Electricity, gas and steam and air conditioning supply). However, the ac-
tivity “combustion of fuels” can occur in all types of NACE categories, not only
industrial ones. Examples of such non-industrial installations are combustion
units in greenhouses, hospitals, universities and office buildings, booster stations
in natural gas transport networks etc. Thus, performing an “industrial activity” is
not the determining factor for deciding whether an installation falls under the
scope of the EU ETS.
Several activities of Annex I of the EU ETS Directive are not identical to those in
Annex I of the IED^13. In several cases, the EU ETS-related installation boundaries
may deviate from the IED-related installation boundaries (e.g., regarding waste
water plants, on-site landfills, etc.). Also, the EU ETS Directive’s aggregation
clause for combustion installations (see chapter 4) differs from the IED. While a
list of IED installations might give a good first estimate, each installation has to
be assessed individually regarding inclusion in the EU ETS.
```
## 2.3 Various questions

## 2.3.1 What is “stationary”?

```
Every technical unit that is connected to the installation and serves a purpose,
which usually requires the unit to be stationary during operation, is considered
part of that installation. For example, some types of installations are stationary
only for a period of time such as LNG terminals^14 and asphalt plants and can be
moved to another place. During operation, however, they are stationary. The
GHG emissions permit should clearly identify such units as part of the installation.
Furthermore, emergency and backup electricity generators may be installed in
movable containers but cannot be removed from the installation for safety rea-
sons. Such units should be considered “stationary”.
Also, testing stands for motors, turbines and equivalent products should be con-
sidered stationary. Even though the tested products are removed after the test,
the production equipment such as fuel supply and exhaust stack are stationary^15
and should be considered integral part of the installation.
The “stationary” definition does not include mobile machinery and vehicles (e.g.
trucks, forklifts, bulldozers, company cars, etc.), which are mobile at the moment
of performing their tasks. However, their fuel consumption and emissions will be
included in the ETS2 when they are used for activities listed in Annex III of the
EU ETS Directive or for activities included by the Member State in accordance
with Article 30j of the Directive^16.
```
(^12) According to NACE rev.2, **https://ec.europa.eu/eurostat/documents/3859598/5902521/KS-RA-
07-015-EN.PDF**
(^13) Bulk organic chemicals, ceramics, etc.
(^14) Note: Where the LNG terminal or other offshore installations such as oil rigs are installed on a ship,
the emissions from the ship’s engine would be covered by the EU ETS for maritime transport while
it is mobile. However, if the ship’s engine is used during stationary mode (e.g. for the production of
electricity or heating, its emissions are to be included in the GHG permit which it requires for being
stationary.
(^15) Note that such testing stands could be considered as “units” (see section 4.4) if separately useable,
and could fall under the 3 MW de-minimis rule of clause 3.
(^16) A separate guidance document for the ETS2 will be published.
**_Scope different
from IED
Stationary, but not
permanent
Mobile machinery_**


It should be noted that Chapter III “Stationary installations” of the EU ETS Di-
rective applies to all the activities listed in Annex I other than aviation activities
and maritime transport activities. This includes the activity “Transport of green-
house gases for geological storage in a storage site permitted under Directive
2009/31/EC, with the exclusion of those emissions covered by another activity
under this Directive” although it may include non-stationary elements in the chain
of custody. The exclusion of those emissions covered by another activity means
that the emissions from the combustion of fuels in maritime transport and in road
transport (e.g. trucks) would be covered respectively by the maritime activity and
by the ETS2 activity once it starts. Before the start of ETS2, the emissions from
road transport should be covered by the existing EU ETS (rules are under devel-
opment).

```
2.3.2 Installation boundaries and treatment of associated activi-
ties
```
The installation boundaries should be set as broad as possible. This is supported
by clause 5 of Annex I:

```
“When the capacity threshold of any activity in this Annex is found to be
exceeded in an installation, all units in which fuels are combusted, other than
units for the incineration of hazardous or municipal waste, shall be included
in the greenhouse gas emission permit.”
```
This also gives an indication that ‘directly associated activities’, as mentioned in
the definition of installation, are primarily combustion units. Other activities which
do not emit GHGs but may be relevant under the IED because of the emission of
other pollutants, are often irrelevant under the EU ETS.

Small units such as heaters for office buildings belonging to the site should be
considered part of the installation and should be included in the GHG emissions
permit.

In relation to the phrase “ _other than units for the incineration of hazardous or
municipal waste_ ” see sections 3.4.3 and 3.4.4 as well as chapter 6.

## 2.3.3 Testing and research

Clause 1 of Annex I states:

```
“Installations or parts of installations used for research, development and
testing of new products and processes are not covered by this Directive.”
```
Pure research operations (like pilot scale or even small plants) can usually be
identified based on their environmental permits or other types of written opinion
given by the competent authority (as far as required by national legislation). The
production of goods (even if they are saleable) is not the main purpose of such
installations or technical units. Such installations or parts of installations should
not be included when calculating the capacity of an installation for the purpose of
deciding its inclusion in the EU ETS.

“Testing of new products and processes” is often carried out for a limited period
of time (some hours up to several days) in existing, commercial scale installa-

```
Use broadest
installation
boundaries
```
```
Research
```

```
tions. This includes optimisation tests, the test of new raw materials or the pro-
duction of new grades of products. Such occasional tests are to be understood
as business as usual for normal industrial operations and cannot, therefore, be
understood as a reason for exclusion of the whole installation from the EU ETS,
nor when calculating the capacity (rated thermal input or production capacity) of
an installation.
Another type of test is the period of pre-commissioning or start-up operations of
new installations or after significant technical changes in existing installations.
Such pre-commissioning or start-up operations are an integral part of the opera-
tion of installations, and must therefore be covered fully by the GHG emissions
permit and the monitoring plan. However, precise monitoring may sometimes be
difficult as long as the construction of the installation is not finalised. The MRR
requires^17 completeness of monitoring of all emissions including non-typical situ-
ations such as during start-up. It also covers the commissioning phase^18. As for
permitting in general (see section 1.2), it is left to the national permitting practice
and the judgment of the competent authority, whether it may be acceptable if a
simplified monitoring plan (low tier approaches or the fall-back approach should
be applicable) is approved by the competent authority until the full regular oper-
ation starts. It should be ensured that low tier approaches do not lead to an un-
derestimation of emissions.
```
## 2.3.4 Does an installation have to emit greenhouse gases?

```
Article 2(1), first sentence, describes the scope of the EU ETS Directive as “ This
Directive shall apply to the activities listed in Annexes I and III, and to the green-
house gases listed in Annex II. ”^19 This clarifies that the activity carried out in an
installation (and meeting its threshold, if applicable) is the relevant criterion for
inclusion in the EU ETS, not whether the installation actually emits greenhouse
gases covered by the Directive. In this context, note section 3.5 on the option for
installations to remain in the EU ETS if falling below the 20 MWth threshold, and
section 3.3 on updated activity definitions in Annex I of the EU ETS Directive.
```
(^17) Last subparagraph of Article 20(1) of the MRR: “ _The operator shall also include emissions from
regular operations and abnormal events, including start-up, shut-down and emergency situations,
over the reporting period, with the exception of emissions from mobile machinery for transportation
purposes._ ”
(^18) European Court of Justice (case C 457/15), Vattenfall Europe Generation AG vs Bundesrepublik
Deutschland: The ruling finds that emissions generated during other abnormal events, such as
those produced during the trial period of an installation before the start of normal operation, must
also be taken into account for the purposes of the monitoring and reporting of emissions.
(^19) In accordance with the 2023 amendments of the EU ETS Directive, which introduced the quoted
wording replacing “This Directive shall apply to emissions from the activities...”. Note that this
amendment impacts the interpretation made in case C-577/16, judgment of the European Court of
Justice of 28 February 2018, Trinseo Deutschland Anlagengesellschaft mbH vs. Bundesrepublik
Deutschland.
**_Commissioning
New: zero-emission
installations
possible_**


## 2.3.5 What is an emission?

The 2023 amendment of the EU ETS Directive updated the definition of ‘emis-
sions’ in Article 3(b) as follows: “‘ _Emissions’ means the release of greenhouse
gases into the atmosphere from sources in an installation or the release from an
aircraft performing an aviation activity listed in Annex I or from ships performing
a maritime transport activity listed in Annex I of the gases specified in respect of
that activity, or the release of greenhouse gases corresponding to the activity
referred to in Annex III”_ ;

The deletion of “into the atmosphere” in the definition does not impact whether
an installation should be included in the EU ETS or the installation boundaries.
However, it paves the way to a consistent treatment of CO 2 transfer and carbon
capture and utilisation (CCU) activities (Article 12(3b) of the EU ETS Directive).


## 3 DEFINITION OF ANNEX I ACTIVITIES

## 3.1 Combustion activities

```
The EU ETS uses a broad definition of combustion activities:
“‘combustion’ means any oxidation of fuels, regardless of the way in
which the heat, electrical or mechanical energy produced by this process
is used, and any other directly associated activities, including waste gas
scrubbing”.
Although not explicitly stated by the Directive, but within the same spirit of unam-
biguous broadness, “fuel” for the purpose of the EU ETS for installations^20 should
be defined as “any solid, liquid or gaseous combustible material”^21.
Gasification is an oxidation process even though less than the stoichiometric
amount of oxygen is used. In pyrolysis, heat has to be fed into the process and
oxygen is usually absent. The gaseous products of pyrolysis and gasification are
usually used as fuel onsite. Thus, the existence of combustion can be assumed.
The definition of combustion is applicable to all kind of economic activities, in-
cluding industrial activities listed in Annex I to the EU ETS Directive as well as
non-listed ones (e.g. asphalt mixing, textiles production...), as well as to the ser-
vice sector (see section 2.2), no matter if there is direct heat use (e.g. in a steel
reheating furnace) or if a heat transfer medium (steam, hot water etc.) is used.
Even if the generated heat is not used at all (flares and in some post-combustion
units^22 ), the fact of combustion will lead to an inclusion in the EU ETS, since the
combustion definition clarifies that combustion is found “regardless of the way in
which the heat, electrical or mechanical energy produced by this process is used”.
Furthermore, all combustion units are included of which only the mechanical en-
ergy is used without use of heat or generation of electricity. This applies e.g. to
pipeline booster stations and other compressors directly driven by turbines or en-
gines.
The fact that the definition is very broad is supported by clause 3 of Annex I,
which gives a non-exhaustive list of types of combustion units, that includes
“all types of boilers, burners, turbines, heaters, furnaces, incinerators, cal-
ciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion
units, flares, and thermal or catalytic post-combustion units.”
As a further consequence of the definition of combustion, associated activities
are relevant not only in the context of installation boundaries, but also within the
activity “combustion of fuels”. This clarifies that process emissions may occur as
part of combustion activities^23 , especially CO 2 emissions from desulphurisation,
from deNOx units (e.g. when urea is used as reductant), etc.^24
```
(^20) The Directive contains a different definition for ‘fuel’ for the purpose of the ETS2.
(^21) This is the same definition as in IED Article 3(24).
(^22) Note that no distinction can be justified between the gases flared and the auxiliary fuel.
(^23) See also Section 1 of Annex IV of the MRR.
(^24) The MRR contains specific rules for monitoring of these combustion-associated process emissions.
They are furthermore included in the calculation of the heat and fuel benchmarks according to the
FAR (Free Allocation Rules), Commission Delegated Regulation (EU) 2019/331,
**[http://data.europa.eu/eli/reg_del/2019/331/oj](http://data.europa.eu/eli/reg_del/2019/331/oj)**
**_Codified broad
definition
Sector-independent
Flue gas treatment_**


## 3.2 Combustion vs. more specific activities

## 3.2.1 Clause 4 of Annex I

Eleven activities are listed in Annex I for which the capacity threshold (if any) is
not expressed as total rated thermal input, but as "production capacity", "melting
capacity" or just "capacity". These activities are:

_Table 1: Activities of which the capacity threshold is not expressed as total rated
thermal input (Applicable from 1 January 2024)_

```
Activities Relevant
capacity
```
```
Relevant capacity
threshold to be ex-
ceeded
Production of iron or steel (primary or
secondary fusion) including continuous
casting
```
```
Capacity 2,5 tonnes per hour
```
```
Production of cement clinker Production
capacity
```
```
500 tonnes per day
(when in rotary kilns)
50 tonnes per day
(when in other furnaces)
Production of lime or calcination of dolo-
mite or magnesite
```
```
Production
capacity
```
```
50 tonnes per day
```
```
Manufacture of glass including glass fibre Melting
capacity
```
```
20 tonnes per day
```
```
Manufacture of ceramic products by fir-
ing, in particular roofing tiles, bricks, re-
fractory bricks, tiles, stoneware or porce-
lain
```
```
Production
capacity
```
```
75 tonnes per day
```
```
Manufacture of mineral wool insulation
material using glass, rock or slag
```
```
Melting
capacity
```
```
20 tonnes per day
```
```
Drying or calcination of gypsum or pro-
duction of plaster boards and other gyp-
sum products, with a of calcined gypsum
or dried secondary gypsum
```
```
Production ca-
pacity
```
```
20 tonnes per day
```
```
Production of paper or cardboard Production
capacity
```
```
20 tonnes per day
```
```
Production of carbon black involving the
carbonisation of organic substances such
as oils, tars, cracker and distillation resi-
dues
```
```
Production ca-
pacity
```
```
50 tonnes per day
```
```
Production of bulk organic chemicals by
cracking, reforming, partial or full oxida-
tion or by similar processes
```
```
Production
capacity
```
```
100 tonnes per day
```
```
Production of hydrogen (H 2 ) and synthe-
sis gas
```
```
Production
capacity
```
```
5 tonnes per day
```
Clause 4 of Annex I stipulates:

