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Jurisdiction: United Kingdom
Commencement: 23rdMay 2024
Amends: New Legislation
In order to support the Net Zero Strategy to deliver Carbon Capture Usage and Storage (“CCUS”) targets, Industrial Carbon Capture Business Models have been introduced. These models will be the main mechanism for supporting low-carbon electricity generation, with the goal being to provide revenue support through a private law contract between an organisation who captures carbon dioxide as an eligible carbon capture entity and a carbon capture counterparty*.
* Carbon capture counterparty means a person designated by the Government to be a counterparty on their behalf for the purpose of carbon capture revenue support contracts.
Eligible entities
A carbon capture entity that is eligible for a carbon capture revenue support contract:
Duties
Various duties apply and are available to view on The Legislation Update Service.
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CBAM has been introduced as a complement to EU and UK ETS, in order to “put a fair price” on carbon emitted during the production of intensive industrial goods, such as the aluminium, cement, ceramics, fertiliser, glass, hydrogen, iron and steel sectors. This is done by reporting emissions and buying CBAM certificates to cover those emissions.
Importers will be required to pay a price on imported goods from a third country to cover the emissions as though they had been produced under the EU pricing rules. If a non-EU importer can show they have already paid a carbon price, then that price will be deducted from the costs to the EU importer.
The goal of the scheme is to help tackle climate change and to try and prevent carbon leakage*.
*Carbon leakage is where a manufacturer moves production to another country with a lower carbon price or less stringent emissions regulations.
The mechanism is currently in a transition phase in the EU. This means that any organisation that imports eligible goods* into the EU must report the following information every quarter.
*Eligible goods for this phase are from the cement, iron & steel, aluminium, fertilizer, electricity, and hydrogen sectors. A list of the eligible sectors and associated guidance can be found here.
The full scheme, including requirements to pay for certificates will only fully come into effect in the EU by 2026.
The UK is also aiming to implement UK CBAM by 2027, with consultations on the design and delivery of the scheme happening later this year. There are no current requirements under UK CBAM, however, applicable organisations are encouraged to start collecting data for reporting.
There are current trading systems in place, namely the EU and UK ETS, which operate through the trading of emissions allowances between organizations using a ‘cap and trade’ system. They also include free allowances for organisations who are at risk of carbon leakage in order to keep production in the country.
CBAM differs from an emissions trading scheme in that there is no trading system between organisations. It also aims to phase out free allowances from 2026 as CBAM will apply if they import goods into the EU, regardless of where they are located.
More information and guidance can be found below.
Jurisdiction: UK
Commencement: 4th October 2023 & 1st January 2024
Amends: The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021
The legal framework for auctioning of emissions allowances under the UK Emissions Trading Scheme (UK ETS) is established by The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021
The UK Emissions Trading Scheme (UK ETS) implements the principals of emissions trading by allocating and trading greenhouse gas (GHG) emissions allowances to participants of the scheme. These Regulations set out the legal framework to allow auctioning of emissions allowances.
One allowance equals one tonne of carbon dioxide (CO2) equivalent. At the end of each year, installations must have enough allowances to account for their GHG emissions. They have the flexibility to buy additional allowances on top of their allocation, or to sell surplus allowances generated from reducing their emissions below their allocation at auction. An allowance allows a participant to emit 1 tonne of carbon dioxide equivalent.
The UK ETS was implemented in the UK by The Greenhouse Gas Emissions Trading Scheme Order 2020 (‘2020 Order’). It replaces the European Union Emissions Trading System (EU ETS) for UK participants, which also follows the principles of emissions trading. For more general information on the UK ETS and how it works for participants see the entry for the 2020 Order.
The UK ETS authority for these Regulations are the national authorities, which are:
The Regulations are made under the power in section 96 of the Finance Act 2020 to make Regulations on the allocation of emissions allowances in exchange for payment. They are equivalent to the provisions made around allowances for EU ETS by Regulation (EU) 1031/2010 on the timing, administration and other aspects of auctioning of greenhouse gas allowances.
