The potential administrative cost savings offered under the EU ETS opt out scheme are the replacement of requirement to surrender allowances with an emission reduction target; simplified monitoring, reporting and verification; removal of the requirement to hold a registry account and less burdensome rules for target adjustment on changes of installation capacity. On the other side, installations, however, will not receive a free allocation of emission allowances.
General Remarks
The interesting practical follow-up to remarks made in the article 'Exclusion of small installations and hospitals from EU ETS – time for conclusive decisions' are the legislative developments in the UK allowing small emitters to opt out EU ETS from 2013
(http://www.decc.gov.uk/en/content/cms/news/pn12_067/pn12_067.aspx).
Small emitters and hospital installations are offered the opportunity to ‘opt out’ from the EU ETS from 2013 as part of the UK Government efforts to cut down on red-tape. The effort is worth considering as, pursuant to the UK government estimations, the Opt Out scheme could save industry up to £80 million from 2013-2020, depending on take up from the around 250 eligible installations, accounting for 1% of UK EU ETS emissions.
Limiting Deadlines
There are, however, a few limiting legal circumstances that should be borne in mind as regards the said issue. Assuming that the legal instrument provided for in Article 11 of the Directive - National Implementation Measure (NIM), besides a list of all installations in the territory of the Member State included in the Scheme as from 2013, should also reflect decisions of Member States under the said Article 27, i.e. in relation to the possible exclusion of small emitters and hospitals from EUETS and the fact that NIMs should published and submitted by each Member State to the European Commission by 30 September 2011, the statutory deadlines for the said political and legal decisions generally lapsed (the separate issue is that Member States have been in delay with meeting requirements relating to the submission of NIMs). It is apparent that the UK Government have, however, met them given the indication on the DECC website ‘We have worked successfully with the European Commission to ensure EU regulation is proportionate.’
So, this is time for appropriate decisions of the respective UK small installations and hospitals, which have the sole opportunity to exclude their installations from EU ETS.
Pursuant to the UK Government notice any application forms in that regard submitted to DECC after 18 July 2012 will not be accepted and the installation will remain in the EU ETS. Additionally, once an application form has been submitted for an eligible installation, operators will be unable to alter their decision.
The Aim of the Scheme
The scheme aims to alleviate the disproportionately higher administrative burden faced by small installations and hospitals per tonne of CO2 emitted and as such is a key proposal on cutting out ‘red tape.’ Administrative costs for small emitters are estimated at over £1/t CO2, while large emitter costs are estimated to be £0.04/t CO2.
Eligible installations
To be eligible to opt out installations must be incumbent to the EU ETS and meet the criteria for a small emitter: verified annual emissions below 25,000t CO2e from 2008 onward and, where it undertakes combustion, thermal capacity below 35 MW during 2008-2010. Incumbent hospital installations may also opt out. The opt out is only available to stationary installations, therefore aircraft operators are not eligible to opt out.
The Start Date of the Opt-Out
The UK ‘Opt-out’ will take effect from January 2013, the start of Phase III of the EU ETS.
Alternative Measures Applicable to Opt-Out Installations
Installations that are opted out will be given an individual emission reduction target and will face a penalty if annual emissions exceed this target. The penalty price per tonne of carbon dioxide equivalent will be set in line with the EU Emission Allowance (EUA) price.
Operators will not be required to surrender allowances against emissions and will therefore will not receive a free allocation.