```
“If a unit serves an activity for which the threshold is not expressed as total
rated thermal input, the threshold of this activity shall take precedence for
the decision about the inclusion in the EU ETS.”
```
```
Activities with
production
thresholds
```

This clause stipulates that the activity-specific capacity thresholds mentioned in
Table 1 shall take precedence (above the total rated thermal input capacity
threshold) for the decision about the inclusion in the EU ETS. That activity-spe-
cific capacity threshold only takes precedence and does not exclude the applica-
tion of another threshold expressed as total rated thermal input.

In some cases, a unit can be assigned to two different categories of activity, e.g.,
a furnace used for production of glass, which can be considered a combustion
unit (where the threshold for all combustion units is expressed as total rated ther-
mal input) or a unit dedicated to the activity “manufacture of glass” (where the
threshold is _not_ expressed as total rated thermal input but as daily tonnage). In
such a case:

1. If both thresholds are exceeded in the installation, then the threshold not ex-
    pressed as total rated thermal input takes precedence over the other, and the
    installation is included in the EU ETS as performing the activity corresponding
    to that threshold (i.e. as performing “manufacture of glass” in the example
    mentioned above). The activity under which the installation is included in the
    EU ETS may be relevant for different reasons:

 (^) regarding the information to be submitted to open the operator holding ac-
count;
 regarding the content of the GHG emissions permit;
 regarding the determination of the possibility of exclusion as small emitter
(see section 4.5.2).

2. If only one of the thresholds is exceeded in the installation (e.g. the 20 MW
    total rated thermal input threshold), the installation is included in the EU ETS
    as performing the related activity (in this example as performing the activity
    “combustion of fuels”).
3. If none of the thresholds are exceeded in the installation, then the installation
    is not included in the EU ETS.

**Example:** An installation producing ceramic products operates 3 units: two ce-
ramics kilns and one CHP plant.

If the ceramics installation exceeds the threshold of 75 tonnes per day, the instal-
lation is to be included in the EU ETS. In the GHG emissions permit, the Annex I
activity "Manufacture of ceramic products" must be listed. Regardless of the total
rated thermal input of the CHP plant, this unit must also be included in the GHG
emissions permit (and/or in the monitoring plan), following clause 5 of Annex I^25.
A special situation occurs if the CHP plant alone exceeds the 20 MW threshold
for the rated thermal input. In such case, the Annex I activity "Combustion of fuels"
should also be listed in the GHG emissions permit.

If the ceramics installation does not exceed the threshold of 75 tonnes per day,
the assessment must continue to confirm if the activity “combustion of fuels” is
carried out at that installation. If it exceeds 20 MW, this installation is included in
the EU ETS. The activity listed in the GHG emissions permit is then “Combustion
of fuels”.

(^25) “ _When the capacity threshold of any activity in this Annex is found to be exceeded in an installation,
all units in which fuels are combusted, other than units for the incineration of hazardous or municipal
waste, shall be included in the greenhouse gas emission permit._ ”


```
3.2.2 Specific activities with capacity threshold expressed as to-
tal rated thermal input exceeding 20 MW
```
There are four activities (besides “Combustion of fuels”) listed in Annex I of which
the specific activity is combined with a capacity threshold expressed as "where
combustion units with a total rated thermal input exceeding 20 MW are operated"
(see Table 2).

These activities could have been included in Annex I as the “combustion of fuels”
activity only since the broad combustion definition would be sufficient for their
inclusion. However, these activities (e.g. ferrous and non-ferrous metals pro-
cessing) can also give rise to process emissions (e.g. from reduction agents,
graphite electrodes etc.), which would not be included in the EU ETS when these
activities would only fall under the “combustion of fuels” activity alone^26. The sep-
arate listing of these activities in Annex I together with the 20 MW capacity thresh-
old makes it clear that all emissions stemming from the respective activity are
included in the EU ETS, not only those relating to combustion.

_Table 2: Specific activities in Annex I combined with a capacity threshold expressed
as ”where combustion units with a total rated thermal input exceeding
20 MW are operated”, applicable from 1 January 2024_

```
Activities
Refining of oil
Production or processing of ferrous metals (including ferro-alloys). Processing includes,
inter alia, rolling mills, re-heaters, annealing furnaces, smitheries, foundries, coating and
pickling
Production of secondary aluminium
Production or processing of non-ferrous metals, including production of alloys, refining,
foundry casting, etc.
```
Another issue arising from these “pseudo-combustion” activities is the aggrega-
tion of units belonging to separate activities. As an example, we use a foundry
which produces parts from cast iron (using combustion units of 15 MW installed
capacity) and from brass (again 15 MW installed). Here the two activities “pro-
duction or processing of ferrous metals” and “production or processing of non-
ferrous metals” are carried out, but each stays below the individual capacity
threshold. However, in this example the “precedence clause” (clause 4 of An-
nex I) does not apply, since both activities have capacity thresholds expressed
as total rated thermal input. Thus, all units involved in the two activities must be
considered units for the activity “combustion of fuels”, and all the capacities
should be added together. This gives a rated thermal input of 30 MW, and the
installation is included in the EU ETS with the activity “combustion of fuels”.

(^26) As mentioned in the last paragraph of section 3.1, some process emissions can be part of the
combustion activity itself, limited to process emissions from flue-gas scrubbing.
**_Activities which can
be treated like
combustion
Example: Metals
processing_**


```
Note that the review of the EU ETS Directive in 2023 resulted in a rule which
allows installations falling below the 20 MW threshold to remain in the EU ETS
for some years. Details are given in section 3.5.
```
## 3.3 Activity definitions applicable from

```
As a consequence of the amendments^27 made to the EU ETS Directive in 2023,
competent authorities will have to revise the list of installations covered in their
Member States from 1 January 2024. There may be cases where additional in-
stallations will fall under the EU ETS, or where installations do not fall under the
EU ETS anymore. The following factors need to be taken into account:
 Installations that carry out activities which have not been included before may
have to be included (see below – in particular regarding production of iron other
than pig iron, alumina, refining of non-mineral oil);
 For some activities, the threshold for inclusion has changed (also discussed
below), which may lead to both inclusions or exclusions of installations;
 Installations, which carry out Annex I activities, may have to be included even
though they do not emit greenhouse gases (see section 2.3.4), or even though
they have dropped below the 20 MW thermal input threshold (see section 3.5);
 The coverage of installations for the incineration of municipal waste for the
purpose of monitoring and reporting as discussed in chapter 6 will lead to cov-
erage of additional installations.
Note : From 1 January 2026, the exclusion of units using exclusively biomass in
the aggregation clause has been removed from the Directive. Instead, a new cri-
terion taking into account the sustainability and GHG savings criteria of the RED
II (Renewable Energy Directive) has been introduced (see section 7.1). This will
lead to further updates of the installation list, to be made for the NIMs submission
in September 2024.
```
```
A complete overview of Annex I changes is given in the Annex of this document.
In connection with the amendment which allows installations without direct GHG
emissions to be covered by the EU ETS (see section 2.3.4), the consequences
of the changes are summarised as follows:
 In the refining sector, t wo changes apply:
 The activity is not limited anymore to the refining of mineral oils^28.
 As this may also concern relatively small installations, a new threshold of
20 MW for the rated thermal input has been added.
 In the iron and steel sector, “iron production” is not limited anymore to “pig
iron”. Therefore, production routes leading to other forms of iron, in particular
sponge iron (also called DRI (Direct Reduced Iron) or HBI (Hot briquetted Iron))
are covered. This enables inclusion (with free allocation) of steel production
routes using hydrogen or even electrolytic iron reduction processes.
```
(^27) Reference given in footnote 2.
(^28) The word “mineral” was deleted from “mineral oil refining” to enable the equal treatment of synthetic
fuels and petroleum refining. The definition should be understood as refining of oil for purposes not
related to the production of edible products. Refining of oil for edible purposes will continue to be
covered by the activity ‘combustion of fuels’, where relevant.
**_New rule when
falling below the
threshold
New: activity
definitions
Detailed changes
and thresholds_**


 Alumina (i.e. aluminium oxide) production is included. There is no production
or thermal input threshold for this activity^29.

 For gypsum and plaster board, instead of the 20 MW threshold, a new thresh-
old is given as production capacity of calcined gypsum or dried secondary gyp-
sum exceeding a total of 20 tonnes per day.

 For carbon black, instead of the 20 MW threshold, a production level of 50
tonnes per day is used for defining the threshold.

 Hydrogen & synthesis gas is affected by two changes:

```
 The limitation to the production processes “reforming or partial oxidation”
has been removed. Together with the removal of the need for GHG emis-
sions in the installation itself (section 2.3.4) this means that all kinds of elec-
trolysis processes will be included.
```
 (^) The threshold has been reduced from 25 to 5 tonnes production per day.
As a result, more installations are expected to be included in the EU ETS.
 Regarding CO 2 transport for the purpose of geological storage of CO 2 , the lim-
itation to transport in pipelines has been removed. However, the Commission
is in the process of developing the relevant legal framework^30 for this topic.

## 3.4 Various interpretation issues.............................................

## 3.4.1 What is “rated thermal input”

Thermal input in the context of the GHG-emitting processes means all input in
the form of fuels. Thus, if a furnace can use both, electrical heating or heating by
combustion of fuels, only the fuel-related input is used for the calculation. Where
various proportions of heat input can be used, the maximum fuel related input is
assumed.

The maximum rated thermal input is normally specified by the manufacturer and
is displayed on the technical device with the consent of an inspection body.
Where different fuels or fuel mixes can be used, leading to different maximum
thermal inputs, the highest possible thermal input should be used.

When no information from the manufacturer is available, the operator of the in-
stallation must provide to the competent authority an estimate based on best
available information (for example maximum fuel throughput achieved in 24 hours
during the last calendar year). As in most cases the exhaust gas has a tempera-
ture above 100°C, and in line with monitoring requirements defined by the MRR,
net calorific values (NCV^31 ) are considered most appropriate for determination of
the thermal input.

Although a fully harmonised approach should be the aim for the EU ETS, it is
recognised that in some Member States gross calorific values (GCV) are used

(^29) Notably, Annex I to the EU ETS Directive lists not only CO 2 but also perfluorocarbon (PFC) emis-
sions for the activity. In Alumina production processes, usually no PFC emission occur. These will
therefore not be relevant in practice. It is suggested that operators and CAs explicitly agree upon
this fact in the GHG permit and/or monitoring plan to provide for legal certainty.
(^30) At the time of publishing this guidance document.
(^31) Also known as “lower heating value”


```
for specifying nameplate capacity. For practical and simplicity reasons only, the
use of GCV in these Member States is considered acceptable.
```
```
Where fuels are used as reducing agents, e.g. in the production or processing of
metals^ or alloys, the heat input of these fuels is also to be taken into account
when calculating the rated thermal input as if they were fuels.
```
```
The rated thermal input may be reduced by operators compared to the original
unit's design by technical means.^32 Such reduction of the rated thermal input may
be accepted by the competent authority in the determination of the installation's
total capacity provided that the change is permanent and cannot be reversed
without major technical intervention or without consent of the competent author-
ity, and the existence of those restrictions and their permanent nature are in fact
verifiable by the competent authority.
```
## 3.4.2 Interpretation of “production or processing” of metals

```
In order to distinguish the Annex I activities “Production of iron or steel (primary
or secondary fusion) including continuous casting” and “Production or processing
of ferrous metals”, it is useful to look at the production processes:
 “Production of iron and steel including continuous casting” ends at iron or steel
in primary forms (slabs, ingots etc.), and it relates to the product benchmarks
“hot metal”, “EAF carbon steel” or “EAF high alloy steel”.
 Production or processing of ferrous metals includes activities using these pri-
mary forms of iron or steel, for performing processes using units such as “ roll-
ing mills, re-heaters, annealing furnaces, smitheries, foundries, coating and
pickling ”, relating to product benchmark “iron casting” or heat benchmark or
fuel benchmark sub-installations.
Similarly, a distinction is possible for the aluminium-related activities:
 “Production of primary aluminium”: involving electrolysis processes, product
benchmark “aluminium”, products in primary forms (ingots, slabs);
 “Production of secondary aluminium”: Production of aluminium in primary
forms from aluminium scrap without electrolysis, no product benchmark appli-
cable;
 “Production or processing of non-ferrous metals” covers all other production or
processing of non-ferrous metals, including production of ferro-alloys.
```
(^32) Case C-575/20, Apollo Tyres (Hungary)
**_Technical reduction
of rated thermal
input_**


## 3.4.3 Waste incineration and co-incineration

The first activity in Annex I is defined as

