UK Greenhouse Gas Emission Trading Scheme - Meeting your company's targets
The UK Greenhouse Gas Emissions Trading Scheme 2002 (ETS) was introduced by the UK Government to manage climate change and to reduce carbon emissions by UK companies. The ETS runs for five years from 1 January 2002 to 31 December 2006.
How does this affect you?
Your company must pay a tax known as the Climate Change Levy on its supply of energy. Having entered into a climate change agreement, your company has an energy/emission target which it must meet in order to receive an 80% Climate Change Levy discount. Your company can choose to trade to meet its target through the ETS, thereby benefiting from extra flexibility and lower compliance costs.
We are now fast approaching the end of the first compliance period under your climate change agreement. After this date, there is a reconciliation period where your company has to compile and verify its energy/emissions data and undertake any necessary trades to meet its target. After the end of this reconciliation period, the Government will check whether you have met your target.
If your company is currently not likely to meet its target or after verifying its energy/emissions data, your company confirms that it has not meet its target, it may join the ETS to purchase surpluses from other participants to meet its target by the reconciliation deadline. Likewise, if your company has, or is likely to have exceeded its target, it may wish to join the ETS so that it can be issued with allowances which can be sold to third parties for profit or bank such surpluses for future trading or compliance purposes.
Your company may therefore - either now or in the near future - need to buy allowances to meet its target, or be in a position to sell surplus allowances to third parties.
This alert may contain information of general interest about current legal issues, but does not give legal advice.