The European Union Emissions Trading Scheme (EU ETS) is due to start in 2005.

The scheme will apply to your facility if you operate:

In the UK this will affect thousands of facilities, and tens of thousands across the EU. This list excludes other energy intensive manufacturing processes, in particular chemicals and aluminium, and the transport sector. These have been provided with a temporary exemption until 2008 at which time their inclusion will be reconsidered. Other sectors have not been implicated so far, but it is possible that the Scheme may be extended beyond the sectors already mentioned.

Note though that combustion units over 20MW are covered by the scheme, no matter what industrial process they are linked with (with the exception of waste incinerators).

The scheme is due to run from 2005 until 2012 but in two phases. Phase 1 which is more of a "dry run" will operate from 2005-2007. Phase 2 will operate from 2008 to 2012. Phase 2 coincides directly with the timing requirements of the Kyoto Protocol.

The scheme covers only CO2 emissions in the first Phase. Individual facilities may opt out of Phase 1 of the Scheme by making representation to government (DEFRA in the case of the UK).

As an affected facility, you will be required to own a permit to operate. This will be separate from the allowances that you will be issued under the scheme. The allowances define your CO2 emissions target and are transferable. The permit is a licence to operate and is not transferable. The UK intends to implement the directive through a modification to the PPC regulations.

The development of the exact rules are still being defined and more information can be found at the DEFRA website:
http://www.defra.gov.uk/environment/climatechange/trading/eu/index.htm

What if you are affected?
Several steps need to be taken prior to the implementation of the EU ETS in January 2005. Actions are required by the UK government, the EC and most importantly participating companies. The following figure illustrates the timetable for action for all these parties. In this figure NAP refers to the National Allocation Plan.

For firms with the prospect of being covered by the scheme, the following activities will need to be undertaken.
1. Determine whether your facility is covered by the scheme (immediately). For most organisations, this will require a review of all combustion facilities.
2. If you are covered by the scheme, actively participate in the development of the NAP to obtain the most favourable allocation for your facilities (summer 2003). Without your involvement, there is the risk that the final allocation will impose excessive costs on your business.
3. Determine whether you wish to opt out of the scheme between 2005 and 2008 (late 2003). For firms not covered by the scheme, determine whether you want to opt-in to scheme after 2008. Decisions on these will require a detailed analysis of the costs and the benefits of participation.
4. Apply for EU ETS permit (Autumn 2003). These will be administered by the Environmental Agency.
5. Set up CO2 management system (Autumn 2003). These systems will be essential if you are to manage your obligations effectively. They should be able to track CO2 emissions from the ETS facility at least quarterly, but preferably monthly. They should also allow forecasting of future CO2 positions against target, to allow decisions to be made to reduce emissions further or buy/sell on the market.
6. Review business plans in light of EU ETS (Autumn 2003). The directive is likely to materially affect the cost base of many businesses. Emissions intensive activities will tend to come of worse. At some point firms will need to assess the extent of these risks and the least cost mitigation options.

If you think you might be affected and would like Enviros to help, please click here to email us with your contact details and one of our experts will speak with you.