```
“Combustion of fuels in installations with a total rated thermal input ex-
ceeding 20 MW (except in installations for the incineration of hazardous
or municipal waste)
From 1 January 2024, combustion of fuels in installations for the incin-
eration of municipal waste with a total rated thermal input exceeding 20
MW, for the purposes of Articles 14 and 15.”^33
```
Installations for the _incineration_ of municipal waste or hazardous waste are thus
excluded by Annex I to the EU ETS Directive (see chapter 6 for the partial inclu-
sion of installations for the incineration of _municipal waste_ ). The competent au-
thority determines whether a particular installation falls into one of these catego-
ries taking into account the relevant definitions in the IED. Installations falling un-
der the IED have a permit under that Directive, which should clearly state the
status of the waste incineration or waste co-incineration units. The IED in force
at the time of publication of this guidance defines a “waste incineration plant” as
a stationary or mobile technical unit and equipment

```
“dedicated to the thermal treatment of wastes with or without recovery of
the combustion heat generated, through the incineration by oxidation of
waste as well as other thermal treatment processes, such as pyrolysis,
gasification or plasma process, if the substances resulting from the treat-
ment are subsequently incinerated.”
```
If an installation is found by the competent authority to fall under this definition,
and if the waste incinerated falls predominantly under the category “municipal” or
“hazardous” (according to the European Waste List^34 ), then it is not subject to the
EU ETS Directive in respect of any incineration that takes place at that installa-
tion, **except for cases discussed in chapter 6**.

_A waste co-incineration plant is defined in the IED as a plant_

```
“whose main purpose is the generation of energy or production of mate-
rial products and which uses wastes as a regular or additional fuel or in
which waste is thermally treated for the purpose of disposal through the
incineration by oxidation of waste as well as other thermal treatment pro-
cesses, such as pyrolysis, gasification or plasma process, if the sub-
stances resulting from the treatment are subsequently incinerated.”
```
If the status of individual technical units cannot be derived unambiguously from
the IED permit, the following considerations may serve as guidance: Units burn-
ing waste, which are situated at sites with industrial production^35 (within the same
installation or outsourced to a separate operator), are usually to be classified as
_co-incineration_ , because their main purpose is the supply of energy to the pro-
duction of industry goods. This fact is often supported by the substitutability of the

(^33) The second part of the activity description will be discussed in chapter 6.
(^34) Commission Decision of 3 May 2000 replacing Decision 94/3/EC establishing a list of wastes pur-
suant to Article 1(a) of Council Directive 75/442/EEC on waste and Council Decision 94/904/EC
establishing a list of hazardous waste pursuant to Article 1(4) of Council Directive 91/689/EEC on
hazardous waste (2000/532/EC). Consolidated version:
**[http://data.europa.eu/eli/dec/2000/532/2015-06-](http://data.europa.eu/eli/dec/2000/532/2015-06-) 01**
(^35) Including both, activities listed in Annex I, and other industrial activities.
**_Exclusion of
hazardous and
municipal waste
incinerators
Waste co-
incineration to be
included in the
EU ETS_**


```
waste unit by units fired with conventional fossil fuels. As evidence for such sub-
stitutability may serve inter alia :
```
```
 The waste unit is operated in technical connection with other boilers or CHP
units, e.g. by feeding into a steam grid;
 The waste unit has replaced a previous boiler or CHP plant, which was fired
by conventional fuels;
 The existence of reserve units which use conventional fuels;
 A significant amount of the thermal input in the waste unit is provided by con-
ventional fuels or other waste than hazardous or municipal waste.
Wherever the competent authority classifies the waste unit as co-incineration or
as using other wastes than municipal and hazardous wastes, it is to be included
in the EU ETS.
```
## 3.4.4 Waste (co-)incineration units

```
Section 3.4.3 has dealt with whole installations for the incineration or co- incinera-
tion of wastes (or installations where only the activity “combustion of fuels” is car-
ried out). Beyond this case, clause 5 of Annex I mandates: “ When the capacity
threshold of any activity in this Annex is found to be exceeded in an installation,
all units in which fuels are combusted, other than units for the incineration of haz-
ardous or municipal waste, shall be included in the greenhouse gas emission
permit. ” In contrast to what has been explained in section 3.4.3, clause 5 of Annex
I mentions “units” for the incineration of hazardous or municipal waste. As this
clause deals primarily with the inclusion of associated activities, a suitable deci-
sion making for this case can be outlined as follows:
```
1. Is the unit under consideration, according to the competent authority’s assess-
    ment, dedicated to the _incineration_ (not co-incineration) of hazardous or mu-
    nicipal waste? If yes, the unit is to be exempted. If not, continue to point 2.
2. Is this unit an integral part of another activity listed in Annex I of the EU ETS
    Directive (e.g. of oil refining or a bulk organic chemical production^36 )? If yes,
    this unit is included in the EU ETS as part of that activity. If not, continue to
    point 3.
3. This unit is exempted from the EU ETS^37.

## 3.4.5 Units using exclusively biomass............................................

```
Until the end of 2025, units exclusively using biomass^38 are excluded from the
aggregation clause. However, where an installation also operates fossil fuelled
```
(^36) Subject to the judgement of the competent authority, a unit may be regarded as “integral part” of
the activity, if the production is technically impossible or not allowed under the relevant permit (IED
or other), when the unit under consideration is shut down.
(^37) The coverage of installations for the incineration of municipal waste under the EU ETS for monitor-
ing and reporting purposes as discussed in chapter 6 is independent of the exclusion of waste
_incineration_ units from the full participation in the EU ETS under the first sentence of the first activity
in Annex I, or of the inclusion as a waste _co-incineration_ unit within another activity of Annex I.
(^38) Note that for this clause, for practical purposes, the sustainability and GHG savings criteria of the
RED II were not applied in most Member States.
**_Units using
exclusively biomass_**


combustion units (with an aggregated capacity above 20 MWth), the biomass
units are included in the EU ETS.

When doing the aggregation to decide upon the inclusion of an installation in the
EU ETS, units which use fossil fuels only for start-up or shutdown may be ex-
cluded as well. However, this exclusion is only relevant for the decision of includ-
ing the installation in the EU ETS. As soon as the whole installation is in the EU
ETS, these units are included as well. Consequently, the fossil emissions from
the start-up burners are to be monitored and reported.

Start-up burners are separate ignition/pilot burners used during start-up of a com-
bustion unit, which are necessary for avoiding unstable combustion situations by
ensuring re-ignition of the fuel, and for controlled shutdown of the combustion
unit. Usually this should be clearly stated by the manufacturer of that unit and be
laid down in the operating and/or GHG emissions permit. The existence of a ded-
icated start-up burner may serve as indicator of the fact that otherwise exclusively
biomass is used in this unit.

If no detailed information is available on the use of fossil fuels, it can be assumed
that fossil fuels are used only for start-up if the share of energy input derived from
fossil fuels of the units does not exceed 1 % of the total annual energy input.

Refer to section 7.1 for the new rules on biomass to be applied to determination
of the EU ETS scope from 2026 onwards.

```
3.5 Options for installations falling below the 20 MW
threshold
```
The 2023 amendments of the EU ETS Directive improve the incentive to reduce
emissions by allowing to keep some free allocation^39 : If an installation is included
in the EU ETS due to one or more activities with the threshold expressed as
20 MW rated thermal input (see section 3.2.2) and changes its production pro-
cesses to reduce its emissions, and thereby reduces its rated thermal input below
the threshold, e.g. by replacing fuel input by electricity, it will not be automatically
excluded from the EU ETS anymore. Instead, the operator may request the com-
petent authority to keep the installation in the EU ETS for the remainder of the
current 5-year allocation period, and optionally for the following allocation pe-
riod^40. Remaining in the EU ETS will mean the continued obligation to perform
monitoring, reporting and verification of emissions, and respective surrender of
allowances, i.e. continued compliance with the GHG emissions permit.

(^39) Article 2(1), starting from the 2nd sentence: “ _Where an installation that is included in the scope of
the EU ETS due to the operation of combustion units with a total rated thermal input exceeding 20
MW changes its production processes to reduce its greenhouse gas emissions and no longer meets
that threshold, the Member State in which that installation is situated shall provide the operator with
the options to remain in the scope of the EU ETS until the end of the current and next five year
period referred to in Article 11(1), second subparagraph, following the change to its production pro-
cess. The operator of that installation may decide that the installation remains in the scope of the
EU ETS until the end of that current five-year period only or also in the next five-year period, follow-
ing the change to its production process. The Member State concerned shall notify to the Commis-
sion changes compared to the list submitted to the Commission pursuant to Article 11(1)._ ”
(^40) The Directive does not exclude the possibility for an operator to change their mind and to request
to be excluded due to the reduced rated thermal input. This may happen e.g. where an installation
changes ownership. However, the exclusion from the EU ETS thereafter is final.
**_Start-up burners
New: remain in the
EU ETS after
decarbonisation or
capacity reduction_**


## 4 THE AGGREGATION RULE

## 4.1 Capacity

```
The EU ETS Directive does not define ‘capacity’. The “Community-wide fully har-
monised Implementing Measures” pursuant to Article 10a(1) (“CIMs”^41 ) for the
3 rd phase of the EU ETS (2013-2020) contained a definition of “capacity”, but this
was removed in the free allocation rules for the 4th phase^42 (2021-2030) as it was
in some cases difficult to apply. Furthermore, it was linked to the concept of “sub-
installations” and was therefore not suitable for issues of Annex I of the EU ETS
Directive.
Since then, capacity is not defined in the legal acts related to the EU ETS. Nev-
ertheless, the term has been consistently implemented with the following mean-
ing since the beginning of the EU ETS, consistent with established practice under
the IED:
“The only technically coherent meaning of “capacity” is, therefore, the ca-
pacity at which the installation is capable of being operated. That is to say,
it is the rated capacity of the installation to operate 24 hours a day, provided
that the equipment is capable of being operated in that way.”^43
```
## 4.2 The aggregation clause

```
The aggregation clause in Annex I of the EU ETS Directive uses the same overall
approach as the IED. The clause is included in the second sentence of clause 2
of Annex I and states:
"Where several activities falling under the same category are carried out in
the same installation, the capacities of such activities are added together.”
The clause should lead to equal treatment of installations of the same capacity,
even if one carries out this activity in several smaller production units and the
other in one bigger unit. In order to support the implementation of the broad com-
bustion definition, the EU ETS Directive adds further rules with clause 3 of Annex
I:
“When the total rated thermal input of an installation is calculated in order to
decide upon its inclusion in the EU ETS, the rated thermal inputs of all tech-
nical units which are part of it, in which fuels are combusted within the instal-
lation, are added together. These units could include all types of boilers,
burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ovens,
dryers, engines, fuel cells, chemical looping combustion units, flares, and
thermal or catalytic post-combustion units. Units with a rated thermal input
under 3 MW and units which use exclusively biomass shall not be taken into
account for the purposes of this calculation. ‘Units using exclusively bio-
mass’ includes units which use fossil fuels only during start-up or shut-down
of the unit.”
```
(^41) Commission Decision 2011/278/EU (not in force anymore).
(^42) Commission Delegated Regulation (EU) 2019/331
(^43) COM (2003) 354, cited in a Commission non-paper on the scope of the EU ETS, September 2003.
**_No specific capacity
definition
Adding up of
smaller units_**


The purpose of this clause (which applies only until 31 December 2025)^44 is mul-
tifold:

 The aggregation clause is repeated with special clarification for all activities,
which have a capacity threshold expressed as total rated thermal input. All
units in which fuels are combusted (i.e. without differentiation between more
specific activities), are to be aggregated. See section 3.2.

 It clarifies (together with the definition of installation (Article 3(e)) the hierarchy
of terms: A site is the biggest item, which can consist of several installations.
An installation can consist of several units.

 The non-exhaustive list gives further insight in what can be such units: boilers,
turbines, kilns, flares, etc. (see section 4.4)

 An exemption (de-minimis rule) to the aggregation clause is included: Units
with a rated thermal input below 3MW are excluded, as well as units using
exclusively biomass (see section 3.4.5). This intends to reduce administrative
burden by excluding installations that would fall under the scope of the EU ETS
only because of many small emission sources which are hard to monitor.

Note: Article 27 does not provide a basis for leaving out biomass units and the
3 MW de-minimis units (see section 4.5.2). However, the term “unit” is relevant
for the exclusion of reserve or backup units under Article 27a(3) (see section
4.5.3).

## 4.3 Reserve and backup units and parallel capacities

It is common industry practice that reserve or backup units exist at installations.
Such units are used to replace the main units during maintenance or other shut-
downs, or to cover heat demands during peak load situations. They can, thus, be
used in parallel to the main units but are not in operation during a major part of
the year. A similar situation occurs where two intermittent kilns take turns for pro-
duction batches.

This situation, where parts of installations _usually_ do not operate at the same
time, is _per se_ not a reason for not adding their capacities together. An exception
can only be granted if the operator can give evidence to the satisfaction of the
competent authority, that there are physical or legal restrictions which effectively
prevent the simultaneous operation of these units^45. These restrictions must be
clearly identified and be mandated by the competent authority in an enforceable
way (e.g. by conditions in the GHG emissions permit or IED permit) and be sub-
ject to regular inspection^46 b y the competent authority. In such cases, the bigger
of the two capacities shall be assumed to determine the inclusion in the EU ETS.

## 4.4 Definition of “Unit”

(^44) For the new approach on biomass installations from 1 January 2026 onwards, consult section 7.1.
(^45) See more details on restricting the thermal input of installations given in section 3.4.1, which espe-
cially also apply to limiting the possibility to run units in parallel.
(^46) This can be done either by third party verifiers, who are accredited for this type of inspection, or by
the competent authority itself.
**_The meaning of
clause 3 of Annex I
Treatment of reserve
and back-up units
Combustion units_**


