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EU Emissions Trading System

The EU Emissions Trading System (EU ETS) is one of the key policies introduced by the EU to address greenhouse gas emissions and help meet its 2020 emission reduction targets. The EU ETS will also contribute to delivering Scotland’s goal of a 42% reduction in CO2 emissions by 2020 and 80% by 2050 compared to 1990 levels.

Installations and aircraft operators covered by the EU ETS are those which carry out activities listed in Annex I of the EU ETS Directive. These activities include combustion, production and processing of metals, production of chemicals, mineral industries, pulp and paper industries, carbon capture and storage and flights departing from or arriving in the EU.

This web page has been designed to assist operators, or others responsible for managing carbon emissions, by providing the necessary information and guidance for participation in the EU ETS. This site may also be useful to students and others wanting to learn more about the trading system.

NIMs data collection exercise

UK participation in the 2019 NIMs data collection exercise will give eligible UK operators of installations the opportunity to apply for free allocation of allowances if the UK remains in the EU ETS post-2020 (for all or part of Phase IV). As previously communicated, continued UK membership of the EU ETS post-EU Exit is being considered alongside a range of options including a carbon emissions tax and a UK ETS (linked or standalone).

This applies to UK operators of stationary installations who have, or expect to have, a greenhouse gas emissions permit on or before 30 June 2019 that want to be eligible for free allocation. This also applies to operators who do not believe they require or are not eligible for allocation (for example electricity generators, as defined by Article 3(u) of the ETS Directive) – the level of information required will however be different. 

The rules for the NIMS data collection

The rules governing the data collection exercise come from the Commission Delegated Regulation (EU) 209/331 of 19 December 2018, The Free Allocation Regulation which came into force on 28 February 2019. The European Commission has prepared a suite of guidance documents relating to the requirements. Most are now published on the European Commission's website but they are also in the Related Items section on this page. The templates for submitting information can be downloaded from the related items.

What you need to submit – by 30 June 2019

Any UK operator that wishes to be eligible to apply for a free allocation of allowances for 2021 to 2025 must submit a ‘full’, independently verified, NIMs return to the relevant regulator (EA in England, SEPA in Scotland, NRW in Wales, NIEA in Northern Ireland and OPRED for offshore installations) by 30 June 2019.

Our previous NIMs newsletter (issue 33, January 2019) explained that the UK Government and Devolved Administrations are minded to offer schemes for operators that are eligible under Article 27 and Article 27A of the EU ETS Directive. For these schemes, participants will not be required to surrender allowances.

However, if for any reason eligible operators are unsure about whether to participate in these schemes, or if they think that they may exceed the threshold for this type of installation during the first allocation period, they must submit the full, independently verified, NIMs data to their regulator in order to be eligible for free allocation.

Please note that any Article 27 and 27a policy at this moment is provisional and may change, including as a result of stakeholder responses to the public consultation. Any such schemes would also ultimately be subject to Commission approval.

Our 16 August 2019 newsletter has important information about the article 27 and 27A opt-out schemes.

It is for each operator to decide whether to participate in the 2019 NIMs data collection exercise, taking into account the consequences of not submitting an application on time (e.g. ineligibility for free allocation).

Type of EU ETS operator

NIMs baseline report

Monitoring methodology plan (MMP)

Verification report with   positive opinion

Supporting evidence for MMP

Deadline for submissions

Electricity generator

Sheet A only

No

No

No

30 June 2019

 

Article 27a

Sheet A and D.1.2

No*

No*

No*

30 June 2019

Article 27

Sheet A and D.1.2

No*

No*

No*

30 June 2019

 

Operators not applying for a   free allocation

Sheet A only

No*

No*

No*

30 June 2019

Eligible operators applying for a free allocation of allowances

All sheets except B+C

Yes

Yes

Yes

30 June 2019

 

Operators who obtained a   permit before 30 June 2019 but have not operated in the baseline period

Sheet A

Yes

No

Yes

30 June 2019

*To note that by opting to not complete these sections an operator renders itself ineligible for free allocation under the EU ETS for 2021-2025

Our 16 September 2019 newsletter includes the lists of Scottish participants to be included in the main scheme, the Article 27 scheme and the Article 27a scheme. ETS organisations participating in the NIMs data collection exercise should check that they are on the correct list by 20 September 2019.

