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.

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.

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 ***

Earth Day 2015 & the Paris Summit

Today is Earth Day, a day set aside each year to reflect on the state of Earth. Information about the Earth Day network is here.

Today also sees the Earth League publish its Paris Statement, a statement of the eight essential elements of the Paris Summit (Climate Change) to agree on in December. Information about the Earth League is here.

Earth League Statement – the full statement is here.

“Eight Essential Elements of Climate Action in Paris

  1. Governments must put into practice their commitment to limit global warming to below 2°C. We should aim to stay as far below it as possible, since even 2°C warming will cause significant damage and disruption. However, we are currently on a path to around 4°C warming by 2100, which would create unmanageable environmental challenges. If we do not act now, there is even a 1 in 10 risk of going beyond 6°C by 2100. We would surely not accept such a high risk of disaster in other realms of society. As a comparison, such a 1 in 10 probability is the equivalent of tolerating about 10,000 airplane crashes every day worldwide!

  2. The remaining global carbon budget – the limit of what we can still emit in the future –­ must be well below 1000 Gt CO2 to have a reasonable chance to hold the 2°C line. Humankind has already emitted around 2000 Gt CO2 since the beginning of industrialization. Respecting the global carbon budget means leaving at least three quarters of all known fossil fuel reserves in the ground. With current emissions trends, the remaining 1000 Gt CO2 would be used up within the next 25 years.

  3. We need to fundamentally transform the economy and adopt a global goal to phase out greenhouse gases completely by mid-­century. Deep decarbonization, starting immediately and leading to a zero-­carbon society by 2050 or shortly thereafter, is key to future prosperity. This long-­term goal, paired with strong national commitments, including a price on carbon, and a possibility to ramp up ambition via regular reviews, are essential elements of the Paris agreement. Fossil fuel subsidies should be removed urgently, and investment should be redirected to spark a global renewable energy revolution, warranting energy access for all and particularly for those most in need.

  4. Equity is critical for a successful global agreement in Paris. Every country must formulate an emissions pathway consistent with deep decarbonization. For the sake of fairness, rich countries and progressive industries can and should take the lead and decarbonize well before mid-­century. Developing countries should formulate plans far beyond what they can be expected to pursue on their own, reaping benefits from leapfrogging into a sustainable economy, well supported by international climate finance and technology access. Safeguarding the right to development of the Least Developed Countries (LDCs) is fundamental.

  5. We must unleash a wave of climate innovation for the global good, and enable universal access to the solutions we already have. The unprecedented challenge of climate change requires unprecedented technological advances. We need targeted research, development, demonstration and diffusion (RDD&D) of low-­carbon energy systems and sustainable land use, and capacity building to enhance access for those most in need. International cooperation, stringent laws and standards, public and private investments and clear economic incentives are all crucial steps in the global transition.

  6. We need a global strategy to reduce vulnerability, build resilience and deal with loss and damage of communities from climate impacts, including collective action and scaled-­up support. With 1°C of warming already having taken place, many societies are challenged by water scarcity, shifting rain patterns and other impacts. This poses a threat to human development in all countries, particularly among the poorest and most vulnerable. A 2°C or more warming of the planet would impose huge social and economic burdens that need to be shouldered through international solidarity.

  7. We must safeguard carbon sinks and vital ecosystems, which is as important for climate protection as the reduction of emissions. Cutting down forests and degrading grasslands and aquatic systems is like killing our best allies in the fight against climate change. A precondition for sustainability is the strengthening, not the weakening of the resilience of natural and managed ecosystems and food production systems.

  8. We must urgently realize new scales and sources of climate finance for developing countries to enable our rapid transition to zero-­carbonclimate-­resilient societies. This includes additional public funding for mitigation and adaptation at a level at least comparable to current global ODA (around 135 billion USD p.a.). Innovative schemes such as globally funded renewable energy feed-­in tariffs are required. The private sector must be encouraged to mobilize substantially larger sums. Governments should engage with banks and pension funds, enabling a shift to  climate-­friendly investments. Global and national climate funding must be effective, transparent and accountable.”

2015 UK Election Debate: Environment and Climate Change

This is a BBC Daily Politics debate involving subject specialists of the main UK political parties; the BBC’s environment analyst Roger Harrabin assisting with the questioning.

Most time was spent on Climate Change and Energy prices, with flooding getting a mention along with a few other issues that have been in recent headlines. 

Voters go to the polls in the 2015 UK Election on May 7, 2015.

This is a link to the BBC IPlayer of the Environment and Climate Change debate, held earlier today – here.