```
The term “unit” is defined only indirectly in the EU ETS Directive, by a non-ex-
haustive list in clause 3 of Annex I:
```
```
“These units could include all types of boilers, burners, turbines, heaters,
furnaces, incinerators, calciners, kilns, ovens, dryers, engines, fuel cells,
chemical looping combustion units, flares, and thermal or catalytic post-com-
bustion units.”
Room for interpretation could exist where one unit contained in this list, e.g. a
kiln, has sub-units also contained in the list, e.g. several burners which together
supply the heat necessary for a certain production process. In such cases, the
overarching unit (in this example the kiln) should be considered the “unit” when
applying the aggregation clause or de-minimis exemption. There are two reasons
for this:
```
```
 A kiln with 12 MW thermal input could be equipped with 2 × 6 MW burners, but
also with 3 × 4 MW, 4 × 3 MW or 6 × 2 MW, and several more options. In order
to treat all comparable kilns equal, the burner cannot be considered the appro-
priate “unit”.
 The Directive stated (before the 2023 review, but still applicable until 31 De-
cember 2025) “‘Units using exclusively biomass’ includes units which use fossil
fuels only during start-up or shut-down of the unit.” Thus, the Directive acknowl-
edged with its own example that a unit is usually the more complex item and
can contain several independent burners (the fossil start-up fuel usually re-
quires a separate “start-up burner”).
From the above, it can be concluded that “burner” is in the list of units for com-
pleteness reasons in order to demonstrate the broadness of the definition for the
rare case of stand-alone burners. Otherwise, a burner is usually considered to be
a sub-part of a bigger unit, which as a whole serves a particular purpose, such
as kilns, boilers or dryers, chemical reactors, distillation columns, CHP plants,
etc.
The exclusion of de-minimis units is only relevant for the decision of including the
installation in the ETS. As soon as the whole installation is in the ETS, these units
are included as well. However, Article 27a(3) provides a possibility for Member
States to allow the exclusion of reserve or backup units (see section 4.5.3).
```
(^)
**_Equal treatment
Unit = equipment
serving a particular
purpose_**


## 4.5 Step-by-step approach (until end of 2025)

**Note 1** : This guidance focuses on the decision whether an installation should be
included in the EU ETS, as if the installation in question were a potential new
entrant. However, it seems logical to apply the same criteria also for the question
if an installation currently under the EU ETS should be excluded from the EU
ETS. In practice this question will arise in case of permit or monitoring plan up-
dates due to technical changes to the installation or upon application by an oper-
ator to re-evaluate the installation’s situation. In such case, the competent au-
thority can follow the same step-by-step approach laid down in this section, taking
into account the latest technical circumstances of the installation.

**Note 2** : Excluding installations under Articles 27 or 27a is only possible for whole
allocation periods (2021 to 2025, 2026 to 2030, etc.). Re-introduction into the EU
ETS is due the year after the relevant threshold is exceeded. The exclusion based
on the 95% biomass criterion from 2026 (see chapter 7) applies to a whole 5-year
period, and neither re-introduction nor an additional exclusion during the 5-year
period is foreseen. All other criteria for inclusion/exclusion (in particular the
thresholds given in Annex I) apply to the actual situation of an installation, i.e.
changes throughout the allocation period are possible.

## 4.5.1 Defining installations which fall under the scope of EU ETS

Summarizing the previous chapters, the following decision tree can be followed
when determining if an installation falls under the scope of the EU ETS (valid only
until the end of 2025)^47 :

1. Apply the broadest possible installation boundaries (section 2).
2. Are activities of Annex I other than "combustion of fuels" carried out at the
    installation? ( section 3.2).
       a. YES: Is the activity-specific capacity threshold (if any) exceeded?
          i. YES:
             1. Include all directly related activities (especially combustion units
                including their waste gas treatment);
             2. Check for units for the incineration of hazardous or municipal
                waste to be excluded following section 3.4.4 and for installa-
                tions/units for the incineration of municipal waste for the inclusion
                for monitoring and reporting from 2024 in accordance with chap-
                ter 6;
             3. _Proceed to point 9_ (section 4.5.2).
ii. NO: _Carry on with point 3_ (assessing combustion units).
       b. NO: _Carry on with point 3_ (assessing combustion units).
3. List all combustion units of the installation.
4. Exclude units for the incineration of hazardous or municipal waste (see sec-
    tions 3.4.3 and 3.4.4) from the list derived under point 3, but leave units for
    waste co-incineration on the list. From 2024, if applicable, include units for the

(^47) For the situation from 1 January 2026 see section 7.2.
**_Decision tree_**


```
incineration of municipal waste, in accordance with sections 6.2 and 6.3, for
the purpose of monitoring and reporting of emissions only.
```
5. Exclude biomass units from the list^48 ,
6. Exclude units with a rated thermal input of less than 3 MWth from the list.
7. Add up all rated thermal inputs of the units remaining on the list of combustion
    units.
8. Does the sum determined under point 7 exceed 20 MWth?

```
a. YES: Installation is under the EU ETS. Add again all units excluded under
point 5 and 6. From 2024, distinguish cases of inclusion of installations for
the incineration of municipal waste for monitoring and reporting and cases
of full inclusion (see sections 6.2 and 6.3). Proceed to point 9 (section
4.5.2).
b. NO: Installation stays out of the EU ETS. Exit decision tree.
```
```
4.5.2 Identifying installations which fall under the scope of EU
ETS, but could be excluded as "small installations" pursu-
ant to Article 27
```
9. Does the Member State concerned intend to allow an exclusion of small in-
    stallations pursuant to Article 27?
       a. NO: Installation is included in the EU ETS or may be excluded under Article
          27a. _Proceed to point 11_.
       b. YES: _Proceed to point 10_.
10. Is at least one of the following criteria met?

```
i. Installation is a hospital (see section 5.5),
ii. Installation carries out Annex I activity other than “combustion of
fuels”, and annual GHG emissions potentially^49 covered by the EU
ETS in each of the three years before notification of the “NIMs list”^50
have been less than 25 000 tonnes CO 2 (eq)51,^52 ,
iii. Installation carries out Annex I activity “combustion of fuels”, and the
aggregate capacity (including the capacity of units mentioned under
points 5 and 6) is less than 35 MWth^53 , and annual GHG emissions
potentially^49 covered by the EU ETS in each of the three years before
notification of the “NIMs list” have been less than 25 000 tonnes
CO 2 (eq)^51.
a. YES: Installation may be excluded from EU ETS, if equivalent measures
and monitoring and reporting arrangements in accordance with Article 14
```
(^48) Units with start-up burners are also excluded, see section 3.4.5 for definition.
(^49) This is to indicate emissions of installations already excluded from the EU ETS before.
(^50) The list of installations and free allocation levels contained in the “NIMs” (National Implementation
Measures) pursuant to Article 11(1). Deadline for this notification by Member States is 30 Septem-
ber 2024 and every 5 years thereafter. Therefore, the three years for assessing the given threshold
are 2021, 2022 and 2023, and the respective years every five years thereafter.
(^51) In order to also give the possibility to exclude small installations that only started up their Annex I
activity in one of the three relevant years, only the years during which the installation was already
operating are taken into account.
(^52) Emissions from biomass are to be excluded in this calculation.
(^53) When assessing the 35 MW and 25 000 tonnes CO 2 (eq) threshold for possible exclusion from the
EU ETS, also the fuel use (and CO 2 emissions) from units with a rated thermal input of less than
3 MWth are included. Exempting the latter is only relevant when assessing whether an installation
falls under the scope of the EU ETS.


```
are put in place and if installation is notified at the latest to the Commission
by the relevant deadline for NIMs notification^50.
b. NO: Installation stays in the EU ETS or may be excluded under Article 27a.
```
```
4.5.3 Identifying installations or units which could be excluded
pursuant to Article 27a
```
11. Does the Member State concerned intend to allow an exclusion of small in-
    stallations pursuant to Article 27a(1)^54?
       a. NO: Installation is included in the EU ETS. _Proceed to point 13_.
       b. YES: _Proceed to point 12_.
12. Did the installation emit less than 2 500 tonnes CO 2 per year^55 in each of the
    three years before notification of the “NIMs list”?
       a. YES: _Installation may be excluded from the EU ETS_.
       b. NO: _Continue to point 13._
13. Does the Member State intend to allow exclusion of reserve and backup units
    pursuant to Article 27a(3)^56?
       a. NO: The installation as a whole remains in the EU ETS. _Exit decision tree._
       b. YES: _Continue to point 14._
14. Does the installation have reserve or backup units which did not operate for
    more than 300 hours in each of the three years before notification of the “NIMs
    list”?
       a. YES: Such units may be excluded from the EU ETS.
       b. NO: The installation as a whole remains in the EU ETS. _Exit decision tree._

```
4.5.4 Examples
```
**Example 1** : An installation operating:

 3 units with 4 MWth each,

 1 unit (boiler) of 9 MWth, and

 8 units of 2 MWth each.

This installation is included in the EU ETS (3 × 4 + 9 = 21 MWth). As all units ex-
cluded under point 5 and 6 have to be added up again, the installation is in-
cluded with its full capacity of 12 + 9 + 8 × 2 = 37 MWth, and cannot be excluded
under Article 27 due to its capacity of 37 MWth.

If the 9 MWth unit were used for the incineration of hazardous waste, the whole
installation would fall out of the scope of ETS, because only the 3 units with 4

(^54) Article 27a(1): “ _Member States may exclude from the EU ETS installations that have reported to
the competent authority of the Member State concerned emissions of less than 2 500 tonnes of
carbon dioxide equivalent, disregarding emissions from biomass, in each of the three years preced-
ing the notification [of the NIMs]”_ under conditions given in that Article.
(^55) Emissions from biomass are to be excluded in this calculation.
(^56) “ _3. Member States may also exclude from the EU ETS reserve or backup units which did not operate
more than 300 hours per year in each of the three years preceding the notification under point (a)
of paragraph 1, under the same conditions as set out in paragraphs 1 and 2._ ”


MWth each would remain to be aggregated. No decision regarding possible ex-
clusion under Article 27 would be necessary in this case.

**Example 2** : An installation operates a boiler of 28 MWth fired with natural gas,
and a biomass-based boiler of 12 MWth. While the biomass boiler is excluded for
the aggregation, it is included for the purpose of checking the capacity threshold
for possible exclusion. Since Article 27 does not refer to the same de-minimis
rules as clause 3 of Annex I, all combustion units at the installation are to be
considered. Thus, the relevant capacity is 28 + 12 = 40 MWth, i.e. too high for a
possible exclusion. (Note that this example would not be valid from 2026 due to
the changes in the biomass criterion).

**Example 3** : A ceramics plant operates 2 tunnel kilns with an aggregate produc-
tion capacity exceeding 75 tonnes per day and a boiler feeding steam to a dryer.
In this situation, the installation can be considered to carry out only the activity
“production of ceramics”. For possible exclusion under Article 27, only the emis-
sions threshold of 25 000 tonnes CO 2 (eq) per year is relevant.

**Note:** Member States are required to notify a list of _all_ installations under the
scope of EU ETS in their NIMs list^50 (identifying also small installations to be
possibly excluded pursuant to Article 27 or 27a).


## 5 OTHER TOPICS

**5.1 What are “bulk organic chemicals”?**

Bulk organic chemicals are chemicals which are usually produced at large scale
and sold as commodities for the purpose of producing other chemicals. Produc-
tion processes under this activity are “cracking, reforming, partial or full oxidation”
and “similar processes” (i.e. processes where severe thermal and/or oxidising
conditions prevail). A production process can be assumed to be a “similar pro-
cess” falling under this activity, if CO 2 emissions are not only result of separate
combustion of fuels, but where part of the emitted carbon stems from the feed-
stock. Other chemical production processes should be assessed regarding inclu-
sion in the EU ETS under the aspect of combustion activities.

There is no exhaustive list of chemicals available that would satisfy the definition
of the activity in Annex I of the EU ETS Directive. However, Table 3 can serve as
a starting point. The fact that the chemicals produced are not listed in Table 3
does not mean that the installation considered should not be included in the EU
ETS. A consideration on a case-by-case basis will therefore be required.

In line with section 4.2, where more than one organic chemical is produced, the
aggregation clause requires all production volumes to be added. Also, in line with
section 3.2, the production of chemicals which have not been identified as being
bulk organic chemicals and which are not individually listed in Annex I (i.e. chem-
icals such as ammonia, carbon black, etc.) must be assessed for inclusion in the
EU ETS under the assumption that the activity “combustion of fuels” is relevant.

_Table 3: Non-exhaustive list of bulk organic chemicals_

