Brexit—emissions trading and carbon pricing
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 impact
  • EU Emissions Trading System
  • Reporting verified emissions and surrendering allowances for 2020 compliance obligations—UK operators
  • Aviation
  • EU exit regulations
  • Future UK involvement in EU ETS?
  • The future of carbon pricing
  • UK ETS
  • Carbon emissions tax

Brexit impact

As of exit day (31 January 2020), the UK is no longer an EU Member State. However, in accordance with the Withdrawal Agreement, the UK has entered an implementation period, during which it continues to be subject to EU law. This has an impact on this content. For further guidance, see Practice Note: Brexit—impact on environmental law and News Analysis: Brexit Bulletin—key updates, research tips and resources.

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.


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