Monday

19th Aug 2019

UK polluters face Brexit anxiety over carbon credits

The UK association for energy companies, Energy UK, has asked the British government several times this year to provide clarity over what will happen to UK involvement in the EU's emissions trading system (ETS) after Brexit, in a series of papers.

In February 2017, it asked for a decision "by the second half of 2017".

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • Conservative MEP Julie Girling is critical of her own Conservative-led government in London (Photo: European Parliament)

In August 2017, it asked the UK government and the EU to confirm continued participation in the ETS by October 2017.

By September 2017, in the lobby group's third ETS paper, it gave up asking for clarity by a certain date - perhaps because it knew that such a request would fall on deaf ears.

Britsh member of the European Parliament Julie Girling can relate to their dilemma.

She said that if she was running a UK company covered under the EU's carbon credits scheme, she would be "worried".

"There has been a real change in UK politics and I think that some people in industry particularly are thinking that they can no longer predict what is going to happen," Girling told EUobserver in a phone interview.

"I would be thinking: 'Who is in charge of this and do they understand our problem?' I don't think I would be as confident as I would have been two years ago."

Her criticism might be predictable from a member of an opposition party, but Girling is a member of Theresa May's ruling Conservative party.

"If you listen to them [May's cabinet], they all have very different views," she said about her government back in London.

MEP Girling said her views on Brexit have "diverged" from London, and that she was one of the "remoaners" – Brits who voted Remain in the 2016 in/out referendum and are having difficulties accepting the vote for Brexit.

Last week, EU leaders decided that talks can begin about the transitional phase, and to begin thinking about the future relationship between the EU and UK.

The future involvement of the UK in the EU's emission trading system (ETS) is one of many topics that the two divorcing sides will have to decide upon.

Polluting permits

Currently, around 1,000 industrial plants and power stations in the UK are covered by the ETS, which means that the companies that own them are required to hand in polluting permits – or 'allowances' – for every tonne of CO2 they emit.

These permits can be bought through auctions, but some of them are also given to companies for free.

The idea is that companies that reduce their CO2 emissions, for example by switching to clean energy, have a financial incentive to do so because they would have to pay less for polluting, or could sell the permits they do not need.

But since the number of permits that are created each year are set in advance, and the economic downturn earlier this century led to less pollution, a surplus of them have been built up.

When the ETS was set up in the mid-2000s, experts were expecting a carbon price of between €20 to €30. The price of an ETS allowance for the past month hovered between €7 and €8.

Part of the proceeds are used to fund clean energy projects.

Last-minute fix

The system is divided in 'phases': the current phase III is in place until 2020, while phase IV will be from 2021 to 2030. Every year in April, companies have to comply with the ETS by handing in a number of carbon credits equivalent to their greenhouse gas emissions.

Brexit is due to happen on 29 March 2019, two years after the UK triggered the EU treaty's Article 50.

With the compliance date for emissions from the year 2018 – April 2019 – falling after Brexit, the European Commission recently proposed a change in the legislation, which brings forward the 2018 compliance date to 15 March 2019.

"This is just a very short-term emergency measure for 2018," said Pieter-Willem Lemmens, of the environmental lobby group Sandbag.

"Policymakers have to start as soon as possible to come up with a solution for the years 2019 and 2020 as well," he noted, adding that the amendment was adopted "very last minute".

It is unclear if the UK government wants the UK to remain part of phase III during its transitional phase, or even after they have fully left the EU, during phase IV.

"The worst case would be if the UK leaves and no adjustments are made to the system, which would mean that we face the market being flooded by allowances intended for compliance by the UK but that will not be used," said Lemmens.

"It would increase the surplus further," he said.

By contrast, Lemmens said that if the surplus was resolved, the best-case scenario would be the UK continuing to participate in the ETS until at least 2030.

"Either directly, by being an integral part of it, or by setting up its own ETS system, which could then be linked to the ETS," he said.

Conservative MEP Girling also believed that to be the best-case scenario.

Girling has been closely involved in shaping the details of phase IV (2021-2030) as 'rapporteur' on behalf of the EU parliament, which means she directly negotiated with representatives of national governments and the European Commission.

"I believe that in phase IV particularly, with the reforms that we've done, we have a really good chance of getting a decent carbon price that really will drive down emissions, and it would be a great shame if the UK would drop out of that," she said.

The energy lobby group, Energy UK, has said that it preferred the UK to remain part of the EU ETS during phase III and IV.

New 'UK system' would take years

If the UK would leave the EU's ETS, but set up its own system, that is not something that can be done overnight.

"They have the advantage that there is a very strong model with the EU ETS, but I think that if they were not going to be participating in the EU ETS, they would probably be under some pressure to have quite a differentiation from it," said Girling.

That would mean the UK would have to figure out how credits from the EU system translate into those from the UK system.

Girling estimated that "a minimum of two years" was needed for the UK to design its own system, and perhaps five to six years in total.

The UK department for business, energy, and industrial strategy did not wish to comment on the record as to whether preparatory work for a UK system has begun, and when it would decide the UK's future role in the EU ETS.

"I don't think that the UK's civil service is currently looking at drawing up an alternative ETS," said Girling, but she added that she had no influence on what the UK will do.

"I honestly don't know."

Emissions trading deal reached after 'isolating' Poland

EU negotiators reached a deal on the ETS after breaking a deadlock on the eligibility criteria for a modernisation fund. Only Romania and Bulgaria will be allowed to use it to finance projects related to coal.

Barnier rules out special trade deal for UK

The chief EU negotiator reiterated that during the transition period the UK would have to follow EU rules, including ones introduced after the UK leaves the bloc in 2019.

UK to create 'no-deal' Brexit minister

No-deal minister to be attached to department for exiting the EU under David Davis to show Britain is serious in its negotiation threats.

Opinion

Brexit vs Grexit: The six stages of losing to the EU

Theresa May's venture seems very similar to the attempt by Alexis Tsipras in 2015 to persuade Brussels to accept his terms for the bail out - a huge negotiation failure, presented to the public as the best possible deal.

Opinion

How Brexit may harm the new EU parliament

British plans to - maybe - take part in EU elections risk legal chaos in the next European Parliament, which could be resolved only by treaty change - an unlikely prospect.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Latest News

  1. EU ends silence on Hong Kong protests
  2. Is Salvini closing just harbours or also the rule of law?
  3. No-deal Brexit would seriously harm UK, leaked paper says
  4. Selmayr did not keep formal records of lobby meetings
  5. EU asked to solve migrant rescue deadlock
  6. Internal EU paper: Second Brexit vote was no longer 'distant dream'
  7. EU has 'zero incentive' to break open 'trilogue' deals
  8. Denmark plans import ban on EU-approved pesticide

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Stakeholders' Highlights

  1. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  2. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  3. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  4. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  5. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  6. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov
  7. Nordic Council of MinistersSeminar on disability and user involvement
  8. Nordic Council of MinistersInternational appetite for Nordic food policies
  9. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  10. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  11. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  12. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit

Join EUobserver

Support quality EU news

Join us