Carbon Emissions Tax (UK Brexit)

Exit day is 31st October.

I previously posted that a Carbon Emissions Tax was being considered, then it seemed it would not go ahead. Today 29 July, the Government issued updated guidance giving 4th November as the start of the Carbon Emissions Tax (in the event of no-deal). The Carbon Emissions Tax is already provided for by Part 3 of the Finance Act 2019.

Part 3 (if not already added to Subscribers EHS Legislation Registers & Checklists) will be added shortly, to the Brexit Law List, as part of the Brexit Law consolidation that is a work in progress.

The relevant Guidance section states : the updated Guidance is here (please read other parts also)

Carbon pricing

As set out at Budget 2018, if the UK leaves the EU in a no deal scenario, the UK government would introduce a Carbon Emissions Tax to help meet the UK’s legally binding carbon reduction commitments under the Climate Change Act.

In this scenario, for 2019 a rate of £16 would be applied to each tonne of carbon dioxide emitted over and above an installation’s emissions allowance. For permit holders outside the simplified reporting scheme this allowance would be based on the allocation of free EUAs that would have been allocated to installations under Phase III of the EU ETS. For those currently covered by the simplified reporting arrangements, the allowance would be based on their current emissions target. The rate for years beyond 2019 would be set at future fiscal events.

The tax would apply from 4 November 2019 to all UK stationary installations currently participating in the EU ETS. The aviation sector would not be subject to the Carbon Emissions Tax. Aviation operators would still be obliged to comply with greenhouse gas Monitoring Reporting and Verification requirements throughout 2019.

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]

Climate Change and EUETS (UK Brexit)

Exit day is 31st October 2019

Climate Change

Today (2 May 2019) sees the publication, by the UK Committee on Climate Change (CCC), of (277 pages of) advice in response to the request of the governments in Westminster, Edinburgh and Cardiff, sent in October 2018.

The CCC advice is for the UK Government to legislate for and reach a net-zero emissions goal by 2050, so as to end its contribution to global warming within thirty years. This net-zero target should cover all greenhouse gases and should include international aviation and shipping, but exclude the use of emissions credits.

Carbon Brief has summarised in a useful Q&A – here – extracts are below –

In 2015, almost every country of the world promised to reach net-zero emissions later this century as part of the Paris Agreement on climate change. The deal set a limit to global warming of “well-below” 2C above pre-industrial temperatures and said countries will “pursue efforts” to keep warming to 1.5C.

In contrast, the UK’s existing climate targets were set in the context of a 2C warming limit. Its overall goal, first set in 2008, has been to cut greenhouse gas emissions to 80% below 1990 levels by 2050.

In the wake of the raised ambition of the Paris deal, the government asked its official climate advisers, the CCC, what this should mean for the UK.

In two separate pieces of advice in 2016, the CCC said that the UK would ultimately have to raise its ambition for 2050, to match the Paris goals, but that it was not the time for doing so.

Under the Climate Change Act 2008, the UK has legally binding five-yearly carbon budgets, which mark staging posts on the way towards the “80% by 2050” goal. So far, the first five carbon budgets have been set down in legislation, covering 2008-2032.

On 8 October 2018, the Intergovernmental Panel on Climate Change (IPCC) published a special report on 1.5C that clearly set out the risks of allowing warming to exceed this level. This report also summarised the latest scientific evidence on what would be needed to stay below 1.5C.

Following this report, on 15 October 2018, the governments in Westminster, Cardiff and Edinburgh asked collectively the CCC for advice on when the UK should cut its emissions to net-zero.

Their letter asked whether the UK should set separate targets for CO2 and other greenhouse gases (GHGs). It asked “whether now is the right time for the UK to set such a target” in legislation. And it asked how the UK would reach net-zero, as well as the costs and benefits of doing so.

Today’s advice from the CCC is its response to this formal request. It comprises 277 pages of advice to the three governments, covering each of the questions posed by their October letter.

This advice is backed by another 300-odd pages setting out the significant changes in scientific knowledge and international policy that have taken place since the UK’s existing 2050 target was set. Behind the scenes are numerous research projects, technical annexes and advisory groups.