```
Ethylene / Propylene / Butene / Butadiene and other olefins
Acetylene if not produced from calcium carbide
EDC / VCM (Vinyl chloride)
Aromatics (Benzene, Toluene, Xylenes, Styrene, Ethylbenzene, Naphthalene and oth-
ers)
Terephthalic acid / Dimethyl terephthalate
Ethylene oxide and Ethylene glycol, Propylene oxide and other epoxides
Phenol and other phenols
Acetone, Cyclohexanone and other Ketones
Acrylonitrile, Acrylic acid, Methacrylic acid
Cumene
Methanol, Ethanol (if not produced by fermentation) and higher alcohols
Formaldehyde, Acetaldehyde, Acrolein and higher aldehydes
Formic acid, acetic acids (if not from fermentation) and higher carboxylic acids
Phthalic acid, Maleic acid and their anhydrides
Acetic anhydride
Polyethylene, Polypropylene, Polystyrene, Polyvinylchloride
Polycarbonate, Polyamide, Urea derivatives, Silicones
```
```
Production process
as criterion, no
exhaustive list
available
```

**5.2 Glyoxal and glyoxylic acid**

```
A special case of Annex I is the activity “production of glyoxal and glyoxylic acid”.
These can be produced by two different routes: (1) Oxidation of ethylene glycol
in the presence of a catalyst only leads to CO 2 emissions. (2) Liquid phase oxi-
dation of acetaldehyde with nitric acid leads to emission of both CO 2 and N 2 O.
MS have to take this into consideration when identifying and permitting respective
installations.
```
**5.3 Nitric acid, adipic acid, glyoxal and glyoxalic acid**

```
For these activities, N 2 O and CO 2 emissions are to be included. This means N 2 O
emissions as covered by Section 16 of Annex IV to the MRR and all CO 2 emis-
sions arising from the production process of these chemicals and from combus-
tion activities at these installations.
```
**5.4 Production of primary and secondary aluminium**

```
In the case of primary aluminium production, CO 2 emissions can occur from fuel
combustion and anode consumption, and PFC emissions^57 can occur from anode
effects. In secondary aluminium productions CO 2 emissions from fuel consump-
tion can occur. With regards to installation boundaries, at least the following pro-
cess steps should be taken into consideration:
 Primary smelting operations (CO 2 and PFC)
 Primary aluminium casting
 Combustion of fuels for
```
 (^) Secondary remelting operations
 (^) Secondary refining operations
 (^) Rolling operations
 (^) Extrusion operations
 Casting
Alumina refining and anode production are considered part of the activity “alu-
minium production” if carried out in the same installation. If the production of an-
odes takes place in a separate installation, the activity must be included in the
EU ETS if fuels are combusted with a rated thermal input of more than 20 MW.
Alumina production is included without a threshold, both in installations for the
production of primary aluminium or as separate installation, from 2024.
For secondary aluminium production or processing see also section 3.2.2.
(^57) Gases to be taken into consideration are CF 4 and C 2 F 6.
**_N 2 O and CO 2
Aluminium
production and
processing_**


**5.5 Definition of hospital**

Hospitals can be excluded from the EU ETS under Article 27, irrespective of their
emissions or thermal capacities. Thus, a definition of hospitals should be applied
consistently by all Member States in order to prevent abuse of this exception. For
this purpose, the operator of a hospital shall provide evidence to the competent
authority that providing hospital activities is the main purpose of the installation in
question. This can be a proof from the statistical office that the installation is clas-
sified as 86.10 (NACE rev. 2).

**5.6 Flue gas desulphurisation**

Even though sometimes marketable gypsum is a by-product of flue gas desul-
phurisation, this cannot be regarded a separate activity of gypsum production as
listed under Annex I. Since waste gas scrubbing is part of the definition of com-
bustion, only one activity (“combustion of fuels”) is carried out per definition in
such case.


## 6 MUNICIPAL WASTE INCINERATION –

## APPLICABLE FROM 2024

```
According to the EU ETS Directive as amended in 2023, the first activity in Annex
I is defined as
“Combustion of fuels in installations with a total rated thermal input ex-
ceeding 20 MW (except in installations for the incineration of hazardous
or municipal waste)
From 1 January 2024, combustion of fuels in installations for the
incineration of municipal waste with a total rated thermal input ex-
ceeding 20 MW, for the purposes of Articles 14 and 15 .”
The bold part of the definition is discussed here. How it is applied together with
the first part, in particular regarding the phrase “ (except in installations for the
incineration of hazardous or municipal waste) ” is discussed in section 6.3.
```
```
It is a novel element of the Directive that an activity is included in the EU ETS
only for the obligation to perform monitoring, reporting and verification (MRV), but
without an obligation to surrender allowances. This is further emphasised by Ar-
ticle 30(7), which mandates the Commission to perform a review by July 2026 to
assess the feasibility of including municipal waste incineration (MWI) installations
in the EU ETS.
Note: As long as there is no obligation to surrender allowances for emissions
from installations for the incineration of municipal waste ( ‘ MWI installations’),
any heat delivered from such installations to other EU ETS installations shall be
considered “non-ETS heat” for the purpose of free allocation rules. The same
applies to heat delivered from other EU ETS installations to such MWI installa-
tions.
This section only discusses installations or technical units being included in the
EU ETS with this new qualifier of “MRV only”. All installations or units in which
waste is used that have already been included in the EU ETS before 2024 do not
need to be further discussed. All installations and units which have been iden-
tified as included in accordance with sections 3.4.3 and 3.4.4 remain fully
within the EU ETS.
Questions that need to be answered are:
```
```
 How can MWI installations be identified which have not yet been included in
the EU ETS, but need to carry out MRV from 1 January 2024? (Section 6.1)
 For these MWI installations, how to interpret the aggregation clause and the
“associated activities”? (Section 6.2)
 Regarding installations already included in the EU ETS, are there changes with
regard to Clause 5 of Annex I, i.e. regarding the exclusion of “units for the in-
cineration of hazardous or municipal waste”? (Section 6.3)
 How to implement the “MRV only” inclusion in the EU ETS in practical terms,
in particular for installations that consist of parts fully included in the EU ETS
and parts included for MRV only? Guidance on this issue is given in section
6.4.
```
**_Relevance from 1
January 2024_**

```
MRV only
```
```
New questions
```

```
6.1 What are installations for the incineration of municipal
waste
```
According to the premise put forward that any co-incineration is included in the
EU ETS already, the first identifying element must be that the installation under
consideration for inclusion must be a “waste incineration plant” as defined by the
Industrial Emissions Directive (IED), which regulates waste incineration, not a
“co-incineration plant”. The IED defines^58 :

```
“‘waste incineration plant^59 ’ means any stationary or mobile technical unit
and equipment dedicated to the thermal treatment of waste, with or without
recovery of the combustion heat generated, through the incineration by oxi-
dation of waste as well as other thermal treatment processes, such as py-
rolysis, gasification or plasma process, if the substances resulting from the
treatment are subsequently incinerated.”
```
The IED does not contain a definition of “municipal waste incineration plant”, as
waste incinerators in general are designed to use many waste types in a flexible
way. In Annex I of the IED, two different activities are defined:

```
5.2. Disposal or recovery of waste in waste incineration plants or in waste
co-incineration plants:
(a) for non-hazardous waste with a capacity exceeding 3 tonnes per hour;
```
```
(b) for hazardous waste with a capacity exceeding 10 tonnes per day.
```
As these thresholds are relatively low, it is highly likely that most waste incinera-
tion or co-incineration covered by the EU ETS will be covered by an IED permit.
Smaller units would be of interest for the EU ETS only if they are included due to
the aggregation clause, in which case they would usually be _co-incineration_ units,
which would be covered by the EU ETS not just for MRV, as discussed in sections
3.4.3 and 3.4.4.

The IED provides further helpful elements for the purpose of this guidance:

 Waste incinerators using only certain vegetable biomass wastes are exempted
from the waste-relevant chapter of the IED^60. Therefore, it can be concluded
that such installations or units will qualify neither as MWI nor hazardous waste
incineration installations or units. Note that municipal biomass wastes (park
and garden wastes, kitchen wastes, etc.) do not fall under this exception.

(^58) IED Article 3(40)
(^59) Note that “plant” might be both, an installation or only a “unit” in EU ETS terminology.
(^60) More precisely, point (a)(i) of Article 42(2) of the IED excludes the whole point (b) of Article 3(31)
from the scope of chapter IV of the IED (i.e. rules on waste (co-)incineration), that is:
(i) vegetable waste from agriculture and forestry;
(ii) vegetable waste from the food processing industry, if the heat generated is recovered;
(iii) fibrous vegetable waste from virgin pulp production and from production of paper from pulp,
if it is co-incinerated at the place of production and the heat generated is recovered;
(iv) cork waste;
(v) wood waste with the exception of wood waste which may contain halogenated organic com-
pounds or heavy metals as a result of treatment with wood preservatives or coating and which
includes, in particular, such wood waste originating from construction and demolition waste;
This list does not include e.g. vegetable wastes like “garden and park wastes” which again qualify
as municipal according to the European Waste List.
**_IED differentiates
only hazardous and
other waste
incineration_**


```
 Pursuant to Article 45(1)(a) of the IED, any waste incineration plant’s permit
must contain a list of all types of waste which may be treated (identified ac-
cording to the European Waste List^61 ) and information on the quantity of each
type of waste that can be used.
 Article 52(2) of the IED requires the operator to determine the mass of each
type of waste according to the European Waste List, prior to accepting the
waste. It is therefore a valid assumption that operators can provide data to the
competent authority demonstrating whether they have incinerated predomi-
nantly municipal wastes over the last years. The same applies to hazardous
wastes.
 Article 45(2) of the IED establishes additional requirements for the permit of
waste incineration plants which can use hazardous wastes. It is therefore pos-
sible to identify if units can be used for incinerating hazardous waste.
 Article 50 of the IED requires that waste incineration plants for the incineration
of certain^62 hazardous wastes are designed, equipped, built and operated in
such a way that the gas resulting from incineration is raised to a temperature
of at least 1100°C for at least 2 seconds, while for the incineration of other
wastes only a combustion gas temperature of at least 850°C needs to be en-
sured. Therefore, it can be assumed that if a waste incineration unit has an
IED permit requiring a combustion gas temperature of at least 1100°C and
fulfils the requirements of Article 45(2) of the IED, it is a unit for hazardous
waste incineration.
```
```
The second element to be considered is the definition of “municipal waste”. The
MRR defines ‘municipal waste’ as defined in the Waste Framework Directive
(WFD)^63 , Article 3(2b):
‘municipal waste’ means:
(a) mixed waste and separately collected waste from households, including
paper and cardboard, glass, metals, plastics, bio- waste, wood, textiles,
packaging, waste electrical and electronic equipment, waste batteries
and accumulators, and bulky waste, including mattresses and furniture;
(b) mixed waste and separately collected waste from other sources, where
such waste is similar in nature and composition to waste from house-
holds;
Municipal waste does not include waste from production, agriculture, for-
estry, fishing, septic tanks and sewage network and treatment, including
sewage sludge, end-of-life vehicles or construction and demolition waste.
This definition is without prejudice to the allocation of responsibilities for
waste management between public and private actors.
```
(^61) Decision 2000/532/EC
(^62) More precisely, at least 1100°C are required only if hazardous waste with a content of more than
1 % of halogenated organic substances, expressed as chlorine, is incinerated.
(^63) Directive 2008/98/EC of the European Parliament and of The Council of 19 November 2008 on
waste and repealing certain Directives; consolidated version:
**[http://data.europa.eu/eli/dir/2008/98/2018-07-](http://data.europa.eu/eli/dir/2008/98/2018-07-) 05**
**_IED provides basis
for waste use
records
Definition of
municipal waste
European Waste List_**


The third important legislation in this area is the European Waste List^64. I t can be
used to determine what should be considered “municipal waste”. Category 20
contains “ _municipal wastes (household waste and similar commercial, industrial
and institutional wastes) including separately collected fractions_ ”. However, the
categorisation is not unique. Category 20 contains also hazardous wastes (e.g.
batteries and pesticides), while in particular packaging, which will be a significant
part of mixed municipal wastes, is in category 15, too. Municipal waste is very
heterogeneous, containing a wide mix of materials common to household-like
wastes (although fractions suitable for recycling should be largely removed be-
fore incineration takes place). In this regard, the WFD and the Waste List con-
verge.

Therefore, the competent authority should assess waste incineration installations
not yet included in the EU ETS on a case-by-case basis, using the installation’s
IED permit and its documentation of waste streams received in the past (or
planned to be used, in case of new installations) to decide whether it is an MWI
installation that needs to be included in the EU ETS for MRV obligations from
2024 onwards.

The following may be used for a step-by-step assessment:

1. If the installation or unit does not have an IED permit stating the activity “5.2
    Disposal or recovery of waste in waste incineration plants”, the installation or
    unit is probably not relevant^65.
2. As has been argued above, units which according to the IED permit are de-
    signed, equipped, built and operated for the incineration of certain types of
    hazardous waste because they fulfil the criterion of combustion gas tempera-
    ture above 1100°C can be considered units for the incineration of hazardous
    waste and can remain excluded in line with clause 5 of Annex I of the EU ETS
    Directive.
3. Based on the IED permit and the documentation of actually used waste
    streams:
    a. If only a narrow, specific range of (sorted, not mixed) waste types is used,
       it is likely that it is non-municipal waste, in particular where specific (in-
       dustrial) sources of the wastes can be identified;
    b. A broad range of wastes, or highly mixed wastes containing materials
       typical for household wastes, indicate that it may be an MWI installation
       or unit;
    c. A large percentage (in terms of energy content) of hazardous wastes (all
       waste numbers indicated by an asterisk in the European Waste List), in-
       dicates that it might be an installation or unit not exclusively used for mu-
       nicipal wastes. Fractions listed in section 20 of the European Waste List
       but marked as hazardous waste should be treated like hazardous rather
       than municipal waste in this assessment. This would be consistent with
       the fact that also for the plant design and permit conditions the hazardous
       character of such waste would prevail^66.

(^64) Decision 2000/532/EC
(^65) It may, however, be worth checking its rated thermal input, whether it has been “forgotten” before.
(^66) See above regarding the IED requirement of having a combustion gas temperature of at least
1100°C and meeting the requirements of Art 45(2) of IED.
**_Identifying MWI
installations_**


```
The assessment of the predominant waste type should cover the previous three
years^67 or longest period possible if the start of operation was within the last three
years. The predominant waste type is defined as the type of waste with the largest
share in mass (municipal waste, hazardous waste or other wastes). The following
results are possible:
 The predominant type is hazardous waste. In this case the installation (or unit)
remains outside of the EU ETS.
 The predominant type is other waste (neither municipal, nor hazardous). In this
case, the installation or unit should be fully included in the EU ETS, i.e. not
only for MRV purposes.
 The predominant type is municipal waste. In this case the installation should
be included for MRV from 2024 onwards.
 All three types of waste are used with no clearly dominant waste type. The
installation should be fully included in the EU ETS, as it is not an installation
“for the incineration of hazardous or municipal waste” only.
```
```
Example:
A given installation that incinerates waste uses the following types of waste: 34%
municipal waste, 33% hazardous waste, 33% other wastes. The predominant
waste type is municipal waste. Therefore, the installation should be included for
MRV only from 2024 onwards.
```
**6.2 MWI-associated activities and aggregation clause**

```
The aggregation rule of clause 3 of Annex I has not changed. The decision tree
in section 4.5.1 is still applicable for existing activities.
As municipal waste incineration is part of the definition of “combustion of fuels”,
in principle the aggregation clause will apply. This means that e.g. an installation
consisting of two MWI lines of 12 MW each would be above 20 MW and conse-
quently be included in the EU ETS for MRV only.
Because the normal combustion of fuels and MWI fall within the same activity,
respective units need to be added up in the aggregation clause. However, be-
cause clause 5 of Annex I still excludes units for MWI, the Directive requires a
distinction of different cases as follows:
The following cases can be distinguished:
 MWI unit above 20 MWth: This unit would fall under the EU ETS for MRV pur-
poses on its own. It could therefore be qualified as an installation on its own. If
there are associated activities (combustion units), which are below 20 MWth
themselves (excluding units for the incineration of hazardous waste), those
units are included in the monitoring plan and/or permit (depending on the Mem-
ber State’s practice), but only MRV needs to be performed.
```
(^67) Since data needs to be assessed by the competent authority before the end of 2023, these would
be the years 2020-2022.
**_Relation to other
“combustion of
fuels”_**


 MWI unit above 20 MWth (i.e. qualifying as an _installation_ ) and associated ac-
tivities (combustion units) which are _above_ 20 MWth themselves (excluding
units for the incineration of hazardous waste): Here the units except the MWI
need to be fully in the EU ETS. If it is confirmed that the MWI is an _incineration_
unit, it is subject to MRV only, and its heat – if delivered for use in an EU ETS
installation, including in the same installation – is considered “non-ETS heat”.
Those MWI units are to be included in the monitoring plan and/or permit (de-
pending on the Member State’s practice), but only MRV needs to be performed
for these units;
For practical implementation in this situation see section 6.4.
However, if the competent authority determines that the MWI is in fact _co-in-
cineration_ , it is to be fully included in the EU ETS (i.e. with an obligation to
surrender allowances).

 MWI _unit_ below 20 MWth, but as an installation together with other combustion
units (above 3 MWth each) – the 20 MWth threshold is exceeded (but the non-
MWI units together do not reach 20 MWth, i.e. the installation was not included
in the EU ETS before). Here all combustion units (including those below
3 MWth) are added together to the GHG permit and/or monitoring plan for MRV
only.

 Installation with activity “combustion of fuels”, where the 20 MWth threshold is
exceeded without inclusion of MWI units, and where the sum of MWI units
alone does not exceed the 20 MWth threshold: The installation is fully included
in the EU ETS, but the _units_ for municipal waste incineration remain excluded
from the EU ETS (see also section 6.3).

To assess which of the above situations applies, it is necessary to decide which
combustion units^68 are “normal combustion”, and which ones belong to the incin-
eration of municipal wastes. For example, auxiliary burners using fossil fuels for
raising the combustion temperature to the levels required by the IED would qualify
as units that need to be included as part of the MWI unit. On the other hand,
where e.g. a reserve boiler with conventional fuels is used to cover heat demand
of a district heating network during peak hours or maintenance of the MWI unit,
such reserve boiler would be a “normal combustion unit” for consideration in the
bullet points below.

```
6.3 Units for the incineration of hazardous or municipal
waste
```
For the purpose of including associated activities, the 2023 amendment of the EU
ETS Directive has left clause 5 of Annex I unchanged:

```
“When the capacity threshold of any activity in this Annex is found to be
exceeded in an installation, all units in which fuels are combusted, other
than units for the incineration of hazardous or municipal waste , shall
be included in the greenhouse gas emission permit.”
```
(^68) Annex I clause 3: “ _Those units may include all types of boilers, burners, turbines, heaters, furnaces,
incinerators, calciners, kilns, ovens, dryers, engines, fuel cells, chemical looping combustion units,
flares, and thermal or catalytic post-combustion units_ .”
**_Aggregation clause
for MWI units_**


```
This is to be understood as applying in the assessment of the activities for the full
inclusion in the EU ETS as it was not changed in the EU ETS revision. This rule
should be applied as follows, considering the coverage of MWI installations for
MRV only:
 If only other Annex I activities than “combustion of fuels” are carried out in the
installation, then:
```
 (^) The associated activities should be governed by clause 5, i.e. all combus-
tion units except those for the incineration of municipal or hazardous waste
should be excluded, as has been discussed in sections 3.4 and 4.5 for the
situation before the 2023 amendment.
 However, if units are identified as units for the incineration of municipal
waste, but not hazardous waste, which together exceed the 20 MWth thresh-
old, these units need to be included for MRV purposes only.
 If all combustion units alone exceed the 20 MWth threshold, it can be assumed
that the activity “combustion of fuels” is carried out at the installation, and the
approach laid down in section 6.2 above applies. This approach builds on the
fact that MWI and other combustion of fuels are within the same Annex I activ-
ity.
**6.4 How to implement the inclusion for MRV only**
For practical implementation of the inclusion of MWI installations for MRV pur-
poses only, Member States should consider the following:
 Where an MWI installation has been identified in line with section 6.2 to be
included in the EU ETS for MRV only, the Member State may issue a GHG
permit for this installation. However, this is not a strict requirement.
 Where in an installation already included in the EU ETS there are units for the
incineration of municipal waste which jointly exceed 20 MWth, there is some
flexibility whether to treat the MWI and the rest of the installation as two sepa-
rate installations, i.e. with separate monitoring plans. Member States may de-
cide to include those MWI units in the permit. A separate permit for those units
is not a requirement.
 The MWI installation or units included for MRV only have to be covered by a
monitoring plan. Where installation parts fully covered by the EU ETS and parts
covered for MRV only are considered the same installation, the monitoring plan
must clearly indicate which source streams and emissions sources belong to
which part.
 In any event, for practical reasons, annual emission reports for the two sepa-
rate installation parts have to be separate, since the part of the installation fully
in the EU ETS needs to report the amount of emissions for which allowances
need to be surrendered (and this number must be entered in the Registry), and
the MWI under the MRV only regime needs to report information that Member
States then have to report to the Commission separately according to Article
68(4) of the MRR.
**_Practical
implementation_**


## 7 CHANGES APPLICABLE FROM 2026

**7.1 The biomass criterion from 2026 onwards**

Before the 2023 EU ETS review, clause 3 (the aggregation clause) contained the
provision that “ _units which use exclusively biomass shall not be taken into ac-
count for the purposes of this calculation_ [i.e. the summing up of thermal inputs
of combustion units]_. ‘Units using exclusively biomass’ includes units which use
fossil fuels only during start-up or shut-down of the unit._ ” This provision has been
deleted from the Directive. Therefore, the provisions discussed in section 3.4.5
are not applicable from 2026. Consequently, the decision tree presented in sec-
tion 4.5 is not applicable from 2026. A new decision tree is provided in section
7.2.

From 2026, the question whether installations can be excluded from the EU ETS
will not be applied anymore on basis of individual units using biomass, but at
installation level. Furthermore, it is now clarified that only “zero-rated” biomass
will allow excluding installations from the EU ETS, i.e. biomass must comply with
the GHG savings and sustainability criteria defined by the RED II^69. Clause 1 of
Annex I, 2nd sentence reads:

```
“Installations where during the preceding relevant five-year period referred
to in Article 11(1), second subparagraph, emissions from the combustion of
biomass that complies with the criteria set out pursuant to Article 14 contrib-
ute on average to more than 95 % of the total average greenhouse gas emis-
sions are not covered by this Directive.”
```
The reference to Article 14 means the way how the MRR applies the RED II cri-
teria^70.

(^69) RED II means the recast Renewable Energy Directive (Directive (EU) 2018/2001).
(^70) At the time of publishing this guidance document, Article 38(5) of the MRR reads as follows:
_“5. Where reference is made to this paragraph, biofuels, bioliquids and biomass fuels used for com-
bustion shall fulfil the sustainability and the greenhouse gas emissions saving criteria laid down in
paragraphs 2 to 7 and 10 of Article 29 of Directive (EU) 2018/2001_ [the RED II]_.
However, biofuels, bioliquids and biomass fuels produced from waste and residues, other than ag-
ricultural, aquaculture, fisheries and forestry residues are required to fulfil only the criteria laid down
in Article 29(10) of Directive (EU) 2018/2001. This subparagraph shall also apply to waste and
residues that are first processed into a product before being further processed into biofuels, bioliq-
uids and biomass fuels.
Electricity, heating and cooling produced from municipal solid waste shall not be subject to the
criteria laid down in Article 29(10) of Directive (EU) 2018/2001.
The criteria laid down in paragraphs 2 to 7 and 10 of Article 29 of Directive (EU) 2018/2001 shall
apply irrespective of the geographical origin of the biomass.
Article 29(10) of Directive (EU) 2018/2001 shall apply to an installation as defined in Article 3(e) of
Directive 2003/87/EC_ [the EU ETS Directive]_.
The compliance with the criteria laid down in paragraphs 2 to 7 and 10 of Article 29 of Directive
(EU) 2018/2001 shall be assessed in accordance with Articles 30 and 31(1) of that Directive.
Where the biomass used for combustion does not comply with this paragraph, its carbon content
shall be considered as fossil carbon.”_
**_Biomass and RED II
criteria_**


