Carbon Pricing Consultation (UK Brexit)

Exit day is 31st October 2019

UPDATE : persons are invited to attend one of consultation workshops:

• London, 22 May 2019: book on Eventbrite

• Northern Ireland, Belfast, 30 May 2019*

• North Wales, Llandudno Junction, 3 June 2019

• South Wales, Swansea, 5 June 2019

• Scotland, Glasgow, 12 June 2019*

All the workshops will be available on Eventbrite. * events do not cover aviation

———-

The UK government and the devolved administrations are now seeking views (by way of consultation) on their proposals for carbon pricing after Exit. The consultation ends 12 July 2019, and the documents are here

The consultation focuses on four aspects :

(1) the design of a UK Emissions Trading System (ETS) (I posted a few days ago, that a UK ETS is a prospect)

(2) the operation of a UK ETS

(3) aviation

(4) continued UK membership of the EU ETS for Phase IV (2021-2030).

[Note: I don’t cover aviation in detail in this Blog]

A UK ETS that is linked to the EU ETS is the UK Government’s and the Devolved Administrations’ preferred carbon pricing option. This is envisaged in the Political Declaration that accompanies the Withdrawal Agreement (that is not ratified by the UK Parliament).

The view is a linked ETS would create a larger carbon market that would deliver more cost-effective emission reduction opportunities for UK businesses.

The consultation document sets out alternatives, including:

* a standalone domestic emissions trading system;

* a tax on carbon, similar to the policy described in the HMRC technical note “Carbon Emissions Tax” (and provided for in Legislation, not yet commenced – I Blog posted about this); or

* participating in Phase IV of the EU ETS.

Note : the consultation does not seek detail re a tax on carbon. But, the summary states – if necessary, responses to this consultation may be used to develop work on such an alternative.

Questions relevant to a standalone UK ETS or a tax on carbon are included. The proposals in Chapters 1-3 would be applicable for either a linked or standalone UK ETS unless clearly stated otherwise.

Chapter 1 focuses on proposals for the design of a linked or standalone UK ETS which covers: the scope in terms of gases and sectors; the cap and trajectory; the distribution of allowances; free allocation; supply flexibility; phases and reviews; the small emitter opt-out; and the ultra-small emitter exemption; and a UK industrial decarbonisation fund.

• To ensure that any UK ETS is linkable to the EU ETS, the proposal is to match the scope of a UK ETS with the scope of the EU ETS both in respect of sectors and greenhouse gases covered. Views are, in addition, sought on the potential to expand scope in later years of UK ETS operation.

• For the free allocation of allowances, the proposal is to follow broadly the free allocation methodology used in the EU ETS to provide a smooth transition for the relevant sectors and to support the potential for linking a UK ETS with the EU ETS.

• The proposals for a Small Emitter and Hospitals Opt-out Scheme and an Ultra- Small Emitter Exemption also align with the EU ETS, including setting a threshold of 25,000t CO2eq/35MW and 2,500t CO2eq respectively.

• In addition, views are sought on the possibility of monetising allowances from within the UK ETS to fund UK industrial decarbonisation.

Chapter 2 seeks views on the operation of a UK ETS.

Chapter 4 covers the scenario whereby the UK remains part of Phase IV of the EU ETS past 2020. Note: while the UK is still within the EU or within the Transition/Implementation Period, the UK has an obligation to transpose the Phase IV revisions to the EU ETS Directive into UK law before 9 October 2019.

The chapter also includes proposed Phase IV implementation features which may be incorporated within a UK ETS.

Chapter 4 seeks views on:

• The timing and method of this transposition (and further transposition arising as a result of tertiary legislation not yet agreed at EU level);

• Elements of Phase IV where the UK has discretion over whether and how to implement – most notably the opt out schemes for small emitters, which the proposal is to implement anyway as part of a linked or standalone UK ETS.

The above sets out some salient features, the reader is asked to scan the entire consultation.

[the Exit Day could change, please continue to follow this Blog]

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