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Details of the how the new carbon emissions tax will look have started to emerge, through the publication of the Finance Act 2019.

Who does it apply to?

The tax will apply to permit holders of stationary installations currently covered by the EU Emissions Trading System (EU ETS).

This includes:

  • power generators;
  • certain large industrial premises and manufacturers, including food processing plants;
  • certain public sector facilities; and
  • those small emitters and hospitals that are subject to simplified reporting arrangements.

General overview of the plans

First announced during the Budget 2018, the carbon emissions tax will only take effect if the UK leaves the EU without a deal.

In a "no deal" scenario, the UK would cease to participate in the EU ETS from exit day. The plan is to introduce a tax on carbon dioxide emissions (and other greenhouse gas emissions on a carbon equivalent basis) produced by UK stationary installations currently in the EU ETS.

The carbon emissions tax would be introduced from 1 April 2019, with the first tax period ending on 31 December 2019. The first payment would be due in 2020, and would be collected by HMRC annually.

All current participants in the EU ETS who are UK operators of stationary installations would be set an annual emissions allowance for the purposes of the tax.

For permit holders outside the simplified reporting scheme this would be based on the allocation of free EU Allowances (EUAs) that would have been allocated to installations under Phase 3 of the EU ETS.

For those currently covered by the simplified reporting arrangements, the allowance would be based on their current emissions target.

Installations would continue to report their activities annually under the existing Monitoring, Reporting and Verification scheme and this information would establish how many tonnes of greenhouse gases they emit during the reporting period. All emissions that exceed the annual allowance would be taxed on a carbon equivalent basis at a rate for 2019 of £16 per tonne.

Aim of the tax

The new tax would maintain a stable carbon price for those stationary emitters currently covered by the EU ETS, providing stability for businesses and supporting the UK to meet its legally binding carbon reduction targets, which would be unaffected by leaving the EU.

It would also aim to replace the revenue lost from the auctioning of EUAs which would result from the UK leaving the EU ETS.

So what does the new Finance Act 2019 say?

The Finance Act 2019 creates the new carbon emissions tax.

It sets its scope, rate and basic structure and establishes that it would be payable only on emissions above an emissions allowance set for each installation.

The Act also makes provision for secondary legislation (Statutory Instruments) to be produced around the tax, in order to:

  • set the level of the emissions allowance;
  • amend existing emissions reporting requirements to adapt them for the tax;
  • set payment and tax collection arrangements;
  • establish conditions on when the taxpayer would be able to seek a review and against which they would be able to appeal;
  • establish record-keeping requirements.

Current legislation

The Greenhouse Gas Emissions Trading Scheme Regulations SI 2012/3038 is the domestic law relating to free allocation of EUAs and permitting requirements. It also sets out simplified reporting arrangements for small emitters and certain hospitals.

They implement Directive 2003/87/EC which established a system for greenhouse gas emission allowance trading within the EU and sets out the framework for the important features of the system, such as the requirement to obtain a permit to carry out in-scope activities and then to monitor, report and verify emissions in each calendar year.

Additional EU legislation, which applies directly to the UK includes:

  • Regulation (EU) 601/2012, which sets out detailed rules relating to the monitoring and reporting aspects of greenhouse gases. This Regulation will be revoked and replaced in January 2021 by Regulation (EU) 2066/2018;
  • Regulation (EC) 600/2012, on the verification of greenhouse gas emission reports and the accreditation of verifiers. This Regulation was revoked and replaced in January 2019 by Regulation (EU) 2067/2018.

UK Government advisers suggest that new homes should be banned from connecting to the gas grid within six years, to tackle climate change.

They believe:

  • new-build homes in the countryside should be warmed by heat pumps and cooking done on induction hobs, instead of gas boilers and hobs;
  • new housing estates in cities should be kept warm by networks of hot water;
  • water should be heated by waste heat from industry or through heat pumps, drawing warmth from the sea or lakes, or burn gas from waste.

The Report, from the independent Committee on Climate Change, recommends these changes are made to new homes initially as it is more cost effective. They confirmed it is £4,800 to install low-carbon heating in a new home compared to £26,300 in an existing home.

Also the systems will only work if homes are insulated to the highest standard so little heating is required, which is easier to confirm in new homes.

It is the Committee's job to lay down a pathway for the UK to meet its targets for reducing greenhouse gas emissions by 80% by 2050.

As a surprise to the Committee, emissions from housing increased last year, coming mainly from heating boilers.

The Committee concluded that to meet climate targets all homes in the future will have to virtually eliminate emissions. The Government has committed to investing six billion pounds to improve the energy efficiency of lower income and vulnerable households in a decade.