Webinar on data collection

On 21 March, a two hour webinar session covering the following topics was delivered to around 135 participants. The presentations including the Q&A session is available by clicking on the links below:

EU ETS Article 27/27a Information Session - NIMs data collection webinar

Monitoring Methodology Plan Approval Process

The data collection exercise in summer 2019 required you to submit to us a report on your installations activity levels (baseline data report) as well as a plan showing how you gathered that information (monitoring methodology plan MMP). The baseline data reports will be used to calculated the level of free allocation which your installation will receive for the period 2021 to 2025. The process of calculating your allocation is on-going at present.

The monitoring methodology plan (MMP) also contained how you intend to monitor information relating to your installations activity level going forward. This plan should be implemented at present as the 1st report on your annual activity levels will be provided to us in 2021.

We are currently starting the process of approving the MMPs which were submitted to us during summer 2019, which may require us to contact you for changes to be made. We would therefore like to encourage you to review your MMP to ensure it can be approved by us.

We have produced an interim guidance note on MMPs to assist you in reviewing your MMP; this should illustrate what we will be looking for. The guidance note will required to be updated with further details on the activity level change regulations and the reporting process. It can be found in the related items section.

Information on EU ETS Opt-Out Schemes

The information below relates only to Phase IV of the EU ETS and is published in accordance with legislation that currently applies in the UK. This is without prejudice to the UK’s future approach to carbon pricing after the UK leaves the EU ETS. The UK’s future carbon pricing policy will be released through the Government Response that follows the consultation on the Future of UK Carbon Pricing. Further information relating to the UK’s opt-out schemes will follow the Government Response.

In accordance with the EU ETS Directive, which during the Transition Period continues to apply to the UK, the UK must publish information relating to the Article 27 and Article 27a schemes as set out below.

Article 27

Article 27 of the ETS Directive provides for the exclusion from the main EU ETS of installations emitting less than 25,000 tCO2eq per year which have a rated thermal output below 35MWth where combustion activities are carried out (excluding biomass emissions), and hospitals. These installations instead enter into a simpler scheme, the design of which is determined by each Member State within the framework set by the Directive. These schemes must establish measures to ensure that participating installations deliver equivalent emissions reductions to the EU ETS, to ensure that the environmental goals of the EU ETS are preserved.

Information that must be published, in accordance with the EU ETS Directive, includes:

a)    Installations wishing to participate in the Article 27 scheme and the equivalent measures for emissions reduction.
UK Article 27 & 27a Installation List.  All Article 27 installations are given emissions targets to ensure those installations provide an equivalent emissions reduction as in the EU ETS.  A Direction, setting out the methodology to calculate targets for Article 27 installations. The targets for the installations wishing to participate in the Article 27 scheme.
NB. This information is without prejudice to the UK’s future approach to carbon pricing after the UK leaves the EU ETS, which will impact this information and targets set.

b)    Confirmation that monitoring arrangements are in place.
In accordance with the EU ETS Directive, the UK transposed the reforms for Phase IV of the EU ETS by amending the Greenhouse Gas Emissions Trading Scheme Regulations 2012 through the following amendments:
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 3) Regulations 2019
The Greenhouse Gas Emissions Trading Scheme (Amendment) Regulations 2020
These included amendments to the monitoring, reporting and verification requirements applicable to Phase IV of the EU ETS. The Article 27 Direction sets out the monitoring and reporting provisions relevant to Article 27 installations.
Some key elements for monitoring, reporting and verification.

c)    Confirmation that any installation failing to meet the eligibility criteria for the A27 scheme will be re-introduced into the main scheme.
If an Article 27 installation exceeds its emissions target in a year, it must pay for its emissions over its target.
The amended Greenhouse Gas Emissions Trading Scheme Regulations 2012 set out relevant provisions, including impacts on permits and penalties, for breaching eligibility rules.

d)    The information outlined above is to be published for public comment.
General queries can be directed to BEIS. Technical queries from operators should be raised with the appropriate regulator. Contact details can be found below.


