UK Greenhouse Gas Emission Trading Scheme - Meeting the industry targets

04.09.02 Share


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?

Companies in your industry must pay a tax known as the Climate Change Levy on their supply of energy. As a trade association with a climate change agreement in place or under negotiation with department for environment, food and rural affairs (DEFRA), you may have an industry-wide emission/energy reduction target which if met, will enable all participating companies in your industry to benefit from an 80% Climate Change Levy discount and from dispensing with a governmental performance audit. You may wish to encourage companies in your industry to participate in the ETS in order to buy allowances to meet their individual targets, or to sell their allowances to other industry companies to enable the industry target to be met. You may wish to manage trading arrangements by, for example, setting up an arrangement requiring those members who wish to participate to first offer excess allowances to fellow participants.

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 companies in your industry have to compile and verify their energy/emissions data and undertake any necessary trades to meet their individual targets. After the end of this reconciliation period, the Government will check whether your industry have met its overall industry target.

Companies in your industry may therefore - either now or in the near future - need to buy allowances to meet their individual targets, or be in a position to sell surplus allowances to other companies in your industry to meet the overall industry target.

Key Contact

Derek Goodban, partner, +44 (0)121 685 2710,

This alert may contain information of general interest about current legal issues, but does not give legal advice.

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