UK exits the EU (EU ETS)

Background 

The EU ETS is the European Union Emissions Trading System (carbon). Large polluters such as power companies and industrial firms are obliged to pay for their carbon dioxide emissions by buying carbon permits called EU Allowances. Britain is the EU’s second-largest emitter of greenhouse gases and its utilities are among the largest buyers of carbon permits. 

Article 19(1) of European Directive 2003/87/EC requires that all emission allowances issued from 1 January 2012 onwards must be held in a central Union Registry on accounts managed by the European Union Member States.

The EU system of emission allowances registries has been operational since January 2005 and provides a standardised and secure system of electronic registries which tracks the issuance, holding, transfer and cancellation of all allowances issued under the EU ETS. Initially each EU Member State had its own emissions alllowances registry. In 2012, these registries were replaced by the single Union Registry, which provides a harmonized basis to transfer allowances across the EU.

This single registry is operated and maintained by the European Commission, and national registry administrators in all 31 countries participating in the EU ETS remain the point of contact for the representatives of more than 20,000 accounts (companies or physical persons). 31 countries participate, a few more than the EU28. 

Also the allocation processes in phase 3 of the EU ETS are performed centrally in the Union Registry, both for the allocation of allowances to stationary and aircraft operators for free and for the auctioning of allowances through the common and two ‘opt-out’ auction platforms.

The legal instrument providing specific rules on the Union Registry is the Commission Regulation (EU) No 389/2013. This Regulation applies to allowances created for the EU ETS third trading period commencing on 1 January 2013 as well as for subsequent periods, annual emission allocation units and Kyoto units. It also applies to aviation allowances to be auctioned that were created for the trading period from 1 January 2012 to 31 December 2012.

Change

Known as the EU ETS Registry Regulation, Commission Regulation (EU) No 389/2013 will be amended (by EU Regulation) to Brexit safeguard the EU ETS system during the third trading period (2013-2020). The change was agreed by the European Parliament in October, and Reuters reports yesterday it is now agreed by EU Member States. The proposal document is here

The change will provide for marking and restricting the use of allowances issued by the United Kingdom as of 1 January 2018. The proposal is that marking should distinguish United Kingdom issued allowances from other allowances. The marked allowances would then no longer be able to be surrendered in order to meet compliance obligations under the EU ETS. In essence, any carbon permits (EU allowances) issued by the UK will be void from 1 January 2018

The proposed measures apply to the auctioning of ETS allowances, the issue of free allocation by the United Kingdom and the exchange of international credits for allowances, as of 1 January 2018.

A European Commission FAQ document is issued, here

Clean Growth Strategy (UK)

Published this morning, 165 pages setting out the areas of new policy and rules for all UK, the BEIS Clean Growth Strategy (persuant to sections 12 and 14 of the Climate Change Act 2008) is here

Key points of relevance to industrial energy and environment (your ISO compliant Energy Registers) are as follows :

(1) Re the EU Emissions Trading System (EU ETS) covering the “traded sector” (power, heavy industry and intra EEA aviation) which collectively account for around 40 per cent of UK emissions under carbon budgets – the document confirms commitment to reducing emissions in these sectors and states the UK already has a “range of domestic policies in place to support this”. 

The document statement is “we will seek to ensure that our future approach is at least as ambitious as the existing scheme and provide a smooth transition for the relevant sectors”.

Note : the document states “the Government is considering the UK’s future participation in the EU ETS after our exit from the EU and we remain firmly committed to carbon pricing as an emissions reduction tool whilst ensuring energy and trade intensive businesses are appropriately protected from any detrimental impacts on competitiveness”.  

Carbon prices for the 2020s will be set out in the 2017 Autumn Budget. 

(2) For sectors not covered by the EU ETS, the document states two sector policies operate at EU rather than UK level and are particularly important for driving emissions reductions – new car and van CO2 regulations, and EU “fluorinated gas quotas”

The document statement is “we remain committed to reducing emissions in these areas and will offer certainty to industry as soon as possible on our future relationship with the EU. We will seek to ensure our future approach is at least as ambitious as the current arrangements”. 
(3) Re EU products policy which sets minimum standards for a range of products such as white goods and lighting, which improve energy efficiency (NB: I put a recent post about EU Ecodesign) –

The document statement is “we continue to support these policy measures, which cut energy bills, increase energy security, reduce emissions and help customers make informed choices, and we will keep step with equivalent standards wherever possible and appropriate, or even exceed them where it is in the UK’s interest to do so. This may include products not yet covered by European legislation, such as smart appliances”. 

(4) Re Non-energy and climate EU frameworks and policies which affect the UK, such as the Common Agricultural Policy. 

