Resilient Energy Union with a Climate Change Policy / up to €250Bn

LEGISLATIVE TRAIN 03.2021 3 RESILIENT ENERGY UNION WITH A CLIMATE CHANGE POLICY / UP TO €250BN

PROPOSAL FOR A COMMISSION REGULATION ON SAFEGUARD MEASURES FOR EU EMISSIONS TRADING SYSTEM [ ARRIVED ] > STRATEGY FOR A RESILIENT ENERGY UNION > CLIMATE ACTION AND GREENHOUSE GAS EMISSIONS REDUCTION

CONTENT

The decision of the United Kingdom (UK) to leave the European Union (EU) will have an impact on the EU emissions trading system (ETS) in which the UK participates. If the UK should leave the EU without an agreement on its continued participation in the EU ETS, emission allowances issued in the UK would remain valid throughout the EU, while the obligation of UK operators to surrender allowances for their emissions would lapse. Due to the EU-wide nature of the EU ETS, the origin of allowances is not known to market participants. Allowances for verified emissions in the year 2018 must be surrendered by 30 April 2019, whereas the EU membership of the UK would end on 29 March 2019, so that UK operators would not have to surrender allowances for their 2018 emissions. Such a situation would undermine the environmental integrity of the EU ETS by further increasing the existing surplus of allowances.

In order to address this risk, on 13 September 2017 the European Parliament amended the legislative proposal for the inclusion of aviation in the EU ETS (see separate file EU ETS aviation) with a paragraph that would prevent aviation operators and other operators in the EU ETS from using allowances that are issued from 1 January 2018 onwards by a Member State whose obligations cease. On 18 October, a trilogue agreement on the aviation ETS file was reached, including the safeguard measures introduced by Parliament.

To implement the agreed safeguard measures, the Commission drafted a Commission Regulation amending the Registry Regulation that would require EU allowances created from 1 January 2018 to be identified by a country code, if they are issued by a Member State in respect of which there are obligations lapsing for aviation operators and other operators. Allowances that have such a country code may not be surrendered for compliance in the EU ETS. This would apply to all allowances, whether auctioned, allocated for free, or issued in exchange for international credits.

On 30 November 2017, the EU Climate Change Committee approved the Commission proposal. The amendment to the EU ETS Registry Regulation was formally adopted by the Commission on 12 February 2018 and entered into force on the same day. Parliament and Council did not raise any objections.

On 5 December 2017, the UK government adopted a statutory instrument that brings forward the ETS compliance deadline for 2018 emissions of UK operators to 15 March 2019. It came into force on 27 December 2017. Therefore allowances issued by the United Kingdom for the calendar year 2018 will not be marked and will be accepted for surrender.

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References:

• Commission Regulation (EU) 2018/208 of 12 February 2018 amending Regulation (EU) No 389/2013 establishing a Union Registry • European Parliament, Amendments adopted by the European Parliament on 13 September 2017 on the proposal for a regulation of the European Parliament and of the Council amending Directive 2003/87/EC to continue current limitations of scope for aviation activities and to prepare to implement a global market-based measure from 2021 • Council, Extending current aviation rules in the EU emissions trading system - provisional deal reached, Press release, 18 October 2017 • European Parliament, Aviation emissions: MEPs reach deal with Council, Press release, 19 October 2017 • European Commission, Commission proposes safeguard measures for EU Emissions Trading System, Press release, 24 October 2017 • European Commission, Climate Change Committee approves safeguard measures for EU Emissions Trading System, Press release, 30 November 2017 • Minister of State for Climate Change and Industry (UK), 2017 No. 1207, The Greenhouse Gas Emissions Trading Scheme (Amendment) Regulations 2017 • European Commission, Update on safeguard measures for EU Emissions Trading System due to the UK's withdrawal from the European Union, News, 13 February 2018