Brexit—emissions trading and carbon pricing

The following Environment practice note provides comprehensive and up to date legal information covering:

  • Brexit—emissions trading and carbon pricing
  • Brexit
  • EU Emissions Trading System
  • Reporting verified emissions and surrendering allowances for 2020 compliance obligations—UK operators
  • Northern Ireland
  • Registry access to the Kyoto Protocol National Registry
  • EU exit regulations
  • Future UK involvement in EU ETS?
  • The future of carbon pricing
  • UK ETS
  • More...

Brexit—emissions trading and carbon pricing

Brexit

11pm (GMT) on 31 December 2020 marked the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements came to an end and significant changes began to take effect across the UK’s legal regime.

EU Emissions Trading System

The EU Emissions Trading System (EU ETS) works on the cap and trade principle and is the largest ETS in the world by volume. This means there is a limit on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy from one another as needed. The limit on the total number of allowances available ensures that they have a value. At the end of each year, each company must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed. If a company reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another company that is short of allowances. The number of allowances is reduced over time so that total emissions fall.

The EU ETS is based on Directive 2003/87 EC (later amended

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