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Energy & Carbon Update January 2018

News from Inenco’s energy and carbon compliance team

EU Emissions Trading Scheme (EU ETS) updates

The EU ETS 2019 reporting deadline has become something of a Brexit-related “hot potato”. This is because the usual deadline, 31st March, will fall after the UK’s anticipated date for departing the EU.

Following a November consultation with stakeholders, the Environment Agency (EA) published an initial response in December. This states that the government would favour a reporting date of Monday 11th March 2019 (rather than 28th February, as originally proposed), to extend the window for emissions reporting and verification. This remains subject to confirmation, as does the UK’s long-term participation in EU ETS.

In related news, the EA is currently holding a Strategic Review of Charges consultation. This invites views on proposed changes to various environmental-related charges in England from April 2018, including EU ETS.

It is proposed that the current ETS system of tiered subsistence charges be replaced with a flat rate for installation operators of £3,065 (£3,135 for aircraft operators). The charge for non-emitters will be removed.

Some ETS costs may also increase: the fee for opening a Registry person holding account or trading account is proposed to increase from £190 to £915, while a change of registry authorised representative, currently free, will cost £880. Conversely, the annual registry subsistence charge will fall from £380 to £255.

The consultation will run until 26th January and can be accessed at https://consult.environment-agency.gov.uk/engagement/environmentagency-charging-proposalsfromapril2018/.

In other EU ETS news, the allowance cost has consistently been over €8 recently. In conjunction with a weak pound, this means that costs for UK companies required to purchase allowances may be higher than projected.

 

Energy Intensive Industries (EII) Compensation Schemes

It was confirmed in December that the Renewables Obligation element of EII, currently a compensation-based scheme, will become exemption-based from April 2018. The Feed-In Tariff (FIT) scheme will remain compensation-based until further notice.

Widening eligibility for EII exemption schemes is still under consideration. A consultation on this will be launched early in 2018. Over 130 companies have signed up so far, with annual cost savings expected to total over £100m.

 

Carbon Reduction Commitment

In April, CRC participants have the option of using the Forecast sale to purchase allowances for the final reporting year, 2018-19, at a small discount on the ‘buy-to-comply’ (retrospective) sale.

BEIS has already confirmed that there will be no refunds for any excess allowances retained at the end of CRC (except in the case of reporting errors).

This is complicated by the fact that the CRC carbon factors for 2018-19 are unlikely to be published until June 2018, meaning that Forecast sale users will not know how much energy consumption their allowances will offset until two months after placing the order. As a significant further fall in the electricity factor is anticipated – potentially by a further 15% to 20% – participants should take care not to over-order allowances.

The CRC Annual Report Publication for 2016-17 was expected in December, but at the time of writing had yet to appear. Inenco will analyse the results, when they become available, and produce our annual analysis of CRC performance by sector.

 

CCA: No change to 70:30 rule

It has recently been confirmed by BEIS that the 70:30 rule for determining eligibility for Climate Change Agreements (CCAs) will remain in place. This follows a review last year of the impacts of its replacement in 2013 of the previously applied 90:10 rule.