In January 2008, The European Commission published its draft proposals for the review of the EU ETS. The aim of the review was to develop the EU ETS after 2012 and learn from the experiences so far. Please see:
The UK carried out a formal consultation on these proposals, publishing its response and summary report in November 2008:
Following agreement among Member states and the European Parliament, the EU ETS Directive was significantly revised, as part of the EU 2020 Climate & Energy Package in December 2008. The changes will take place from Phase III (running from 1 January 2013 to 31 December 2020).
The changes mean that the EU ETS will deliver two-thirds of the EU’s unilateral 20% emissions reduction target by 2020 on 1990 levels. This equates to 21% reduction by 2020 compared to the 2005 verified emissions baseline under the EU ETS.
This means that by 2020, the EU ETS will be saving 500 MtCO2e per year, making it the biggest single policy instrument for addressing climate change in the EU. These emissions reductions will increase further if the EU moves to a 30% GHG emission reduction target.
For the UK, the EU ETS will cover about 48% of national CO2 emissions from Phase III. It is expected that the ETS will deliver two-thirds of the first 3 UK carbon budgets under the Climate Change Act 2008.
From 2013, the revised EU ETS Directive provides for:
- A centralised, EU-wide cap on emissions with an annually declining trajectory of 1.74%. The cap will deliver an overall reduction of 21 percent below 2005 verified emissions by 2020. The Commission will publish the absolute Community-wide cap for 2013 by 30 June 2010.
- There will be an increase in auctioning levels – at least 50% of allowances will be auctioned from 2013, compared to around 3% in Phase II. This will improve the environmental effectiveness and economic efficiency of the EU ETS. In the UK, there will be 100 percent auctioning to the power sector. This will also be the case across most of the EU.
- Access to project credits under the Kyoto Protocol from outside the EU will be limited to no more than 50 percent of the reductions required in the EU ETS. This is a reduction from 226% in Phase II, and means many more emissions reductions will happen in the EU.
- 12 % of the total allowances auctioned will be re-distributed to Member States with lower GDP in the interests of solidarity. These are mostly the newer eastern Member States.
- There is a non-legally binding commitment from EU member states to spend at least half of the revenues from auctioning to tackle climate change both in the EU and in developing countries.
- Industrial sectors will be allocated allowances for free on the basis of product benchmarks. The benchmarks will be set on the basis of the average of the top 10% most greenhouse gas efficient installations in the EU.
- Sectors deemed at significant risk of relocating production outside of the EU due to the carbon price (i.e. carbon leakage) will receive 100% of the benchmarked allocation for free.
- Sectors not deemed at significant risk of carbon leakage will receive 80% of their benchmarked allocation for free in 2013, declining to 30% in 2020 and 0% in 2027.
- Up to 300 million allowances from the new entrants reserve of the EU ETS will be used to support the demonstration of carbon capture and storage (CCS) and innovative renewable technologies.
- There is the potential for Member States to opt out small emitters and hospitals so as to reduce regulatory burden.
Transposing the Revised EU ETS Directive into UK Law and Implementation
The Directive will be transposed in two stages: Stage 1 by 31 December 2009, and Stage 2 by the end of 2012.
A consultation on first stage transposition of the revised EU ETS Directive was published on 24 June 2009 which is now closed. A formal response and summary of stakeholder responses were published on 30 November 2009.
The Regulations were laid before Parliament on 2 December 2009, and came into force on 31 December 2009. Further details of these can be downloaded from the Office of Public Sector Information: The Greenhouse Gas Emissions Data and National Implementation Measures Regulations 2009 web page.
The Environment Agency website contains further information in relation to:
Please see the DECC EU ETS: publications and research page for more information and documents about Phase III. Please also refer to the EU ETS legislation web page for text of the Revised EU ETS Directive.
Data Collection Phase III
The Environment Agency is currently undertaking various data collection exercises for Phase III of the EU ETS which starts in 2013.
There will be two data trawls for Phase III of EU ETS in the first quarter of 2010:
- Independently verified historic emissions data is required from all new installations to Phase III. This data will be used to inform the European Commission on the adjustment of the community-wide cap – submission of this data will not influence individual allocations to installations.
- The deadline for operators to supply this verified data to the Regulator was 30 April 2010. Guidelines for the verification of emissions are available from the Environment Agency’s forms and guidance page.
The request for the submission of this data was issued to the operators of installations that the Environment Agency are aware of, who are required to submit this data. If you think you operate an installation brought into the EU ETS in Phase III, please contact the Environment Agency immediately.
Verified production data and other related data is required from all installations and is mandatory. This includes installations currently in the EU ETS, and those that may be opted out under the small emitters provision.
This data, for the years 2005 to 2008, will be used to determine the levels of free allocation for installations.
The unverified production data and other related data should have been submitted to the Environment Agency by 30 April 2010.
The verified production data and other related data must be submitted to the Environment Agency by 30 June 2010.
For more information, please see the Environment Agency’s explanation of Phase III data collection, scope and identification of installations new to Phase III.
If you have any queries on these data collections, please contact the Environment Agency’s helpdesk.
The Environment Agency has also produced Guidance for Operators on the Inclusion Criteria for Phase III:
Baseline data verification guidance, for Phase III which includes guidance on the verification of historic emissions and allocation methodology requirements: