Germany could voluntarily cancel 514.000 allowances between 1 september and 31 December 2025, in relation to the year 2023. The amount is part of a total of up to 12,25 million due to be canceled between 2025-2030. 

The announcement was made this Monday by the European Commision and follows the procedure for the cancellation of allowances detailed in Delegated Regulation (EU) 2023/2830 which includes specific rules for auctions under EU ETS. 

The cancellation is linked to two plant closures that occurred in 2022 and is intended to avoid oversaturating the market with allowances no longer used by closed coal plants, a scenario analysts call the “waterbed effect.”

Following Germany’s decision to shut down all of its coal plants by 2038, in April 2022,  RWE closed one unit representing about 13% of capacity at its lignite-fired power station near Neurath. In December 2022, a briquette production facility at Frechen, also operated by RWE, was also shut down.

In May 2024, the Commission published Germany’s intention to voluntarily cancel up to 12,25 million allowances associated with those installations during the period 2025-2030: 11 million allowances linked to Neurath and 1,25 million allowances linked to Frechen.

However, according to the executive, the cancellation of 0,514 million allowances would happen this year provided  the total number of allowances in circulation (TNAC) for 2024 exceeds 1,096 billion allowances. “If the TNAC 2024 is between 833 million and 1,096 million, no allowances would be cancelled, because in that case the Market Stability Reserve would already remove the surplus resulting from the plant closures.”

The  European Commission will publish the total number of allowances in circulation (TNAC) on the EU ETS for 2024 by the end of this month.