```
For the interpretation of the relevant criteria of the RED II as laid down in Article
38(5) of the MRR and for how to provide evidence on compliance with those
criteria, see the Commission’s MRR Guidance document No. 3 (“Biomass is-
sues in the EU ETS”):
https://climate.ec.europa.eu/system/files/2022-10/gd3_biomass_is-
sues_en.pdf (^71 )
```
```
On how to apply Clause 1 of Annex I, two cases should be distinguished:
 For incumbent installations, guidance is given in section 7.1.1;
 Installations which had no MRV obligation under the EU ETS in the relevant
baseline years^72 , but could fall under the scope of the EU ETS due to the ac-
tivities carried out, should be treated as new entrants (see section 7.1.2).
```
```
7.1.1 Assessing the biomass criterion for incumbent installa-
tions
```
```
For the assessment whether incumbent installations can be excluded from the
EU ETS, the following points provide guidance:
```
1. The 95% biomass criterion relates to the total emissions of the installation, i.e.
    it does not exclude process emissions. It is to be noted that process emis-
    sions, if stemming from biomass, are always zero-rated, as the RED II criteria
    apply only to combustion emissions (see GD3 as referred to in the box above).
2. Also, the criterion related to the total emissions is not limited to combustion
    activities only. For determining the total emissions, to which the biomass emis-
    sions are to be compared, all emissions must be determined using the “pre-
    liminary emission factor”^73. If the (final) emission factor were used, all eligible
    biomass emissions would be zero and would never reach the 95% threshold.
    If an installation is already included in the EU ETS (or excluded pursuant to
    Article 27), it is obliged to perform monitoring according to a monitoring plan
    approved by the competent authority. In this case, the data of verified annual
    emissions reports of the relevant years are to be used for determination of the
    zero-rated emissions, and as a basis for determination of the total emissions.
    In case a competent authority has performed a conservative estimate of the
    annual emissions pursuant to Article 70 of the MRR, that estimate should be
    used instead of the annual emissions report.
3. If the installation has not been operated during the whole reference period
    (e.g. because of maintenance shut-downs), all years shall be taken into ac-
    count for which verified annual emission reports are available. If a merger or
    split of installation has taken place during the reference period, the relevant
    data representing the situation after the merger or split shall be used.

(^71) Note that FAQs on the topic are included in the 2022 Compliance Forum training material found
under **https://climate.ec.europa.eu/system/files/2023-05/ets_mrva_training_biomass_en.pdf**
(^72) This includes installations that have never been in the EU ETS before (e.g. because they are to be
included due to changed definitions of Annex I activities, see section 3.3), but also installations
which were excluded due to meeting the 95% threshold (or earlier, the “exclusively biomass use”
criterion).
(^73) Defined by Article 3(36) oft he MRR: “ _‘preliminary emission factor’ means the assumed total emis-
sion factor of a fuel or material based on the carbon content of its biomass fraction and its fossil
fraction before multiplying it by the fossil fraction to produce the emission factor;_ ”
**_MRR Guidance
document 3_**


4. Competent authorities have to collect installations’ emissions data of the years
    2019 to 2023 for the purpose of the NIMs notification in September 2024. For
    administrative efficiency and to use most recent data available, the emissions
    data of these five NIMs baseline years are to be used also for the purpose of
    the biomass criterion of clause 1 of Annex I. In NIMs data, like in annual emis-
    sion reports, emissions are reported in accordance with the MRR, i.e. the bi-
    omass emissions complying with the sustainability and GHG savings criteria
    of the RED II and in accordance with Article 38(5) of the MRR are separately
    reported.
    For the years 2019 and 2020 the MRR did not explicitly require the reporting
    of emissions from biomass. Some Member States allowed them to be reported
    simply as zero. Only since the MRR 2018 (applicable as of 2021), it has be-
    come mandatory to report biomass emissions using a _preliminary emissions_
    _factor_. Therefore, operators will have to provide best available data for these
    years for the purpose of clause 1 of Annex I of the EU ETS Directive. Such
    best available data may be based on default values of the preliminary emis-
    sion factor (tier 2: from national GHG inventories, tier 1: emission factors given
    in the Annex of MRR Guidance Document 3, see textbox above).
    Where operators do not submit NIMs baseline data because they do not apply
    for free allocation, the competent authority will have to rely on annual emis-
    sions reports. However, the same baseline years are to be used for con-
    sistency.
5. While sustainability criteria applied to liquid biomass already during the 3rd
    phase of the EU ETS, RED II criteria were relevant for biomass fuels (i.e. solid
    and gaseous biomass) only from 2022 onwards, and many Member States
    allowed operators a derogation pursuant to Article 38(6) which made monitor-
    ing of compliance with these criteria mandatory only from 2023 onwards. Op-
    erators will therefore have only one or two complete years of data available
    for the data collection in 2024 based on the current RED II criteria. Retrospec-
    tive certification of biomass is not possible pursuant to the rules of the RED II,
    i.e. the RED II criteria cannot be checked for years where they were not ap-
    plicable in the Member State. Therefore, the data collection will cover years
    for which different sets of sustainability and GHG savings criteria are applied.
    The rules for zero-rating of biomass applied for the purpose of emissions re-
    porting during the respective year need to be considered for the purpose of
    the biomass criterion of clause 1 of Annex I.
    For subsequent NIMs data (e.g. baseline years 2024-2028 for submission by
    Member States in 2029), the full RED II criteria as established by the MRR will
    have to be applied.
6. The average percentage of zero-rated emissions in the installation’s total
    emissions of the available years during the reference period shall be calcu-
    lated as follows to determine whether more than 95 % of emissions stem from
    zero-rated biomass (see also the example below):

 (^) First calculate the sum of the emissions over the 5 years period:
 A = Sum of emissions complying with RED II criteria
 B = Sum of other emissions (Fossil and non-RED II compliant biomass)
 (^) Then calculate C = A / (A + B)
 (^) If C > 95%, the installation is to be excluded.
**_Applicable reference
period
Dealing with
changes of RED
criteria_**


**Example:**

```
Source stream t CO 2 2019 2020 2021 2022 2023 Sum (5 yr)
```
Biomass No 1 fossil (^)
RED II compliant^ 1 003^406  995 516  997 521  998 438  996 911 **4 991**^792
other biomass
Natural gas fossil 29 862 29 883 29 935 30 014 29 920 **149 614**
RED II compliant^
other biomass
Limestone fossil 5 019 4 993 5 019 4 984 4 992 **25 007**
RED II compliant^
other biomass
Biomass No 2 fossil (^)
RED II compliant^24 935  25 064  25 021^75 020
other biomass 24 886 25 075 **49 961**
Sum fossil (^) **174 621**
RED II compliant^ **5 066**^812
other biomass **49 961
Total emissions (fossil + non-RED II biomass)** (^) **5 291 394
Zero rated emissions 5 066 812
Percentage of zero-rated emissions** (^) **95,8%
criterion fulfilled**^
**7.1.2 Assessing installation not previously included in the EU
ETS
Case A** : The installation has operated at least one full calendar year in the base-
line period mentioned in section 7.1.1, but was not included in the EU ETS during
that period: In principle, the same approach as described in section 7.1.1 applies.
However, the installation did neither have a GHG emissions permit nor an obli-
gation to comply with the MRR in monitoring and reporting. Therefore, data avail-
ability is limited, unless the Member State has relevant monitoring obligations in
place (e.g. for providing evidence on its national renewable energy targets). The
operator should provide “best available data”^74 on its emissions during the rele-
vant baseline period (or longest available period if not under operation for the
whole duration of the baseline period) to the competent authority. The competent
authority should perform a conservative estimation pursuant to Article 70 of the
MRR; where deemed necessary.
(^74) Building on the monitoring methods provided by the MRR to the extent possible, not requiring spe-
cific tiers. For characterisation of source streams, information from currently used fuels and materi-
als may be considered to apply also to earlier years. Consumption data of fuels and materials should
be proven using financial statements or production data where possible. Where the Member State
requires reporting on biomass sustainability for the purpose of its national renewable energy target,
such data can also be used.


**Case B** : For installations which have not operated (“greenfield installations”), the
above approach is not appropriate. Therefore, a deviating approach should be
followed exclusively for such installations:

1. _If the operator of such installation provides evidence to the satisfaction of the_
    _competent authority that more than 95% of their emissions will be from bio-_
    _mass which complies with the RED II criteria_ , the competent authority may
    decide to exclude the installation from the EU ETS from the start of its opera-
    tion. Such evidence may be based on the installation’s design description pro-
    vided to the competent authority for the purpose of permitting, in combination
    with supply contracts for specific types and quantities of fuels (including bio-
    mass and information on their planned certification under the RED II).
2. Where the occurrence of non-biomass emissions cannot be excluded, or
    where combustion of biomass not complying with the RED II criteria may oc-
    cur, or where the competent authority has any other doubts about the pre-
    dicted biomass use, the competent authority has to require the operator to
    provide emissions data from the first full calendar year of operation in con-
    formity with the MRR. For this purpose, it will be necessary to include the in-
    stallation in the EU ETS by issuing a GHG permit and approving a monitoring
    plan.
3. When the annual emissions report, or, where applicable, the new entrant data
    report (covering the first full calendar year of the installation’s operation) con-
    firms that the criterion of more than 95% zero-rated biomass emissions is
    complied with, the installation can be excluded for the rest of the applicable
    five-year period.

In both cases A and B, installations which have not been covered by the EU ETS
before but which are included from 2026 based on the 95% biomass criterion will
be treated like new entrants with regard to receiving a permit and to free alloca-
tion. Therefore, it is not necessary to notify them to the Commission as part of the
list pursuant to Article 11(1) of the EU ETS Directive. However, Member State
should notify the new entrants as soon as possible in a way that allows the instal-
lation’s inclusion in the EU ETS from 1 January 2026.


```
7.2 New step-by-step approach regarding aggregation of
combustion units
```
```
Additions compared to the situation in 2024 are indicated in bold font and dele-
tions by strikethrough.
```
```
7.2.1 Defining installations which fall under the scope of EU ETS
```
```
Summarizing the previous sections, the following decision tree can be followed
when determining if an installation falls under the scope of the EU ETS from
1 January 2026:
```
1. Apply the broadest possible installation boundaries (chapter 2).
2. **If the installation uses significant amounts of biomass so that the “95 %**
    **sustainable biomass” criterion (see section 7.1) might be relevant, carry**
    **out the assessment as described in that section.**
       **a. More than 95 % of the installation’s emissions can be zero-rated as**
          **stemming from RED II compliant biomass75,**^76 **: The installation is not**
          **to be included in the EU ETS.** **_Exit Decision tree_****.**
       **b. Less than 95% of the installation’s emissions can be zero-rated as**
          **stemming from RED II compliant biomass: Continue to point 3.**
3. Are activities of Annex I other than "combustion of fuels" carried out at the
    installation? (section 3.2).
       a. YES: Activity-specific capacity threshold (if any) exceeded?
          i. YES:
             1. Include all directly related activities (especially combustion units
                including their waste gas treatment),
             2. Check for units for the incineration of municipal and hazardous
                waste to be excluded following section 3.4.4 and (from 2024) tak-
                ing into account chapter 6,
             3. _Proceed to point 10_ (section 7.2.2)_._
ii. NO: _Carry on with point 4_ (assessing combustion units).
       b. NO: _Carry on with point 4_ (assessing combustion units).
4. List all combustion units of the installation.
5. Exclude units for the incineration of municipal and hazardous waste (see sec-
    tions 3.4.3 and 3.4.4) from the list derived under point 3, but leave units for
    co-incineration on the list; from 2024, take into account municipal waste incin-
    eration units in accordance with sections 6.2 and 6.3,
6. Exclude biomass units from the list,
7. Exclude units with a rated thermal input of less than 3 MWth from the list.
8. Add up all rated thermal inputs of the units remaining on the list of combustion
    units.
9. Does the sum determined under point 8 exceed 20 MWth?

(^75) It is to be noted that process emissions, if stemming from biomass, are always zero-rated, as the
RED II criteria apply only to combustion emissions.
(^76) RED II criteria compliance can be checked only from the time period the criteria have been applied
in the specific Member State.
**_Decision tree
applicable from 2026_**


```
c. YES: Installation is under the EU ETS. Add again all units excluded under
point 5 and 6. From 2024, D istinguish cases where municipal waste incin-
erations units are included for MRV only, and cases of full inclusion (see
sections 6.2 and 6.3). Proceed to point 10 (section 7.2.2).
d. NO: Installation stays out of the EU ETS. Exit decision tree.
```
```
7.2.2 Identifying installations which fall under the scope of EU
ETS, but could be excluded as "small installations" pursu-
ant to Article 27
```
10. Does the Member State concerned intend to allow an exclusion of small in-
    stallations pursuant to Article 27?
       a. NO: Installation is included in the EU ETS, or may be excluded under Arti-
          cle 27a. _Proceed to point 12_.
       b. YES: _proceed to point 11_.
11. Is at least one of the following criteria met?

