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.

Carbon Emissions Tax (UK Brexit)

I posted before about a carbon emissions tax being introduced in the event the UK access to the EUETS (the EU Emissions Trading System) is discontinued following Brexit.

The Finance (No. 3) Bill, out for Royal Assent, makes provision for this. Once enacted, the Act will be added to the Brexit Law List (in subscribers to Cardinal Environment EHS Legislation Registers & Checklists systems).

An information note is also published, here.

This note identifies that a Carbon Emissions Tax is one option being pursued by the UK Government.

The note sets out how the new Carbon Emissions Tax would operate.

The existing CCL is unaffected.

The new Carbon Emissions Tax will come into force via separate statutory instrument.

New Carbon Emissions Tax (UK)

The recent Budget 2018 announced a new Carbon Emissions Tax would be introduced from 1April 2019 in the event the UK leaves the EU at the end of March 2019 without a deal.

If the UK secures a transition/implementation period, it would remain a member of the EU Emissions Trading System (EU ETS) during this period. The UK government is continuing to develop options for long term carbon pricing, including remaining in the EU ETS; establishing a UK ETS (linked to the EU ETS or standalone) or a carbon tax.

Already published Brexit Preparedness Notices confirm the UK would be excluded from participating in the EU ETS in a ‘no deal’ scenario. This means that current participants in the EU ETS who are UK operators of installations would no longer take part in the system.

The new Carbon Emissions Tax would apply to emissions of carbon dioxide (and other greenhouse gases on a carbon equivalent basis) from UK stationary installations currently in the EU ETS. The aviation sector would not be subject to the Carbon Emissions Tax.

Details of this New Carbon Emissions Tax are here.

Initial information is here.

Note in particular :

(1) The EU ETS requires participants to obtain permits to emit and then to submit a report annually with details of their activities across the previous calendar year, from which their emissions across the period are calculated. The UK would continue to operate a permitting and reporting regime after leaving the EU ETS. Permits issued for EU ETS compliance before 29 March 2019 would remain valid for compliance with the Carbon Emissions Tax although minor amendments to permits may be necessary.

(2) Any stationary EU ETS installation currently covered by the permitting system and the emissions reporting scheme (including those in a simplified reporting scheme for small emitters and certain hospitals) would remain subject to the reporting requirements and potentially become liable to pay the tax, as would any installation that became permitted after the start of the tax.

(3) There would be no requirement for installations to register for tax or send in a tax return – all information needed to calculate tax liability and to bill the installation would be taken by HMRC from the existing IT system known as ETSWAP. The tax year would cover the same calendar year period as under the existing monitoring, reporting and verification system, with installations continuing to use ETSWAP to submit independently verified data to environmental regulators on their activities covering the period 1 January to 31 December. They would continue to do this by 31 March each year. As a result, by 30 April each year, independently verified data would continue to be available on each installation’s greenhouse gas emissions covering the previous calendar year. HMRC would use these data to generate a tax bill, which would be sent to installations in May, with payment required within a specified period agreed following consultation. Transitional arrangements would apply in the first tax year as it would cover only 9 months as a result of the tax starting part way through the year.

(4) For permit holders outside the simplified reporting scheme the tax would be based on the amount by which reported emissions exceeded an emissions allowance set for tax purposes for each installation in advance of the tax year. For 2019 and 2020, the allowance would be set at the level of free allocation of EUAs under Phase 3 of EU ETS, with an installation paying tax only if its emissions exceeded its allowance, albeit that 2019 allowances would be set at 75% of the full year level.

For power generators who receive no free allocation of EUAs under EU ETS, the allowance would be set at zero.

Installations that became permitted after the UK left the EU ETS would have no EUAs on which to base their emissions allowance – their allowance would be set in a comparable way to existing EU ETS participants.

(5) Premises covered by the simplified reporting scheme would continue to operate as they do at present except that the tax (rather than the current civil penalty) would be payable on emissions above the allowance. The allowances would be set at equivalent levels to the targets that would have been set for them under the current simplified reporting scheme.

(6) HMRC would tax emissions in excess of the emissions allowance on a carbon equivalent basis per tonne. For 1 April to 31 December 2019 the rate would be £16 per tonne. The rate for years beyond 2019 would be set at future Budgets.

(7) As the tax would be introduced from April 2019, the arrangements for the first year would differ from the arrangements set out above. The first tax period would run for only 9 months and cover the period from 1 April to 31 December 2019. As indicated above, installations’ emissions allowances for 2019 would be set at 75% of the level that would have applied had the first tax period covered 12 months. Although they would still need to monitor their emissions for the full 12 months, installations would need to submit 9 months’ activity data by 31 March 2020 covering this first tax period. Payment details for the first tax year would be confirmed after the consultation planned for 2019 but it is possible that tax bills for 2019 would be sent out later than May 2020.

(8) Legislation will be introduced in Finance Bill 2018-19 to create a new Carbon Emissions Tax, setting the scope, rate and basic structure of the tax and establishing that it would be payable only on emissions above an emissions allowance set for each installation. The Finance Bill will provide for a statutory instrument or instruments which would be laid in early 2020 following a consultation in 2019. The instrument or instruments would be wide-ranging.

(9) The government currently sets a total carbon price, created by the price of allowances from the EU ETS and the Carbon Price Support (CPS) rate per tonne of carbon dioxide (t/CO2) which tops up the EU ETS price for electricity generators. The total carbon price is designed to provide an incentive to invest in low-carbon power generation. In a ‘no deal’ exit from the EU the CPS would remain in place.

FURTHER DETAIL IS IN THE LINKED NOTE (see earlier)