As with the EU ETS, under the UK ETS auctioning continues to be the main means of introducing allowances into the market. Participants are also able to trade UK ETS emissions allowances on a secondary market. It is set out in Part 2 of the Regulations how bids are to be submitted and withdrawn, and how the auction clearing price is to be determined.
The minimum volume bid is one lot, and each lot auctioned must consist of 500 allowances. Each bid must state:
Each bid may only be submitted, modified or withdrawn during the bidding window set by the auction platform. Any unsold allowances can be added to the next four auctions up to a limit of 125% of their original volume.
The Auction Reserve Price (ARP) is set by these Regulations and this is the minimum price for which allowances can be sold at auctions. Bids below this price will not be accepted. The UK ETS has an ARP of £22. It is not intended that any changes will be made to the ARP before it is likely withdrawn as the scheme matures.
Auction Calendar
The auctioneer sets the auction calendar, including the bidding windows, individual volumes, auction dates, as well as the auctioned product, payment and delivery dates of the allowances to be auctioned in individual auctions each calendar year. The auction platform provider, ICE Futures, was appointed to host emissions auctions on behalf of the UK Government’s Department for Business, Energy and Industrial Strategy (BEIS), which has been appointed as the UK Auctioneer by the Treasury. ICE published the 2021 calendar for UK ETS auctions on 26th February 2021. The first UK ETS auction is 19th May 2021.
The appointed auction platform must publish the auction calendar for a year by 15th July of the preceding year or as soon as practicable after that date. The auction platform must also report transactions to the Financial Conduct Authority in order to provide appropriate regulatory oversight.
This legislation provides for fees and costs to be charged by the auction platform and auctions are to be monitored for issues such as market abuse, money laundering, terrorist financing or other criminal activity.
Auction participants will need to register with the appointed auction platform and must also hold a registry account in the UK Emissions Trading Registry. This registry system is used to ensure the accurate accounting of all allowances issued under the UK ETS, and it is used by operators to surrender allowances each year as required by the 2020 Order.
Cost Containment Mechanism
The Cost Containment Mechanism will be triggered if the average price for one allowance on secondary futures markets is more than:
If any of the above occur then the Treasury can authorise changing the distribution of allowances or increasing the volume of allowances to be auctioned at auctions within a calendar year.
Access to Auctions
Part 4 of the Regulations legislates access to auctions by participants and details the eligibility criteria and process for those applying to bid in auctions and participate in the auction platform’s secondary market. The appointed auction platform can refuse, revoke or suspend admission to bid in auctions.
There is a right of appeal set by these Regulations against decisions made by the auction platform, such as admissions to bid.
In order to move towards net-zero*, the number of carbon allowances auctioned from 2024 are reduced. The new allowances are set out in regulation 3.
From 2026, there will no longer be any free allocation** for aviation sectors.
*Net-zero is the Government’s commitment to cutting greenhouse gas emissions to as close to zero as possible.
**Free allocation is the process of distributing free carbon allowances to organisations. The alternative allocation method is via paid auction.
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Jurisdiction: United Kingdom
Commencement: 1st July 2023
Amends: New Legislation
A framework is introduced to enable the monitoring and review of carbon emission targets, in accordance with Part 1 of the Climate Change Act 2008.
From 31st March 2024, the Secretary of State must review the maximum allowable carbon emission targets*.
*The maximum allowable carbon emission targets is the maximum carbon emissions that may be released in order to achieve the UK’s commitment under the Kyoto Protocol.
This review must identify whether the maximum allowable carbon emissions is greater than:
*Carbon budget is any carbon budget made under The Carbon Budgets Order 2009.
**The second commitment period is the second emissions reduction period under the Kyoto Protocol which ran from 2013 to 2020.
The review must consider the net emissions reported:
The Secretary of State must, where the maximum allowable carbon emissions is greater than the carbon or second commitment budgets, calculate the excess emissions using UK assigned units*.
*UK assigned units are units assigned to the United Kingdom under the Kyoto Protocol for the purpose of determining compliance.
N.B. Excess UK assigned emissions must not be used to offset greenhouse gas emissions.
There are no duties for organisations under these Regulations; duties are held by the Secretary of State.
