Previously, the UK ETS Authority consulted on amending the civil penalties imposed under the UK Emissions Trading Scheme (ETS), which can be viewed here.
The main changes the Authority proposed were:
– The inclusion of a penalty relating to the failure to submit information to Regulators specified in Article 27a of the Order, and
– The introduction of a new ‘deficit notice’, combined with a penalty for non-compliance, which shall aid enforcement regarding Operators surrendering the correct amount of allowances to cover their emissions.
In addition to this, the Authority held another consultation on some further amendments relating to the civil penalties of the scheme which can be found here.
The Authority issued their response to this consultation on the 30th of September 2024, where it was disclosed that changes relating to the following areas shall be legislated, before the 1st of January 2025:
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1 – For organisations operating without a permit: The Authority has now declared that where there is a ‘penalty year’ where an operator has failed to give notice on or before the 31st of October in the scheme year, Regulators may increase the civil penalties relating to Article 50, 57 and 60 of the Order by 10% or £2500, whichever is higher.
Where there is no ‘penalty year’, the Authority has proposed that for Operators who have failed to give notice on or before the 31st of October in the default year should have the penalty lowered to £2500.
The Authority we will also be removing the £2500 sum from Article 60(2)(a) (ultra-small emitters: failure to notify where reportable emissions exceed maximum amount). The punitive element of this penalty will be calculated in accordance with the directions published here.
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2- For penalties relating to under-reporting: The Authority has expressed that an under-reporting breach for a HSE is less serious than a similar breach by an operator in the main UK ETS, as this impacts the integrity of the UK allowance market. Therefore, the following shall be implemented:
– To remove the link to the carbon price for the scheme year from Article 56.
– To set the value of the Article 56 penalty for unreported emissions at £10 per tonne of carbon dioxide equivalent x an inflation factor.
It is at the Regulator’s discretion to apply an additional penalty of £5000 where a penalty under Article 56 has been issued.
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3 – Inflation Factor Calculation: The current inflation factor for penalties under Articles 52, 53, and 56 is calculated using the formula (CPI2 – CPI1) / CPI1 or 1, with CPI2 being the most recent March Consumer Price Index (CPI) and CPI1 being the CPI for March 2021.
The Authority proposes two changes: a correction to the formula to ‘CPI2 – CPI1 or 1, whichever is greater’ for accurate inflation reflection and redefining CPI2 as the carbon price associated with the month preceding the month in which the allowances are required to be surrendered. This will ensure the most up to date price is used in the inflation factor calculation, and that consistency is applied to the calculations in cases where a price for that month has not yet been published.
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4 – Alignment of under-surrender penalties: As previously mentioned, the Authority plans to introduce a ‘deficit notice’ for operators who fail to surrender allowances for their emissions by the deadline, with penalties including a mandatory component and a discretionary daily penalty. Currently, the penalty under Article 53 for under-reporting is different and lacks a daily penalty. To ensure consistency, the Authority shall amend Article 53 to align with the ‘deficit notice’ and allow Regulators at their own discretion to impose the application of the daily penalty.
If you have any questions regarding these changes, please contact info@swanenergy.co.uk. If you would like to find out more about our UK ETS Consultancy Service please click here.