The document statement is “for instance, we will take the opportunity of leaving the Common Agricultural Policy to address climate change more directly by designing a new system to support the future of farming and the countryside, with a strong focus on delivering better environmental outcomes, including tackling climate change”.

Note : the proposal is to work with the British Standards Institution (BSI) to develop a set of voluntary green and sustainable finance management standards to promote responsible investment practices globally. The BSI will have completed the necessary standards scoping exercises and have the first standard in production by the first half of 2018.

Note : the document states the Government will put in place a “simpler, more ambitious and long-term policy and regulatory framework“, to –

(A) “make it easier for businesses to identify where they can save energy by simplifying the energy and carbon reporting framework” (this will entail changes to local law – please follow this Blog – when the law changes occur – please look out for Email Alerts)

(B) “ensure that those who lease premises to businesses, including in the service sector, continue to refurbish and improve the performance of their buildings. In parallel, all new commercial and industrial buildings should be more energy efficient”.

(C) “help to understand how we can encourage greater investment in energy efficiency measures and technologies, including establishing an Industrial Energy Efficiency scheme to help large companies install measures to cut their energy use, and working with the financial sector to identify how such measures can be taken forward”.

“Energy intensive industries will require steps beyond energy efficiency. Out to 2030, this will require industry to make progress in switching from fossil fuel use to low carbon fuels such as sustainable biomass, in line with broader Government priorities on delivering clean air, and clean electricity. Beyond 2030, this switching will need to substantially increase in scale and be coupled with the deployment of new technologies, for example carbon capture, usage and storage (CCUS). Over the course of this Parliament, we will therefore also develop a framework to support the decarbonisation of heavy industry. Overall, one possible pathway to 2032 could involve emissions from business and industry falling by around 30 per cent on today’s levels to as low as 83 Mt by 2032″.

Summary Local Schemes – the document states the Government will :

(1) continue with plans to close the CRC Energy Efficiency Scheme following the 2018-19 compliance year. “We will drive energy efficiency by implementing the previously announced increase to the main rates of the Climate Change Levy from 2019.” (see the 2016 changes to the Finance Act 2000 (as amended) – I did not send out an Email Alert at the time).

(2) undertake an evaluation of the Climate Change Agreements to inform any successor scheme from 2023.

(3) build on existing schemes such as the Energy Savings Opportunity Scheme (ESOS), undertaking a comprehensive assessment of its effectiveness and consider any future reforms.

(4) (alongside this Strategy), consult on a new and streamlined energy and carbon reporting framework to replace some existing schemes, such as the reporting element of the CRC Energy Efficiency Scheme, and align with mandatory annual greenhouse gas reporting by UK quoted companies. This will improve the way in which businesses report their energy use, and provide businesses with the information needed to identify how they can reduce energy bills. (The document states this consultation is underway – please check with BEIS). 

(5) establish an Industrial Energy Efficiency scheme to help large companies install measures to cut their energy use and their bills.

Note : The Government has commissioned an independent review of Building Regulations and fire safety, being led by Dame Judith Hackitt. The review will report in spring 2018. Subject to the conclusions of that review, the Government intends to consult on making improvements to Building Regulations requirements for new and existing commercial buildings where there are “cost- effective and affordable opportunities, and it is safe and practical to do so”. This will look to promote low carbon and higher energy efficent heating, ventilation and air conditioning systems in new commercial buildings.

Government Changes (UK) #2

Two new Whitehall departments are created, the Department for Exiting the EU, and the Department for International Trade. DECC (the former Department of Energy & Climate Change) is moved into BIS to create BEIS – the Department for Business, Energy and Industrial Strategy, encompassing Climate Change.

Departmental responsibilities are in these links:

(1) Department for Exiting the EU – here

(2) Department for International Trade – here

(3) Department for Business, Energy and Industrial Strategy – here

Various Parliamentary Select Committee investigations are underway, and these can be followed on the Cardinal Environment Limited Facebook page. Select Committee Reports will be notified in my Blog, here.

Today, the first Parliamentary Research Briefing is published on the impact of an EU exit for key UK policy areas – here.

In this Research Briefing, the Environment is a key policy area covered, as is Climate Change.

The senior management structure of the Department for Exiting the EU is as shown below :

Government Changes (UK)

Deep and fundamental changes are underway both to Whitehall (government departments) and to the Ministers responsible. Please look out for my Blog posts over the next days as I summarise the changes and their implications for policy and policy delivery.

Please ensure anyone who is not yet signed up to follow my Blog, signs themselves up now. Follow the instructions. 

Thank you

Fifth Carbon Budget (UK)

A carbon budget places a restriction on the total amount of greenhouse gases the UK can emit over a five-year period. The UK is the first country to set legally binding carbon budgets.