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Jurisdiction: United Kingdom
Commencement: 12th December 2022
Amends:
The Regulations prohibit the storage of carbon dioxide in the water column. The Regulations set out the procedure for applications for ‘appraisal’ times and ‘storage permits’. A list is required to be kept of those with permits.
The Regulations put in place requirements for the closure and post-closure plans for those with storage permits.
The Environmental Damage (Prevention and Remediation) Regulations 2009 have been amended so as to include the Directive on Carbon Capture and Storage.
Minor technical changes are made to replace references to the EU Emissions Trading System Directive with references to The Greenhouse Gas Emissions Trading Scheme Regulations 2012 and The Greenhouse Gas Emissions Trading Scheme Order 2020.
References to ‘exit day’ are replaced with references to ‘IP completion day’.
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Jurisdiction: Republic of Ireland
Commencement: 7th September 2021
Amends:
The Climate Action and Low Carbon Development Act 2015 provides details on approval plans made by the Government in relation to climate change for the purpose of pursuing the transition to a low carbon, climate resilient and environmentally sustainable economy. This Act establishes a body to be known as the Climate Change Advisory Council.
This Act will not affect existing or future obligations of the State under the law of the European Union (including Directive 2001/42/EC, Council Directive 92/43/EEC, Directive 2003/87/EC and Decision No. 406/2009/EC), existing or future obligations of the State under any international agreement, any Act or instrument that gives effect to any such obligation or existing or future entitlements of the State or any person under the said law, agreement, Act or instrument.
The Planning and Development Act 2000 is designed to serve as a planning code and therefore, in order for any development to be valid it should be undertaken in compliance with the requirements of this legislation, as well as any other legislation such as the Environmental Protection Agency Act 1992.
The Planning and Development Act 2000 revised the entire amount of planning law into a single piece of legislation, covering all forms of planning and development. The scope of the Act is wide and sets out a detailed section-by-section analysis of the provisions of the Act, including development plans, local area plans, regional planning guidelines, architectural heritage, housing supply, appeal procedures and environmental impact assessment. Under the Act each Local Authority has a responsibility to determine policy in its area through a Development Plan and for applying the policy through planning control, planning applications and enforcing planning decisions.
The amendments of 2002 include changes to Part V of the 2000 Act (Housing Supply) and other miscellaneous amendments.
Amendment
In order for Ireland to meet plans set out by the Government in relation to climate change to help the transition to a climate resilient, biodiversity rich and climate neutral economy before the end of 2050, significant changes have been made to The Climate Action and Low Carbon Development Act 2015 (‘2015 Act’). These changes (mainly affecting requirements of the Government, Ministers and local authorities) are reflected in the summary and duties above.
Section 3 of the 2015 Act has been replaced with the “national climate objective” outlined in the summary and duties above. Section 4 of the 2015 Act has been replaced with the “climate action plan and national long term climate action strategy” outlined in the summary and duties above.
Technical amendments are made to section 5 (national climate change adaptation framework) to clarify the matters that the Minister and Government must consider in the national climate change adaptation framework. Updates are made to the specific documentation which the Minister and Government must jointly make and submit in section 6.
The following new sections are added to the 2015 Act:
The content of these regulations are further explained above in the duties section.
Sections 9, 11, 12 and 13 relating to the Advisory Council are amended by updating the information around the number of persons in the Advisory Council.
Section 14A (Climate Reporting and Sections) and section 14B (Role of local authority) are added into the 2015 Act. These sections explain the specific climate areas that the Minister should report on, and the role of local authorities in achieving climate goals.
Section 15 (Duties of certain bodies) is amended to update the rules which a relevant body must adhere to.
Changes to the Planning and Development Act 2000 require development plans to include objectives to reduce anthropogenic greenhouse gas emissions and address the necessity of adaptation to climate change, taking account of the local authority climate action plan.
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Jurisdiction: United Kingdom
Commencement: 15th February 2022
Amends: The Carbon Accounting Regulations 2009
For the purposes of Part I of the Climate Change Act 2008, these Regulations set out the following as carbon units:
Each carbon unit has a value of 1 tonne of carbon dioxide equivalent.
