Important update below.
From Reuters via The World Business Council for Sustainable Development:
The European Union will auction virtually all its allowances for industry to emit carbon dioxide by 2020, doing away with the current system of largely free allocations, the EU's environment chief said on Tuesday.
The European Commission is due to announce plans on Jan. 23 for legislation to improve the emissions trading scheme (ETS), Europe's main tool to fight climate change, including a key change to make business buy more allowances. "Auctioning will be more (prevalent) during the third trading period, after 2015, and we are discussing right now the role that this auctioning will start and how it will proceed," European Environment Commissioner Stavros Dimas said.
"After 2020, almost 100 percent of the allowances will be auctioned," he told reporters on the sidelines of a meeting of the European Commmission with the EU's new Slovenian presidency....
...The current system of giving out largely free emissions allowances handed utilities and other big emitters windfall profits, and the Commission's plans to make companies pay more in future has alarmed industry groups.UPDATE: Reports are, no more free lunch by 2013:
...Auctioning: While currently 90% of pollution allowances are handed out to installations for free, the draft foresees a huge increase in auctioning. "Overall, it is estimated that at least two thirds of the total quantity of allowances will be auctioned in 2013," states the text. It adds that "full auctioning should be the rule from 2013 onwards for the power sector, refineries and carbon capture and storage", while installations in other sectors would benefit from a gradual transition, starting with a yet-to-be-determined percentage of free allocation that would decrease by equal amounts each year, arriving at zero free allocation by 2020. While in earlier drafts, there had been talk of allowing exemptions for a number of energy-intensive sectors, allowing them to receive up to 70% free allocations until 2018, BusinessEurope told EurActiv that the most recent draft makes no reference to this and refers again to the comitology procedure.