Today, the UK Government agreed with its independent Committee on Climate Change and proposes that the fifth budgetary period covering 2028 to 2032 should be set at 1.725m metric tons of carbon dioxide equivalent (MtCO2e). In 2015, the UK emitted 497 MtCO2e. The decarbonisation target is set at 57% emissions reduction by 2030 (on 1990 levels). The EU decarbonisation target is 40% reduction by 2030 (on 1990 levels). 

The 2008 Climate Change Act commits the UK to decarbonise by 80% by 2050. The carbon budgets and targets are designed to ensure the UK meets this commitment.

Orders and associated documents will be published shortly. When they are, this Blog will be updated to carry the links.

Subscribers to Cardinal Tailored EHS Legislation Registers should email if they need the 5th Carbon Budget order added to their system. Systems already carrying the 2008 Climate Change Act and associated Orders, will have the 2016 Order added automatically.

Energy Bill 2015-2016 (UK)

Happy New Year, and welcome to 2016!

I am waiting today for the second reading of the Energy Bill 2015-2016. Further blog posts will be at the end of January.

In the meantime, find here the summary of the Energy Bill as it returned to the Commons from the Lords, for this second reading.

The Energy Bill (when enacted) will:

  1. Formally establish the Oil and Gas Authority (OGA) as an independent regulator of the UK Oil and Gas industry, which will take the form of a government company, charged with (amongst other matters) the asset stewardship and regulation of domestic oil and gas recovery. 
  2. Transfer the Secretary of State for Energy and Climate Change’s existing regulatory powers in respect of offshore oil and gas to the OGA. It will transfer the Secretary of Stateʹs existing regulatory powers in respect of onshore oil and gas in England to the OGA and in relation to onshore oil and gas in Scotland and Wales will respect the changing devolution position. The Secretary of State’s environmental regulatory functions in relation to oil and gas would not be transferred.
  3. Give the OGA additional powers including: access to company meetings; data acquisition, retention and transfer; dispute resolution; and sanctions.
  4. Introduce provisions in relation to charges for the offshore oil and gas environmental regulatorʹs services to the industry.
  5. Make legislative changes to remove the need for the Secretary of State’s consent for large onshore wind farms (over 50 Mega Watt (MW)) under the Electricity Act 1989, acting in tandem with other measures to, in effect, transfer the consenting of onshore wind farms into the planning regime in the Town and Country Planning Act 1990.
  6. Make an amendment to the Climate Change Act 2008 preventing, from 2028, the net UK carbon account being calculated taking into account carbon units derived from the European Union Emissions Trading System.

Within the Department of Energy and Climate Change (ʺDECCʺ), the offshore Oil and Gas Environment and Decommissioning Unit (ʺOGEDʺ) is the body responsible for environmental regulation functions relating to the offshore oil and gas industry on behalf of the Secretary of State. OGED has been charging fees annually to operators in the territorial sea and the UKCS (UK Continental Shelf) to cover the costs of its functions. OGED recently reviewed the current fees charged by the Secretary of State to ensure they were in line with current Treasury Guidance. As a result of this work, it became clear that whilst the majority of fees that were recovered were properly covered by fee schemes, there were elements that were not provided for by the current legislation. The Bill therefore validates those charges that have already been raised without authority. The Bill also provides that the Secretary of State can charge a fee in future for two sets of functions.

The UK Government made a manifesto commitment to decentralise decision making on new onshore wind farms. Ministers have said that onshore wind energy development should only get the go‐ahead if supported by local people (Written Ministerial Statement). DECC is implementing measures, including through the Energy Bill, to help fulfil the commitment by removing the requirements for a consent from the Secretary of State for Energy and Climate Change in relation to the construction, extension or operation of onshore wind farms with a capacity greater than 50MW. In future, local authorities (or potentially the Welsh Ministers in the case of Wales) will be the primary decision‐makers for all onshore wind projects including those with a capacity greater than 50MW.

COP21: Paris Agreement is Adopted

Today, the Conference of the Parties to the UN Climate Change Convention adopted the Paris Agreement. 

The Paris Agreement is found here, at the Annex at the base of the document (the first part is the Proposal). The Agreement commits ratifying countries to a range of actions to combat climate change. I will post further in January.

Article 2

1. This Agreement, in enhancing the implementation of the Convention, including its objective, aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by:

(a) Holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change;

(b) Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production;

(c) Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate- resilient development.

Article 21

1. This Agreement shall enter into force on the thirtieth day after the date on which at least 55 Parties to the Convention accounting in total for at least an estimated 55 percent of the total global greenhouse gas emissions have deposited their instruments of ratification, acceptance, approval or accession.

2. Solely for the limited purpose of paragraph 1 of this Article, “total global greenhouse gas emissions” means the most up-to-date amount communicated on or before the date of adoption of this Agreement by the Parties to the Convention.

*** HAPPY CHRISTMAS ***