Article 27a

Article 27a of the ETS Directive provides for the exclusion from the main EU ETS of installations emitting less than 2,500 tCO2eq per year (excluding biomass emissions). This is a new Opt-Out scheme that is introduced for Phase IV.

Information that must be published, in accordance with the EU ETS Directive, includes:

a)    Installations wishing to participate in the Article 27a scheme. UK Article 27 & 27a Installation List

b)    Confirmation that simplified monitoring arrangements are in place to assess emissions levels.
These requirements are set out in Schedule 5A to the Greenhouse Gas Emissions Trading Scheme Regulations 2012.
Some key elements for monitoring, reporting and verification.

c)    Confirmation of consequences if an installation no longer meets eligibility criteria.
These requirements are set out in Schedule 5A to the GHG Greenhouse Gas Emissions Trading Scheme Regulations 2012.

For any general policy related questions on this information, you can contact the Emissions Trading Scheme team at BEIS via emissions.trading@beis.gov.uk

For any questions from operators relating to your specific installation and the UK’s opt-out schemes, please contact your regulator:

•    Scotland – emission.trading@sepa.org.uk
•    Wales – GHGHelp@naturalresourceswales.gov.uk
•    Northern Ireland – emissions.trading@daera-ni.gov.uk
•    England – ethelp@environment-agency.gov.uk

Civil penalties

Participants or operators who have not complied with their legal requirements and received a penalty:

RWG (Repair and Overhauls) Limited

Failure to comply with Regulation 9 of the Greenhouse Gas Emissions Trading Regulations 2012. A regulated activity was carried out at the Tullos Test Facility from 1 January 2013 to 01 August 2017 without a permit.

Penalty  £55,106.53 (published August 2018)

Shell (UK) Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation at Fife NGL Plant by 30 April 2013, 30 April 2014 and 30 April 2015.

Penalty £40,056.00 (published July 2018)

ENGIE FM Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation by 30 April 2015.

Penalty £35,224 (published June 2018).

Hillhouse Quarry Group Limited

Failure to comply with Regulation 9 of the Greenhouse Gas Emissions Trading Regulations 2012. A regulated activity was carried out at Hillhouse Quarry from 1 January 2013 to 15 September 2015 without a permit.

Penalty £31,533.10 (published December 2017)

Marathon Oil Corporation

Failure to comply with Regulation 26(1) of the Aviation Greenhouse Gas Emissions Trading Scheme Regulations 2010. The operator did not surrender sufficient allowances or project credits equal to their aviation emissions for the 2012 calendar year by 30 April 2013.

Penalty £56,884.02 (published May 2017)

Simec Lochaber Hydropower 2 Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation by 30 April 2014.

Penalty £728 (published May 2017)

Aggregate Industries (UK) Limited

Failure to comply with Regulation 9 of the Greenhouse Gas Emissions Trading Regulations 2012. A regulated activity was carried out at Chryston Works from 1 January 2013 to 9 March 2015 without a permit.

Penalty £6854.10 (published February 2017)

Repsol Sinopec Resources UK Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation by 30 April 2015.

Penalty £40,501 (published February 2017)

DSM Nutritional Products (UK) Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation by 30 April 2014.

Penalty £4,690 (published July 2016)

Aggregate Industries (UK) Limited

Failure to comply with condition 2 of a Greenhouse Gas Emissions permit. The operator did not submit the annual emission report for 2013 by 31 March 2014 and the late report did not include all the annual reportable emissions for that reporting year.

Penalty £2,812 (published March 2016).

Talisman Sinopec Energy (UK) Limited

Failure to comply with condition 4 of a Greenhouse Gas Emissions Permit. The operator did not surrender sufficient allowances to cover its annual reportable emissions from the installation by 30 April 2014.

Penalty £40,804 (published March 2016).

Contact us

If you have any questions or require any further information or advice on any aspect of the ETS, please contact us.