The UK Government response is to welcome the advice, to not accept its recommendations immediately, and to respond in due course. The response is here.

Re Scotland, the CCC advice is for Scotland to reach net-zero by 2045 (5 years earlier). The Scottish Government will now legislate to achieve this, and on Sunday its First Minister declared a “Climate Emergency”. A 2018 bill currently going through the Scottish Parliament aims to increase the current 2009 Climate Change (Scotland) Act target to 90% (emissions reduction by 2050 against a 1990 benchmark). It will now be amended so MSPs can vote on the new target of net-zero by 2045.

The current Scotland bill is here.

Re Wales, the CCC advice is the 2050 goal should be for a 95% reduction on 1990 levels. This is due to its relatively lower potential for CO2 storage and relatively high agricultural emissions. The Welsh government has also declared a “Climate Emergency” – here. And in March 2019, the Welsh government published its Plan to set out how Wales aims to meet the first carbon budget (2016-2020) and consequently the 2020 interim target through 100 policies and proposals across Ministerial portfolios.

I will update this post online, with the Welsh government response to the CCC advice.

EUETS

The EU emissions trading system (EUETS) requires heavy industry and power producers to obtain and surrender allowances equal to their level of carbon emissions on an annual basis. Companies that are the most exposed to international competition are allocated a proportion of free ETS allowances annually. For years, many companies have used these free allowances to comply with their obligations for the previous year.

Just over four months ago, in December 2018, the European Commission suspended the UK’s ability to auction ETS allowances until the withdrawal agreement was ratified. This was decided in order to maintain the integrity of the European carbon market in the event that the UK left the EU without a deal on 29 March this year. This position means that free allowances for 2019 are not issued. I posted about this decision before Christmas.

The withdrawal agreement negotiated with the European Union (but not ratified by the UK Parliament) allows for full and continuing membership of the EU ETS until the end of December 2020.

If it had been ratified when planned, the UK would have had the full legal basis immediately to issue free 2019 allowances. However, the decision of the UK Parliament was not to vote in favour of the withdrawal agreement. This has meant that UK businesses have, since December, been left without access to 2019 free allowances.

Despite the situation, all UK installations had met their 2018 obligations in full (allowances are available in other markets) – before the 30th April compliance deadline. The UK government (BEIS department) had reminded all participants that they still had a legal duty to meet their obligations for 2018 and that the UK is committed to upholding its environmental standards and continuing to comply fully with European law while its remains a member of the EU. I posted before about this deadline and the delay in the no-Deal replacement carbon tax.

Re British Steel (special case) – the UK Government has entered into a short-term bridge facility, valued at about £120 million, under section 7 of the Industrial Development Act 1982, at an interest rate of LIBOR plus 7%. The effect of this agreement is that the Government has, in the last week, purchased the necessary emissions allowances on behalf of British Steel, to enable British Steel to meet its EUETS obligations.

Per the BEIS Minister statement to Parliament yesterday – In return, under a deed of forfeiture, ownership of the company’s 2019 allowances will now be transferred to the Government once they are released. Through the subsequent sale of these 2019 allowances, the UK Government expect the taxpayer to be repaid in full. The 2019 allowances are more than are needed to fulfil the 2018 obligations, and all of them will come to the Government.

The terms of the deal ensure that if the price of allowances were to rise, the taxpayer would receive half of any financial upside once the allowances are sold back into the market. To ensure the taxpayer is protected in the event that allowances were to fall, under the terms of the deal, British Steel has been required to underwrite any shortfall and is covering the cost of arranging the facility. The price of carbon allowances has been rising over the past two years, and the Exchequer received £1.4 billion from auctioning allowances in 2018, up from £533 million in 2017.

The UK Government is engaging with the Commission about the implications for the UK continued participation in the EU ETS.

In the event that an agreement is not reached (and the Withdrawal Agreement stays unratified) – the UKGovernment will put in place a domestic scheme that provides security against the loss of EU-derived allowances. I will post again about this, when further information is public.

