EU ETS – Commission Brexit Rule Changes Cause Uncertainty for U.K. Paper Mills

The European Commission has moved prematurely to change rules that govern the allocation of EU European Trading System (EU ETS) permits to U.K. operators without reference to the Brexit negotiations, according to a U.K.-based CPI (Confederation of Paper Industries) release this week.

  

CPI noted that installations in regulated sectors are required to monitor and report their emissions of fossil carbon and provide permits to cover them. A limited number of permits (based on the heat requirements of the most efficient installations and reduced in number each year) are distributed free of charge to protect industrial competitiveness and support a drive for improved efficiency.

The scheme, CPI points out, has strict legally binding rules that set hard deadlines for reporting and providing the correct number of permits to the regulator, adding that most paper mills in the U.K. are short of allowances and are required to purchase additional units on the open market.  

The Brexit complication, CPI explains, is that, in the event of a hard-Brexit, the U.K. could leave the European Union in March 2019, before the legal deadlines for 2018 reporting have passed. The Commission has moved to change the rules so that any U.K. issued allowances, issued after the start of 2018, cannot be used for compliance, resulting in considerable uncertainty for U.K. papermakers. While the U.K. Government has proposed an alternative by offering to bring forward 2018 compliance dates so that the process would be finished by the Brexit date, the commission is proceeding with its original plans and is only willing to change them after the U.K. has acted.    

CPI has consistently called for the U.K. to commit to staying in EU ETS until the completion of the current phase that ends on Dec. 31, 2020. Such an agreement would remove uncertainly and mean obligated companies could plan for compliance with certainty, CPI says.      

Andrew Large, CPI director general, said that "this is a very unwelcome development in the context of the ongoing Brexit negotiations. The future relationship between the U.K. and EU27 will require flexibility and imagination on both sides, and I call on both the U.K. Government and the European Commission to negotiate a mutually satisfactory compromise. EU ETS is a cornerstone of European polices to address climate change and politicians could easily get this issue resolved. 

 

With a small amount of goodwill on both sides a huge uncertainty over the future of EU ETS could be resolved and industry could at least plan with some certainly for 2018 compliance. If this issue remains unresolved our Members will be put in an impossible position from January next year."

The CPI Position Statement on Brexit and EU ETS is available online.

 

The Confederation of Paper Industries is the leading trade association representing the U.K.’s Paper-based Industries, comprising paper and board manufacturers and converters, corrugated packaging producers, makers of soft tissue papers, and collectors of paper for recycling. CPI represents an industry with an aggregate annual turnover of £6.5 billion and 25,000 direct and more than 100,000 indirect employees.