A duty has been placed upon the Secretary of State to open a ‘credit’ account in which the UK’s carbon credit is to be held. A credit may only be taken out of the account for the purposes of cancellation, unless the registry administration is satisfied that certain conditions have been met.
Carbon units may be transferred to the net UK carbon account by any person, but are only credited if a minister of the Crown makes a declaration to that effect.
The Secretary of State sets the circumstances in which carbon units are to be credited to and debited from the net UK carbon account during the 2008-2012 budgetary period as a result of the operation of European Union Emissions Trading Scheme.
The regulations introduce provisions for carbon units to be debited from the net carbon account during 2008-2012 budgetary period where carbon units have been disposed of in the course of a given year.
The Secretary of State is required to cancel all the units in the credited account and to cancel a further amount of units representing the difference between the UK’s carbon budget and the UK’s assigned amount under the Kyoto Protocol as is attributable to net UK emissions.
A register must be kept by the Secretary of State containing details of the amounts of carbon units credited to and debited from the net UK carbon account and the amounts of carbon units cancelled.
The carbon accounting system for the third carbon budget year (2018-2022) is updated. The system is used to monitor compliance with the targets for reducing greenhouse gas emissions, set out by the Climate Change Act 2008.
Mechanisms are provided to account for the credits and debits that resulted from the final year, when the United Kingdom (UK) was still a European Union (EU) Member State and participated in the European Union Emissions Trading Scheme (EU ETS).
The accounting system for the third year (2020) of the third carbon budget (2018-2022) is updated by:
*Domestic aviation means flights between airports within the UK.
The Secretary of State is required to cancel any carbon units held at the end of the third carbon budget period.
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Jurisdiction: Republic of Ireland
Commencement: 7th September 2021
Amends:
The Climate Action and Low Carbon Development Act 2015 provides details on approval plans made by the Government in relation to climate change for the purpose of pursuing the transition to a low carbon, climate resilient and environmentally sustainable economy. This Act establishes a body to be known as the Climate Change Advisory Council.
This Act will not affect existing or future obligations of the State under the law of the European Union (including Directive 2001/42/EC, Council Directive 92/43/EEC, Directive 2003/87/EC and Decision No. 406/2009/EC), existing or future obligations of the State under any international agreement, any Act or instrument that gives effect to any such obligation or existing or future entitlements of the State or any person under the said law, agreement, Act or instrument.
The Planning and Development Act 2000 is designed to serve as a planning code and therefore, in order for any development to be valid it should be undertaken in compliance with the requirements of this legislation, as well as any other legislation such as the Environmental Protection Agency Act 1992.
The Planning and Development Act 2000 revised the entire amount of planning law into a single piece of legislation, covering all forms of planning and development. The scope of the Act is wide and sets out a detailed section-by-section analysis of the provisions of the Act, including development plans, local area plans, regional planning guidelines, architectural heritage, housing supply, appeal procedures and environmental impact assessment. Under the Act each Local Authority has a responsibility to determine policy in its area through a Development Plan and for applying the policy through planning control, planning applications and enforcing planning decisions.
The amendments of 2002 include changes to Part V of the 2000 Act (Housing Supply) and other miscellaneous amendments.
Amendment
In order for Ireland to meet plans set out by the Government in relation to climate change to help the transition to a climate resilient, biodiversity rich and climate neutral economy before the end of 2050, significant changes have been made to The Climate Action and Low Carbon Development Act 2015 (‘2015 Act’). These changes (mainly affecting requirements of the Government, Ministers and local authorities) are reflected in the summary and duties above.
Section 3 of the 2015 Act has been replaced with the “national climate objective” outlined in the summary and duties above. Section 4 of the 2015 Act has been replaced with the “climate action plan and national long term climate action strategy” outlined in the summary and duties above.
Technical amendments are made to section 5 (national climate change adaptation framework) to clarify the matters that the Minister and Government must consider in the national climate change adaptation framework. Updates are made to the specific documentation which the Minister and Government must jointly make and submit in section 6.
The following new sections are added to the 2015 Act:
The content of these regulations are further explained above in the duties section.
Sections 9, 11, 12 and 13 relating to the Advisory Council are amended by updating the information around the number of persons in the Advisory Council.
Section 14A (Climate Reporting and Sections) and section 14B (Role of local authority) are added into the 2015 Act. These sections explain the specific climate areas that the Minister should report on, and the role of local authorities in achieving climate goals.
Section 15 (Duties of certain bodies) is amended to update the rules which a relevant body must adhere to.
Changes to the Planning and Development Act 2000 require development plans to include objectives to reduce anthropogenic greenhouse gas emissions and address the necessity of adaptation to climate change, taking account of the local authority climate action plan.
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Jurisdiction: United Kingdom
Commencement: 26th November 2021
Amends: UK Retained: Regulation (EU) 2019/631 setting CO2 emission performance standards for new passenger cars and for new light commercial vehicles
CO2 emissions performance requirements are set by the European Commission (EC) for new passenger cars* and new light commercial vehicles* in order to help achieve the European Union (EU) greenhouse gas emissions reduction target and the objectives of the Paris agreement (a global action plan to limit global warming to below 2°C above pre-industrial levels).
*New passenger cars are Category M1 vehicles which are registered in the EU for the first time and have not previously been registered outside of the EU. Category M1 means vehicles for the carriage of passengers with no more than 9 seats, including the driver’s seat, as defined in Annex II of Directive 2007/46/EC establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles.
*New light commercial vehicles are Category N1 vehicles with a mass not exceeding 2610kg and those type approved under Regulation (EC) 715/2007 which are registered in the EU for the first time and have not previously been registered outside of the EU. Category N1 means vehicles for the carriage of goods with a maximum mass of 3.5 tonnes. as defined in Annex II of Directive 2007/46/EC establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles.
Zero emissions category N vehicles with a mass exceeding 2480kg will be counted as light commercial vehicles from 1st January 2025, if the excess mass is due to the energy storage system.
If a vehicle has been registered outside of the EU for less than 3 months before it is registered in the EU, then it is will still be considered a ‘new’ vehicle.
The Regulation does not apply to special purpose vehicles, i.e. a vehicle intended to perform a function which requires special body arrangements and/or equipment. This category includes wheel-chair accessible vehicles, caravans, and ambulances, as defined by Part A of Annex II of Directive 2007/46/EC establishing a framework for the approval of motor vehicles and their trailers, and of systems, components and separate technical units intended for such vehicles.
Manufacturers responsible for fewer than 1000 new passenger cars or light commercial vehicles registered in the EU in the previous calendar year are not required to comply with certain requirements, including the requirement to meet specific emissions targets and pay excess emissions premium.
Amendment
Changes are made to set CO2 emission performance standards for new passenger cars and new light commercial vehicles for the period 2021-2024, so that UK CO2 targets are fully established, and relevant data can be collected. The new specific emissions targets that manufacturers must meet are outlined below.
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Jurisdiction: Republic of Ireland
Commencement: 12th October 2021
Amends: Climate Action and Low Carbon Development Act 2015
The Climate Action and Low Carbon Development Act 2015 provides details on approval plans made by the Government in relation to climate change for the purpose of pursuing the transition to a low carbon, climate resilient and environmentally sustainable economy. This Act establishes a body to be known as the Climate Change Advisory Council.
This Act will not affect existing or future obligations of the State under the law of the European Union (including Directive 2001/42/EC, Council Directive 92/43/EEC, Directive 2003/87/EC and Decision No. 406/2009/EC), existing or future obligations of the State under any international agreement, any Act or instrument that gives effect to any such obligation or existing or future entitlements of the State or any person under the said law, agreement, Act or instrument.
Amendment
These Regulations specify that the carbon budgets, referred to in the Duties section above, (commencing on 1st January 2021 and ending on 31st December 2025, and future budgets thereafter), must take into account emissions from the greenhouse gases specified in the CRF*.
*The CRF is the common reporting format tables provided annually by the Environmental Protection Agency (EPA) to the United Nations under UN reporting guidelines. The CRF are amended by the EPA and published on the EPA website.
The way in which emissions should be calculated and accounted for, is specified in the United Nations Framework Convention on Climate Change reporting guidelines on annual inventories for Parties.
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