New guidance contains clarifications from the European Commission and seeks to lessen trade barriers following the Brexit transition period.
By Paul A. Davies and Michael D. Green
The UK’s Department for Business, Energy and Industrial Strategy (BEIS) has published updated guidance on meeting climate change requirements after the Brexit transition period ends on 1 January 2021. This document is part of wider efforts to clarify the legislative framework and prepare businesses for how to comply with their post-Brexit obligations.
On 7 July 2020, the European Commission published a notice to stakeholders to assist the UK with technical issues relating to the end of the transition period. According to the notice, even if the EU and the UK conclude a partnership, Brexit will still ‘inevitably create barriers to trade and cross-border exchanges that do not exist today’. On 19 August 2020, BEIS released updated guidance reflecting the developments contained in the European Commission’s notice. The guidance aims to ensure that relevant parties are aware of their obligations post-Brexit by addressing the following topics.
EU ETS compliance and operations
In relation to the EU Emissions Trading System Union Registry, the guidance confirms that UK operators of stationary installations and UK-administered aircraft operators (currently participating in the EU Emissions Trading Scheme (EU ETS)) must continue to comply with their obligations for the year 2020.
Starting 1 January 2021, holders of trading accounts, person holding accounts, and former operator holding accounts in the UK sections of the EU Emissions Trading System Union Registry will have their access terminated. Should they wish to continue trading under the EU ETS, they must move their assets to an account administered by an EU Member State. Importantly, the move to an EU-based account should happen before the transition period ends.
In respect of the Kyoto Protocol National Registry, members will continue to be able to access their accounts until 1 January 2021. The UK government expects to set up a fully operational system allowing UK-based businesses to hold and trade in Certified Emission Reductions and Emission Reduction Units by the spring of 2021. However, the affected businesses should be mindful and prepare for the uncertainties associated with the short gap in service; for example, by opening an account in an EU Member State to mitigate risk.
The guidance also discusses the possibility of linking the UK Emissions Trading Scheme and the EU ETS, if doing so suited both the UK and EU. Alternatively, the UK system could operate as a stand-alone system or the Carbon Emissions Tax could be introduced to control carbon prices and reduce carbon emissions.
Geological storage of carbon dioxide
In areas where the Oil and Gas Authority is the licensing entity, businesses involved in geological carbon dioxide storage should contact the authority for information on changes to the licensing regime. In areas where licensing duties are delegated to devolved administrations, they should contact the latter. There are no further details in the guidance on the nature of the changes.
Ecodesign and energy labelling standards
The guidance confirms that all consumers will still have access to the ‘open’ section of the EU product database. However, the UK’s market surveillance authorities will no longer have access to the ‘closed’ sector of the abovementioned database and to the technical product-related information this section contains. UK and EU suppliers and retailers dealing in energy-using products on the EU market will continue to enter relevant information into the database and ensure that such products comply with the EU Ecodesign and Energy Labelling standards.
For products placed on the UK market, both UK and EU suppliers and retailers must ensure that energy-using products comply with the UK Ecodesign and Energy Labelling standards. However, under domestic law, there will no longer be an associated duty to enter relevant information into the database.
Latham & Watkins will continue to monitor developments in this area.
This post was written with the assistance of Sabina Aionesei in the London office of Latham & Watkins.
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