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What are the consequences of Brexit for the EU Emissions Trading System (EU ETS)?

Once the Agreement for the Withdrawal of the United Kingdom from the European Union enters into force, a transitional period will begin, running from 1 February 2020 to 31 December 2020. During this period the EU rules on emission allowance trading will be applicable.

During this transition period installations located in the UK, as well as the aircraft operators administered by the UK, will continue to be subject to the obligations established by Union law, in particular Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003, establishing a scheme for greenhouse gas emission allowance trading within the EU and amending Council Directive 96/61/EC (hereinafter the ETS Directive); and by the rest of the rules approved by the Union on this matter.

  • The owners of installations and the aircraft operators administered by the UK must both report the emissions for the years 2019 and 2020, and make the corresponding surrender of emission allowances in 2020 and 2021 respectively. In the case of aircraft operators, whether administered by the UK or by other Member States of the EU, they must deliver emission allowances of an amount equivalent to the emissions produced under the reduced scope application of the EU ETS pursuant to current law (in other words, surrender emission allowances produced in the flights departing from aerodromes of Member States of the EEA (European Economic Area) or the UK and arriving at aerodromes located in the Member States of the EEA and the UK).
  • Once the ratification instruments concerning the agreement have been deposited before the Secretariat General of the Council, the suspension prohibiting the issue of free allocation of emission allowances, exchange of international credits and emission allowance auctions will be lifted.
  • The accounts of the registry stored in the British Area of the Union Registry will remain at the disposal of their owners and administrators for the time necessary to comply with the obligations of the EU ETS current during the transition period, as well as those derived from the Kyoto Protocol.

Following the end of the transition period, and notwithstanding the provisions that may be established on that date through a possible agreement regulating the relationship between the EU and UK, pursuant to Article 184 of the Withdrawal Agreement, the EU law will no longer be applicable to the UK, therefore:

  • The installations situated in the UK will no longer be subject to EU law, and therefore to compliance with the obligations of the EU TMS.
  • Flights of aircraft operators between the UK and any airport situated in a country of the EEA will not be included within the reduced scope of application of the ETS Directive. Such flights will therefore not have to notify the emissions corresponding to the flights operated between the UK and the airports located in the countries of the EEA. Aircraft operators administered by the UK within the scope of the EU TMS will be reallocated to other Member States, so they must report the emissions corresponding to the flights included in the EU TMS to their new administering state (only flights departing from and arriving at countries of the EEA). The European Commission will update the list of aircraft operators in Commission Regulation EC No. 748/2009 of 5 August 2009 on the list of aircraft operators which performed an aviation activity listed in Annex I to Directive 2003/87/EC on or after 1 January 2006.
  • No emission verification reports will be accepted from verification bodies accredited by the UK national accreditation body (UKAS).
  • There will be no more allocation and auctions of emission rights in the UK.

I am holder of an account open in the Spanish area of the Union Registry. To what extent will the suspension of the processes of free allocation, auctioning or international credit exchange adopted by Union law affect me?

Pursuant to Article 99 of Commission Regulation (EU) No. 389/2013 of 2 May 2013, establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of the Council, and repealing Commission Regulations (EU) No 920/2010 and No 1193/2011, on 17 December 2018 the European Commission adopted a Decision to suspend the processes for the United Kingdom of free allocation, auctioning of emission rights and the exchange of international credits for emission allocations, as of 1 January 2019.

The suspension of these processes affects installations situated in the UK and aircraft operators administered by the UK, so any installation situated in another Member State or aircraft operator administered by another Member State of the European Union will continue to receive normally the free allocation that has been recognised for it and may carry out international credit exchanges for emission allocations in accordance with the recognised quota.

Emission allocations may also continue to be bought on EU auction platforms.

This suspension is temporary and will be removed the day after EU and UK ratification instruments are deposited before the Secretariat General of the Council of the European Union. The end of the suspension process will be a public matter.

What will happen with the emission rights in the accounts open in the Spanish area of the Union Registry?

The emission allocations currently held in accounts in the Spanish area of the Union Registry will not be subject to any limitation beyond the rules already established by Union law.

As a result, the installations and aircraft operators obliged to comply with the TMS will not be at any risk of receiving emission allocations that represent limitations for the annual surrender as compensation for their emissions.

What will the situation be for the sales made by Spanish companies supplying HFCs to the UK?

These sales to the UK, including Gibraltar, will be exempt from the quota system for HFCs established by Regulation (EU) 517/2014, on fluorinated greenhouse gases, but they will have to be declared to the European Environment Agency through the F-Gas Portal as an export, provided that, together with any other exports made, they exceed the annual threshold of 100 tonnes of CO2 equivalent.

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