EU Brexit Preparedness (EU Brexit)

UK Exit day is 31st October 2019

Please read this Blog post carefully, if you have any questions or uncertainties as to your actions, please email to arrange a telecon.

Today, 12th June, the EU Commission published its fifth Brexit Preparedness Communication – it is a review of the state of the EU Brexit preparedness and contingency measures, and is important for activities in the EU and in the UK. The document is here.

Key elements :

(1) As stated in the fourth Brexit Preparedness Communication of 10 April 2019, the Commission is ready to propose financial support measures (applicable to the E27) to mitigate the impact in the most affected areas and sectors, taking into account the funds that are available and any adjustments on the expenditure and revenue side of the EU budget that might result from a disorderly withdrawal. For more immediate support to affected stakeholders, EU State aid rules offer flexible solutions for national measures. But see Item (4) below.

(2) In this review, the Commission screened all the EU-level measures to assess whether they are still fit for purpose given the extension of the Article 50(3) TEU period. On the basis of this screening, the Commission considers that the legislative and non-legislative Union acts continue to meet their intended objectives. There is therefore no need to amend them on substance. The Commission does not plan any new measures ahead of the new withdrawal date (31st October).

(3) The Commission adopted 16 non-legislative contingency acts under the EU sanitary and phytosanitary legislation in view of the previous withdrawal date of 12 April 2019 on the basis of assurances given by the United Kingdom. These measures are now obsolete due to the extension. However, if the United Kingdom continues to provide the necessary assurances, the measures will be re-adopted to apply as of 1 November 2019.

These acts cover the listing of the United Kingdom and its Crown Dependencies as a third country allowed to export live animals and animal products to the EU; and the approval of new or extended Border Inspection Posts in the EU27 Member States most concerned by UK imports.

They do not cover acts on the recognition of health marks for products of animal origin, heat treated pallets, or fortified flour (UK requests).

(4) In some sectors, companies indicated in March 2019 that they had not had sufficient time to adapt. The Commission strongly encourages stakeholders to take advantage of the extra time until 31 October 2019 to ensure that they have taken all the necessary action to prepare for the United Kingdom’s withdrawal.

They should ensure that the necessary regulatory authorisations are in place, that they have taken the administrative steps for cross-border trade and the necessary action for relocation, corporate reorganisation or contractual adaptations.

In particular, it will not be possible to place on the EU market after Exit day products which do not comply with the necessary requirements and authorisations.

As stated above, the Commission does not plan to adopt any new measure in view of a possible no-deal scenario or to compensate for a failure to prepare by operators.

The Commission considers that the additional time available because of the extension will in principle be sufficient for operators to adapt, so that even in cases where exemptions or derogations are available, they should not be necessary.

(5) EU27 Member States should screen their national contingency measures to ensure that they remain fit for purpose given the extension of the Article 50(3) period. In case of a no-deal withdrawal, the final preparatory measures must apply as of 1 November 2019 at the latest.

(6) Note the specifics on medicinal products, medical devices and chemical substances – page 5 of the document (link above).

(7) In the field of sanitary and phytosanitary controls (SPS), EU27 Member States have set up new Border Inspection Posts (BIPs) or extended existing ones at entry points of imports from the United Kingdom into the EU. As stated above, the non-legislative act approving these BIPs will need to be adopted again given the most recent extension of the Article 50(3) period. In the meantime, EU27 Member States should use the additional time to evaluate the need for any further adjustments to these BIPs to ensure that they are fully functional from the outset.

Furthermore, the Commission maintains regular contacts with the most concerned Member States so that, in a no-deal scenario, a landbridge route between Ireland and the rest of the European Union via the United Kingdom can be implemented swiftly, including support from the necessary IT systems.

(8) The international road haulage measure expiry deadline of 31st Dec 2019 is unaltered.

It is important companies review their supply contracts, and ensure suppliers are Brexit ready.

UK Industrial Goods Export to EU (EU Brexit)

Exit day is 31st October 2019.

The EU issued in February a Q&A document answering questions arising on the specifics of UK Industrial Goods circulation in the European market following Exit. This document is here.

Please examine this document carefully, particularly as respects the point in the circulation when the Third Country regime would apply, and the matter of Technical Dossier transfer (Category D).

Any questions not addressed by this Q&A should be made to the UK BEIS department.

The UK has said it would permit CE marked Goods to circulate in the UK market after Exit day, as far as I can determine, this is not reciprocated by the EU (as respects UKCA marked Goods). If anyone has an update on this, perhaps they would email me it. Thank you.

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

International Road Haulage (UK Exit)

Exit day is 31st October 2019

Whilst the UK is in the EU, road transport continues as usual. Once the UK leaves the EU, road transport to and in the EU will be subject to new arrangements.

International ECMT permits were oversubscribed in the first round, accordingly the UK opened a new round of ECMT permit applications in March 2019 –

The government has secured additional ECMT permits at the ECMT Road Transport Group meeting. These include both Euro V and Euro VI permits. There are now:

• 1,320 annual Euro VI permits

• 290 annual Euro V permits

• 3,744 short-term Euro VI permits (valid for 30 days)

• 1,080 short-term Euro V permits (valid for 30 days)

Annual permits cover all journeys made using the permit between 1 January and 31 December 2019. Monthly permits are valid for all journeys within 30 days of the start date listed on the permit.

UK hauliers will be able to carry on doing work to and from the EU, after the 31st October 2019 for a short time, under the EU Contingency law enacted (see diagram). This law allows UK registered operators to carry out road haulage to EU member states until 31 December 2019. The new rules were approved by the EU Parliament and Council in March and allow most journeys without a permit until 31 December 2019:

• travel to any EU member state (empty or laden) and return (empty or laden)

• a limited amount of ‘cross-trade’ or ‘cabotage’ work

• the EU law does not allow permit free access to non-EU countries – an ECMT permit will be required (after Exit) to transit EU member states to a 3rd countries such as Switzerland or Turkey.

I will update this post or issue a new Blog post when the arrangements for 2020 are announced.

Enquiries should be made to the UK Department for Transport.

EU (Withdrawal Agreement) Bill (UK Brexit)

Exit day is 31st October 2019

On the evening of 14th May (two days ago), the UK Government said it would bring the EU (Withdrawal Agreement) Bill to Parliament in the week beginning 3rd June 2019 (two weeks time).

The EU (Withdrawal Agreement) Bill is not published. The Bill is needed to implement the EU-UK Withdrawal Agreement that is signed but not ratified by the UK.

This Institute for Government explainer sets out information about the Bill – here.

It is unlikely that Parliament will enact the Bill. There are a number of reasons for this, covered in the Institute for Government explainer and publicised almost daily in the media. I will issue a new Blog post if it is; and if it is, it will be a major change to the going forward arrangements.

The Exit day is the day the UK leaves the EU, unless Article 50 is revoked in which case there is no Exit day.

The arrangements for conducting trade with the EU and other matters regulated presently by EU law, after Exit day, will be as set out in ‘No Deal’ Notices and other instructions, and may be subject to change as these arrangements firm up, or new arrangements created. This Blog contains many posts drawing attention to these new arrangements (please check the different Blog categories). I update the posts online if there are updates. Or I issue new Blog posts.

Changes in the date of the Exit day must be agreed between the EU and the UK, and are not in the gift of one side unilaterally. By decision of the European Court, Article 50 may be revoked by the UK on its own.

[The Exit day may change, please keep following this Blog]

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]