[the Exit day may change, please continue to follow this Blog]

Climate Change Measures (UK Brexit)

Exit day is 31st October 2019

The UK Government has a Technical notice setting out instructions in relation to the EU ETS, the replacement Carbon Emissions Tax, and Energy-using Products. I have posted in the Blog about this before.

This Technical notice is here.

The Technical notice is updated to set out the changes following the next Exit day of 31st October.

* The 2018 compliance deadline to surrender allowances for the EU Emissions Trading Scheme (ETS) is now 30 April 2019.

* The Carbon Emissions Tax did not commence on 15 April 2019. The Technical notice states further information on the implications of the change of Exit day for carbon pricing will be set out in due course.

[the Exit day may change, please continue to follow this Blog]

National Air Pollution Control Programme (UK)

Published yesterday (1st April 2019) the National Air Pollution Control Programme (NAPCP) sets out measures and analysis for how emission reduction commitments can be met across the UK. The document (which is a lengthy series of tables spanning 60+ pages) is here.

The NAPCP sets out how the UK can meet the legally binding 2020 and 2030 emission reduction commitments (ERCs). These commitments apply for 5 pollutants:

• nitrogen oxides

• ammonia

• non-methane volatile organic compounds

• particulate matter

• sulphur dioxide

This programme is required under The National Emission Ceilings Regulations 2018 (which give effect to EU law on this topic).

The programme identifies the UK air quality framework to be derived from a mixture of domestic, EU and international legislation and consists of three main strands:

(1) Legislation regulating total national emissions of air pollutants – the UK is bound by both EU law (the National Emission Ceilings Directive) and international law (the Gothenburg Protocol to the UNECE Convention on Long-range Transboundary Air Pollution);

(2) Legislation regulating concentrations of pollutants in ambient air;

(3) Legislation regulating emissions from specific sources such as legislation implementing the Industrial Emissions Directive, Medium Combustion Plant Directive, and the Clean Air Act.

The programme mentions Directive 2008/50/EC of 21 May 2008, on ambient air quality and cleaner air for Europe which sets objectives for the following pollutants; sulphur dioxide, nitrogen dioxides, particulate matter (as PM10 and PM2.5), lead, benzene, carbon monoxide and ozone (and applies to the UK).

Plus, Directive 2004/107/EC of 15th December 2004, relating to arsenic, cadmium, mercury, nickel and polycyclic aromatic hydrocarbons in ambient air, covers the four elements cadmium, arsenic, nickel and mercury, together with polycyclic aromatic hydrocarbons (PAH) including benzo[a]pyrene.

The programme mentions the UK National Air Quality Strategy, published in 1997 under the Environment Act 1995 (the last time a UK-wide Environment Act was enacted). This Strategy established objectives for eight key air pollutants, based on the best available medical and scientific understanding of their effects on health, as well as taking into account relevant developments in Europe and the World Health Organisation. These Air Quality Objectives are at least as stringent as the limit values of the relevant EU Directives – in some cases, more so. The most recent review of the Strategy was carried out in 2007.

The programme details the steps taken since in the devolved administrations of England, Scotland, Wales and Northern Ireland.

The programme sets out, in separate Tables, the progress made, targets and future measures.

The programme merits detailed reading, and it is too lengthy to summarise in full in this Blog post.

The programme does not mention the Environment Bill.

Events today 13th March (UK Brexit, Chancellor’s Statement)

Today a number of key events occurred as follows :

(1) (time limited, no deal) UK customs tariffs were published – a Commons Research Paper gives further details – here. [NB : this Blog does not focus on customs tariffs]

(2) time limited (no deal) special arrangements for the international border on the island of Ireland were publishedhere.

* The UK government would not introduce any new checks or controls on goods at the land border between Ireland and Northern Ireland, including no customs requirements for nearly all goods.

* The UK temporary import tariff announced today would therefore not apply to goods crossing from Ireland into Northern Ireland.

* The UK government would only apply a small number of measures strictly necessary to comply with international legal obligations, protect the biosecurity of the island of Ireland, or to avoid the highest risks to Northern Ireland businesses – but these measures would not require checks at the border.

(3) the UK Chancellor announced :

* Consultation on a new business energy efficiency scheme for SMEshere.

* A review of the Aggregates Levy (put in place in 2002) – here.

* A call for evidence on the strengthening of the UK’s offshore oil and gas decommissioning industryhere.

Offshore oil and gas decommissioning industry – A call for evidence, as announced at Budget 2018, seeking to identify what more should be done to strengthen Scotland and the rest of the UK’s position as a global hub for safe, environmentally-friendly decommissioning that meets the Oil and Gas Authority’s ambitious cost reduction targets.

* A Review on the Economics of Biodiversity – A new global review, led by Professor Sir Partha Dasgupta, to assess the economic value of biodiversity and to identify actions that will simultaneously enhance biodiversity and deliver economic prosperity. The review will report in 2020, ahead of the 15th meeting of the Conference of the Parties to the Convention on Biodiversity in Beijing in October that year.

* Re Biodiversity and conservation in Overseas Territories – A call for evidence inviting creative ideas from stakeholders on how the government can safeguard the biodiversity found in the Overseas Territories.

* Red Diesel: Response to Call for Evidence – A summary of responses to the May 2018 call for evidence on red diesel and air quality.

* In the Environment Bill (so far we have only seen part of the Environment Bill) – mandate net gains for biodiversity on new developments in England to deliver an overall increase in biodiversity.

(4) the Government’s motion to rule out leaving the EU on 29th March 2019 without a Withdrawal Agreement and associated Political Declaration was amended to make it apply universally, and then agreed.

Tomorrow, a Government motion to seek consensus on a delay in the exit date to 30 June 2019 will be debated in Parliament. Note : any delay will require EU approval.

I will issue a new Blog post on the matter of the exit day, tomorrow.

Remember : in international and domestic law the exit day is 29th March 2019.

UK Carbon Emissions Tax (UK Brexit)

I posted before about the Carbon Emissions Tax that will be applied in place of EU ETS (the EU carbon trading scheme). The UK Government issued yesterday further instructions on this Carbon Emissions Tax. These instructions are here.

UK Carbon Emissions Tax – imminent key dates

From 30 March 2019, if there is no transition, business emissions from 1 January 2019 onwards will no longer be covered by the EU ETS, so UK businesses will no longer need to surrender allowances for these emissions at the end of each year.

However, all stationary installations currently participating in the EU ETS should continue to comply with the regulations for the monitoring, reporting and verification of greenhouse gases. These regulations will underlie the new UK Carbon Emissions Tax.

The UK Carbon Emissions Tax is provided for in the Finance Act 2019 and will be introduced on 1 April 2019 – the reporting period for stationary operators will be 1 April 2019 to 31 December 2019. The 2019 tax will be set at £16 per tonne. Subject to state aid approval, the scheme to compensate energy-intensive industries for the indirect costs of the EU ETS would remain in place to compensate for the indirect emission costs of the new Carbon Emissions Tax.

The Finance Act 2019 is now added to the Brexit Law List, in Cardinal Environment EHS Legislation Registers & Law Checklists.

Accounts administered by the UK in the EU ETS allowance registry and the Kyoto Protocol registry will be blocked from the point of the UK leaving the EU. Operators wishing to retain access to their allowances after the withdrawal date should consider opening an account in another member state’s registry for this purpose, and should consider the amount of time this is likely to take. Clean Development Mechanism project developers with a UK Letter of Authority will also need a letter of approval from a different Designated National Authority.

Until further notice, the UK government will not issue or auction any 2019 EU ETS allowances. It remains possible for allowances to be purchased through the European Energy Exchange (EEX) auction platform, and on the secondary market. Operators should consider this when planning to meet 2018 compliance obligations. To make sure obligations will not be affected, the government brought forward the 2018 compliance year deadlines, published on 7 March 2018. This states that a company (in EU ETS) needs to report its 2018 emissions by 11 March 2019, and surrender allowances for those emissions by 15 March 2019.

Guidance on this was issued in October 2018 – here.