```
i. Installation is a hospital (see section 5.5),
ii. Installation carries out Annex I activity other than “combustion of
fuels”, and annual GHG emissions potentially^77 covered by the EU
ETS in each of the three years before notification of the “NIMs list”^78
have been less than 25 000 t CO 2 (eq)79,^80 ,
iii. Installation carries out Annex I activity “combustion of fuels”, and the
aggregate capacity (including the capacity of units mentioned under
points 5 and 6) is less than 35 MWth^81 , and annual GHG emissions
potentially^77 covered by the EU ETS in each of the three years before
notification of the “NIMs list” have been less than 25 000 t CO 2 (eq)^79.
a. YES: Installation may be excluded from EU ETS, if equivalent measures
and monitoring and reporting arrangements in accordance with Article 14
are in place and if installation is notified at the latest to the Commission by
the relevant deadline for NIMs notification^78.
b. NO: Installation stays in the EU ETS or may be excluded under Article 27a.
```
(^77) This is to indicate emissions of installations already excluded from the EU ETS before.
(^78) The list of installations and free allocation levels contained in the “NIMs” (National Implementation
Measures) pursuant to Article 11(1). Deadline for this notification by Member States is 30 Septem-
ber 2024 and every 5 years thereafter. Therefore, the three years for assessing the given threshold
are 2021, 2022 and 2023, and the respective years every five years thereafter.
(^79) In order to also give the possibility to exclude small installations that only started up their Annex I
activity in one of the three relevant years, only the years during which the installation was already
operating are taken into account.
(^80) Emissions from biomass are to be excluded in this calculation.
(^81) When assessing the 35 MW and 25 000 t CO 2 (eq) threshold for possible exclusion from the EU
ETS, also the fuel use (and CO 2 emissions) from units with a rated thermal input of less than 3 MWth
are included. Exempting the latter is only relevant when assessing whether an installation falls un-
der the scope of the EU ETS.


```
7.2.3 Identifying installations or units which could be excluded
pursuant to Article 27a
```
12. Does the Member State concerned intend to allow an exclusion of small in-
    stallations pursuant to Article 27a(1)^82?
       a. NO: Installation is included in the EU ETS. _Proceed to point 14_.
       b. YES: _Proceed to point 13_.
13. Did the installation emit^80 less than 2 500 t CO 2 per year in each of the three
    years before notification of the “NIMs list”?
       a. YES: _Installation may be excluded from the EU ETS_.
       b. NO: _Continue to point 14._
14. Does the Member State intend to allow exclusion of reserve and backup units
    pursuant to Article 27a(3)^83?
       a. NO: The installation as a whole remains in the EU ETS. _Exit decision tree._
       b. YES: _Continue to point 15._
15. Does the installation have reserve or backup units which did not operate more
    than 300 hours in each of the three years before notification of the “NIMs list”?
       a. YES: Such units may be excluded from the EU ETS.
       b. NO: The installation as a whole remains in the EU ETS. _Exit decision tree._

(^82) Article 27a(1): “ _Member States may exclude from the EU ETS installations that have reported to
the competent authority of the Member State concerned emissions of less than 2 500 tonnes of
carbon dioxide equivalent, disregarding emissions from biomass, in each of the three years preced-
ing the notification [of the NIMs]”_ under conditions given in that Article.
(^83) “ _3. Member States may also exclude from the EU ETS reserve or backup units which did not operate
more than 300 hours per year in each of the three years preceding the notification under point (a)
of paragraph 1, under the same conditions as set out in paragraphs 1 and 2._ ”


## 8 ANNEX

**8.1 Glossary**

CA ......................... Competent Authority

CHP ...................... Combined Heat and Power production (Cogeneration)

FAR ....................... Free Allocation Rules: Commission Delegated Regulation
(EU) 2019/331 of 19 December 2018 determining transitional
Union-wide rules for harmonised free allocation of emission
allowances pursuant to Article 10a of Directive 2003/87/EC of
the European Parliament and of the Council. Download:
**[http://data.europa.eu/eli/reg_del/2019/331/oj](http://data.europa.eu/eli/reg_del/2019/331/oj)**

EU ETS ................. EU greenhouse gas Emission Trading System. For the pur-
poses of this Guidance Document, EU ETS refers to the emis-
sion trading system for stationary installations (i.e. installa-
tions covered by Chapter III of the EU ETS Directive).

EU ETS Directive .. Directive 2003/87/EC of the European Parliament and of the
Council of 13 October 2003 establishing a system for green-
house gas emission allowance trading within the Community
and amending Council Directive 96/61/EC. Download:
**https://eur-lex.europa.eu/legal-con-
tent/EN/TXT/?uri=CELEX%3A02003L0087- 20230605**

GD ........................ Guidance Document. For the Commission’s guidance docu-
ments on MRVA topics (in particular GD3 on biomass issues),
see **https://climate.ec.europa.eu/eu-action/eu-emissions-
trading-system-eu-ets/monitoring-reporting-and-verifi-
cation-eu-ets-emissions_en**

GHG ...................... Greenhouse gas(es) listed in Annex II to the EU ETS Di-
rective. Only those GHG which are listed in Annex I for each
activity are considered within this guidance.

IED ........................ Industrial Emissions Directive, i.e. Directive 2010/75/EU of
the European Parliament and of the Council of 24 November
2010 on industrial emissions (integrated pollution prevention
and control), **[http://data.europa.eu/eli/dir/2010/75/2011-01-](http://data.europa.eu/eli/dir/2010/75/2011-01-)
06**

MRR ...................... Monitoring and Reporting Regulation: Commission Imple-
menting Regulation (EU) 2018/2066 of 19 December 2018 on
the monitoring and reporting of greenhouse gas emissions
pursuant to Directive 2003/87/EC of the European Parliament
and of the Council and amending Commission Regulation
(EU) No. 601/2012. Download consolidated version:
**[http://data.europa.eu/eli/reg_impl/2018/2066/2022-](http://data.europa.eu/eli/reg_impl/2018/2066/2022-) 08 -28**

MRV ...................... Monitoring, Reporting and Verification

MRVA ................... Monitoring, Reporting, Verification and Accreditation


MS ........................ Member State(s). Note that within this guidance, this should
be read as “EU Member States and Norway, Iceland and
Liechtenstein”, i.e. all States participating in the EU ETS

MWI ...................... Municipal Waste Incineration

NACE .................... Statistical classification of economic activities in the European
Community

NIMs ..................... National implementation measures pursuant to Article 11

RED II ................... Renewable Energy Directive II: Directive (EU) 2018/2001 of
the European Parliament and of the Council of 11 December
2018 on the promotion of the use of energy from renewable
sources (recast). Download under:
**[http://data.europa.eu/eli/dir/2018/2001/2022-](http://data.europa.eu/eli/dir/2018/2001/2022-) 06 -07**

WFD ...................... Waste Framework Directive: Directive 2008/98/EC of the Eu-
ropean Parliament and of The Council of 19 November 2008
on waste and repealing certain Directives; consolidated ver-
sion: **[http://data.europa.eu/eli/dir/2008/98/2018-07-05](http://data.europa.eu/eli/dir/2008/98/2018-07-05)**

```
8.2 Annex I of the revised ETS-directive (excluding
maritime and aviation activities)
```
Additions compared to the Directive before the 2023 preview are indicated in **bold
font** and deletions by strikethrough.

**Categories of activities to which this directive applies**

1. Installations or parts of installations used for research, development and

```
testing of new products and processes and installations exclusively using bi-
omass are not covered by this Directive. Installations where during the
preceding relevant five-year period referred to in Article 11(1), second
subparagraph, emissions from the combustion of biomass that com-
plies with the criteria set out pursuant to Article 14 contribute on aver-
age to more than 95 % of the total average greenhouse gas emissions
are not covered by this Directive.
```
2. The thresholds values given below generally refer to production capacities or

```
outputs. Where several activities falling under the same category are carried
out in the same installation, the capacities of such activities are added to-
gether.
```
3. When the total rated thermal input of an installation is calculated in order to

```
decide upon its inclusion in the EU ETS, the rated thermal inputs of all tech-
nical units which are part of it, in which fuels are combusted within the instal-
lation, are added together. These Those units may could include all types of
```

```
boilers, burners, turbines, heaters, furnaces, incinerators, calciners, kilns, ov-
ens, dryers, engines, fuel cells, chemical looping combustion units, flares,
and thermal or catalytic post-combustion units. Units with a rated thermal in-
put under 3 MW and units which use exclusively biomass shall not be taken
into account for the purposes of this calculation. "Units using exclusively bio-
mass" includes units which use fossil fuels only during start-up or shut-down
of the unit.
```
4. If a unit serves an activity for which the threshold is not expressed as total

```
rated thermal input, the threshold of this activity shall take precedence for
the decision about the inclusion in the EU ETS.
```
5. When the capacity threshold of any activity in this Annex is found to be ex-

```
ceeded in an installation, all units in which fuels are combusted, other than
units for the incineration of hazardous or municipal waste, shall be included
in the GHG emission permit.
```
```
Activities Greenhouse gases
```
```
1
```
```
Combustion of fuels in installations with a total rated thermal
input exceeding 20 MW (except in installations for the incin-
eration of hazardous or municipal waste)
From 1 January 2024, combustion of fuels in installa-
tions for the incineration of municipal waste with a total
rated thermal input exceeding 20 MW, for the purposes
of Articles 14 and 15.
```
```
Carbon dioxide
```
```
2 Refining of mineral tal rated thermal input exceeding 20 MW are operated oil , where combustion units with a to- Carbon dioxide
```
```
3 Production of coke Carbon dioxide
```
```
4 Metal ore (including sulphide ore) roasting or sintering, in-cluding pelletisation Carbon dioxide
```
```
5
```
```
Production of pig iron or steel (primary or secondary fusion)
including continuous casting, with a capacity exceeding 2,5
tonnes per hour
```
```
Carbon dioxide
```
```
6
```
```
Production or processing of ferrous metals (including ferro-
alloys) where combustion units with a total rated thermal in-
put exceeding 20 MW are operated. Processing includes,
inter alia, rolling mills, re-heaters, annealing furnaces,
smitheries, foundries, coating and pickling
```
```
Carbon dioxide
```
```
7 Production of primary aluminium or alumina
```
```
Carbon dioxide
and perfluorocar-
bons
```
```
8
```
```
Production of secondary aluminium where combustion units
with a total rated thermal input exceeding 20 MW are oper-
ated
```
```
Carbon dioxide
```

**Activities Greenhouse gases**

9

```
Production or processing of non-ferrous metals, including
production of alloys, refining, foundry casting, etc., where
combustion units with a total rated thermal input (including
fuels used as reducing agents) exceeding 20 MW are oper-
ated
```
```
Carbon dioxide
```
10

```
Production of cement clinker in rotary kilns with a production
capacity exceeding 500 tonnes per day or in other furnaces
with a production capacity exceeding 50 tonnes per day
```
```
Carbon dioxide
```
11

```
Production of lime or calcination of dolomite or magnesite in
rotary kilns or in other furnaces with a production capacity
exceeding 50 tonnes per day
```
```
Carbon dioxide
```
12 Manufacture of glass including glass fibre with a melting ca-pacity exceeding 20 tonnes per day Carbon dioxide

13

```
Manufacture of ceramic products by firing, in particular roof-
ing tiles, bricks, refractory bricks, tiles, stoneware or porce-
lain, with a production capacity exceeding 75 tonnes per
day
```
```
Carbon dioxide
```
14

```
Manufacture of mineral wool insulation material using glass,
rock or slag with a melting capacity exceeding 20 tonnes
per day
```
```
Carbon dioxide
```
15

```
Drying or calcination of gypsum or production of plaster
boards and other gypsum products, with a production ca-
pacity of calcined gypsum or dried secondary gypsum
exceeding a total of 20 tonnes per day where combustion
units with a total rated thermal input exceeding 20 MW are
operated
```
```
Carbon dioxide
```
16 Production of pulp from timber or other fibrous materials Carbon dioxide

17 Production of paper or cardboard with a production capacity exceeding 20 tonnes per day Carbon dioxide

18

```
Production of carbon black involving the carbonisation of or-
ganic substances such as oils, tars, cracker and distillation
residues with a production capacity exceeding 50
tonnes per day , where combustion units with a total rated
thermal input exceeding 20 MW are operated
```
```
Carbon dioxide
```
19 Production of nitric acid Carbon dioxide and nitrous oxide

20 Production of adipic acid Carbon dioxide and nitrous oxide

21 Production of glyoxal and glyoxylic acid Carbon dioxide and nitrous oxide

22 Production of ammonia Carbon dioxide

23

```
Production of bulk organic chemicals by cracking, reform-
ing, partial or full oxidation or by similar processes, with a
production capacity exceeding 100 tonnes per day
```
```
Carbon dioxide
```
24

```
Production of hydrogen (H2) and synthesis gas by reform-
ing or partial oxidation with a production capacity exceeding
25 5 tonnes per day
```
```
Carbon dioxide
```
25 Production of soda ash (Na2CO3) and sodium bicarbonate (NaHCO3) Carbon dioxide


**Activities Greenhouse gases**

26

```
Capture of greenhouse gases from installations covered by
this Directive for the purpose of transport and geological
storage in a storage site permitted under Directive
2009/31/EC
```
```
Carbon dioxide
```
27

```
Transport of greenhouse gases by pipelines for geological
storage in a storage site permitted under Directive
2009/31/EC , with the exclusion of those emissions cov-
ered by another activity under this Directive
```
```
Carbon dioxide
```
28 Geological storage of greenhouse gases in a storage site permitted under Directive 2009/31/EC Carbon dioxide


