German Emissions Trading Authority

Emissions Trading: "Brexit" requires amendment of the European Registry Regulation (12/2017)

Dear Sir or Madam,

On 30/11/2017 the Climate Change Committee of the member states (MS) of the European Union endorsed an amendment by the European Commission to the EU ETS Registry Regulation, which is supposed to prepare the EU ETS for the United Kingdom leaving the European Union in 2019. This amendment will be submitted to the European Parliament and the European Council for scrutiny. If these institutions will not raise any objections to the amendment it is supposed to enter into force no later than 01/01/2018.

The Climate Change Committee agreed on safeguard measures which are supposed to protect the EU ETS in case the United Kingdom will leave the European Union without any formal agreement. As the United Kingdom will leave the European Union by 30/03/2019, union law would cease to apply in the United Kingdom before the surrender deadline for operators on 30/04/2019. Instead of surrendering in 2019 themselves, British operators could thus sell allowances on the market which they have been issued or which they have acquired at an auction or by exchanging CERs in 2018.

As a safeguard-measure to prevent that the market is "flooded" by British allowances, the European Commission is given the right by the amendment to mark general and aviation allowances which are issued, exchanged or auctioned in 2018 (the issuance is executed in the year, in which the emissions have been generated) in the United Kingdom with a country code. Allowances which are marked with such a country code could no longer be surrendered to fulfill compliance obligations in any MS, but could be traded freely within the Union Registry (UR).

The European Commission momentarily prepares a new software version of the UR, in which these safeguard-measures will be integrated. However, this version (V 8.0.9) will definitely not be ready for operation on 01/01/2018. Therefore, the European Commission is given the right by the amendment to block processes within the Registry until the new version is ready to go online. To our current knowledge this procedure would affect the issuance of allowances in all MS and additionally the auctioning and exchange of allowances in the United Kingdom.

In order not to disrupt the issuance of allowances until 28/02/2018, the European Commission plans to put the new version of the software into operation by the middle of February 2018. We do not know precisely yet how the new version of the software will look like, in which way you will be able to identify marked allowances and how you will be able to specifically choose marked allowances. We will inform you as soon as we will receive new information by the European Commission about the new version of the software.

The government of the United Kingdom plans to pass a law until the end of this year, which should bring the compliance deadline 2019 in the United Kingdom forward and which is also supposed to ensure that British operators can be properly sanctioned in 2019. If this reform will go through as planned, then allowances will probably not be marked by the European Commission and will be eligible for surrender.

We will keep you updated about future developments.

Further information

Please address your enquiries about emissions trading, preferably by e-mail, to emissionstrading@dehst.de. For any further questions you may also call our service hotline at +49-30-8903 5050, Mondays to Thursdays from 8:00 a.m. to 4:00 p.m. and Fridays from 8:00 a.m. to 2:00 p.m. Additionally please find all previous DEHSt mailings on our internet www.dehst.de/English-Mailings.

Yours faithfully,
For the Federal Environment Agency

Dr Michael Angrick
Head of the German Emissions Trading Authority at the German Environment Agency

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