On July 8, prior to approving the auction carbon allowances for 2012, for the European Trading Systemʼs (ETS) third trading phase, Polandʼs government filed a lawsuit in the European Unionʼs Court of Justice contesting the European Commission-approved “benchmarking” system to be used to allocate free greenhouse gas emissions allowances for the power sector during the third phase of the EU Emissions Trading System (2013-2020). Then on July 13, European Union Member states approved 120 million carbon allowances in 2012 to participants in the EU Emissions Trading System (ETS) for the systemʼs third trading phase. The auctioning of emissions allowances, which begins in 2013, will replace free allocation as the main method for distributing allowances under the ETS. Starting in 2013, electricity generating companies must buy nearly all of their emissions allowances at auction, while heavy industry must buy upfront an increasing portion of their allowances. Airlines, which enter the ETS in 2012, must also buy some of their allowances at auction. The ETS is designed to cut emissions overall by gradually reducing the volume of allowances issued to participants, thus forcing them to make emissions-reducing investments or to buy additional allowances on the carbon market. The total amount of emissions allocations, or emissions cap, for 2013 will be just under 2.04 billion allowances, with each allowance representing the right to emit one metric ton of carbon dioxide.