The Greenhouse Gas Emissions Trading Scheme Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations consolidate the Greenhouse Gas Emissions Trading Scheme Regulations 2003 (S.I. 2003/3311) (the “2003 Regulations”) and the Greenhouse Gas Emissions Trading Scheme (Amendment) Regulations 2004 (S.I. 2004/3390) (the “2004 Regulations”) with amendments. In addition to minor and drafting changes, the Regulations include substantive amendments to make provision for the treatment of new installations and installations which cease to carry out an activity listed in Schedule 1 of the Regulations, to provide for subsistence charges in relation to permits and to take account of the entry into force of the Commission Regulation 2216/2004 for a standardised and secured system of registries pursuant to Directive 2003/87/EC of the European Parliament and the Council and of the Council Decision 280/204/EC of the European Parliament and of the Council (the “Registries Regulation”) and of the Commission Decision 2004/156/EC establishing guidelines for the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council.

The Regulations provide the framework for a greenhouse gas emissions trading scheme for the purpose of implementing Directive 2003/87/EC of the European Parliament and the Council establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (the “Emissions Trading Directive”). The Regulations apply to the United Kingdom. Regulation 2 provides for the Scottish Ministers, Department of the Environment in Northern Ireland and National Assembly for Wales to act as appropriate authority for installations situated in their area (other than installations falling within the definition of offshore installation).

The Regulations control emissions of carbon dioxide from any of the activities listed in Schedule 1 to the Regulations. Part 2 of Schedule 1 sets out rules for the interpretation of Part 1 of Schedule 1.

Part 1 of the Regulations (regulations 1 to 6) sets out general provisions. Regulation 2 contains definitions including designating the regulators for installations under the scheme. The other regulations in Part 1 deal with general matters such as the service of notices under the Regulations.

Part 2 deals with the need for a permit to operate an installation covered by the Regulations (regulation 7), the procedure for granting permits and the contents of permits (regulations 8 to 10) and the treatment of permits once granted (regulations 14 to 18). The conditions of permits (regulation 10) must ensure that the emissions of the installation are properly monitored and reported and that the operator surrenders within 4 months of the end of each scheme year allowances equal to the annual reportable emissions from the installation during that year.

Regulation 11 enables an installation in respect of which the European Commission has provided for temporary exclusion to apply for a certificate excluding it from the scheme. Regulations 14 to 17 deal with the variation, transfer, surrender and revocation of permits.

Regulation 18 provides for a charge to be payable in respect of the subsistence of a permit. The subsistence charge and other charges in relation to the scheme are set out in Schedule 5. Regulation 18 provides for the provisions of the Schedule to be superseded by charging schemes adopted by the regulators. Schedule 6 provides for amendments to the Environment Act 1995 to ensure that the Environment Agency and the Scottish Environment Protection Agency are able to adopt charging schemes to supersede the charges in Schedule 5. Regulation 19 is made under section 2(1) of the Pollution Prevention and Control Act 1999 and provides for the Secretary of State to make a charging scheme for specified charges in relation to offshore installations. Schedule 6 provides for an amendment to the Pollution Prevention and Control Act 1999 to enable future regulations to extend regulation 19 to cover all the types of charge provided for in Schedule 5.

Part 3 deals with the allocation of allowances. Regulation 20 requires the Secretary of State to develop a national allocation plan for each phase of the scheme and Regulation 21 provides for the Secretary of State to make a final allocation decision. Regulations 22 to 24 set the framework for the allocation of allowances to installations which obtain a permit after the national allocation plan has been submitted to the European Commission and for the treatment of installations which cease to be covered by the scheme. Regulation 26 makes provisions consequential to the Registries Regulation. Regulation 27 enables operators of certain installations to apply to form a pool.

Part 4 (regulations 28 to 31) contains the enforcement powers under the Regulations. Part 5 (regulations 32 to 34) and Schedules 2 to 4 provide for appeals against decisions of the regulator and for appeals for the appropriate authority, responsible authority or the Secretary of State to reconsider decisions under the Regulations. Part 6 (regulations 35 to 37) sets out information gathering powers and publicity requirements. Part 7 (regulations 38 to 41) sets out offences for contraventions of the Regulations and civil penalties where an operator fails to surrender sufficient allowances to cover its specified emissions. Part 8 (regulations 36 and 37) enables the appropriate authority to give directions and guidance to regulators and Part 9 (regulations 44 and 45) enables the Secretary of State to give directions and guidance to the registry administrator.

Part 10 (regulation 46) identifies powers under the regulations which can be exercised only with the agreement of the devolved administrations in relation to installations situated in their area (other than installations falling within the definition of offshore installations). This includes the power to develop a national allocation plan under regulation 20 and to decide upon the allocation of allowances under regulation 21. There is a default power for the Secretary of State to act where no agreement is reached if it is necessary to ensure that the United Kingdom complies with its obligations under the Emissions Trading Directive.

Part 11 (regulations 47 and 48) and Schedule 6 revoke the 2003 Regulations and the 2004 Regulations subject to savings and introduce the consequential amendments.

A regulatory impact assessment has been prepared and placed in the library of each House of Parliament. Copies can be obtained from National Climate Change Policy Division, Department for the Environment, Food and Rural Affairs, Ashdown House, Victoria Street, London SW1.