How big is the problem?

Around 14% of UK greenhouse gas emissions come from our homes, but little is being done to reduce them.

The Committee's spokesperson Prof Julia King commented that "this generation of home-owners is cheating it's children by leaving homes which are completely inadequate for an age of climate change".

Homes are too cold in winter, and as the climate continues to warm, too hot in summer, as well as not meeting building standards due to poor construction.

Poorly built homes will need to be re-insulated in 10 to 15 years, which is approximately five times more expensive than building it properly in the first place.

What should we do with existing homes?

The Committee have stated that tackling existing housing stock is difficult and expensive in the short term, but it will save on gas bills in the long term.

They want the Government to treat renovating UK homes as a national infrastructure priority.

The Report says upgrades and repairs to existing homes should include plans for shading and ventilation to combat extreme heatwaves expected in the future.

They should have measures to reduce indoor moisture, improve air quality, water efficiency and protection in homes at risk of flooding.

What next?

Ed Matthew from E3G commented that "the chancellor must make building energy efficiency an infrastructure investment priority. Failure to do so will lead to entrenched fuel poverty, failure to meet carbon budgets, higher NHS costs and higher energy bills for us all".

He added that the Treasury's reluctance to invest in insulating private homes needs to change given the climate emergency.

A Government spokesperson commented "the UK has reduced emissions faster than any other G7 nation, and moving to a greener, cleaner economy while continuing to grow the economy is at the heart of our modern Industrial Strategy. We will carefully consider the Committee's recommendations".

For more information on this subject, see:

A move to improve household appliances is gathering momentum as the EU and a number of US states consider introducing legislation to implement design requirements for those appliances that allow users to repair them or replace parts instead of buying a new appliance once it breaks.

The European Commission consulted the public in early 2018 on the proposal to revise the layout and information provided on the energy label that comes with all appliances bought within the EU, which includes data on repairability, durability and resource efficiency.

This idea came amid a growing backlash against products which cannot be fixed because they are glued together or the manufacturer does not supply spare parts or repair instructions once the product's warranty ran out, forcing customers to discard the old appliance and buy a new one. The proposals would primarily apply to lighting, televisions and large household appliances, but some are arguing that smartphones, computers and printers should also be included.

However, some argue that repairing an old appliance with a low energy rating can be worse in terms of lifetime CO2 emissions than buying a new model rated A or AA. The experts say that, in most cases, repairing an old(ish) device produces fewer CO2 emissions than buying a new one.

There are also fears that some customers would try to repair appliance themselves, ultimately damaging the machines and potentially rendering them dangerous. As industry group Digital Europe says: "We understand the political ambition to integrate strict energy and resource efficiency aspects in Ecodesign, but we are concerned that some requirements are either unrealistic or provide no added value."

According to the BBC News website, these policies have been driven by some arresting statistics, where:

  • a study showed that between 2004 and 2012, the proportion of major household appliances that broke down within five years rose from 3.5% to 8.3%;
  • analysis of discarded washing machines at a recycling centre showed that more than 10% were less than five years old;
  • estimates show that due to the CO2 emitted in the manufacturing process, a long-lasting washing machine will generate over 20 years 1.1 tonnes of CO2 less than a short-lived model;
  • many light sources in Europe come with individual light bulbs that can't be replaced, so when the light bulb packs in, the whole lamp has to be discarded.

Secretary of State for the Environment, Food and Rural Affairs in partnership with Her Majesty's Treasury, has developed a new set of Consultations to improve the UK's waste management, reduce plastic pollution and move UK business towards a circular economy.

Four new Consultations cover different aspects of waste management, from the very production of plastic packaging to the waste plastic that needs to be recycled.

The new Consultations are on the following:

Plastic packaging tax

The Plastic packaging tax would apply to businesses that produce or import plastic packaging which uses less than 30% recycled content, from April 2020. It aims to introduce a new tax on plastic packaging, which will increase demand for recycled plastic and stimulate collection and recycling of plastic waste.

The preferred way to respond is by e-mail to ETTanswers@hmtreasury.gov.uk.

Reforming the UK producer responsibility system for packaging waste

Through Packaging waste: reforming the UK producer responsibility system for packaging waste it is proposed that the full net cost of managing packaging waste is placed on the producers of plastic packaging, consistent with extended producer responsibility and polluter pays principle.

This aims to reduce the amount of unnecessary and difficult to recycle packaging and increase the amount of packaging that can be and is recycled, through reforms to the Packaging Producer Responsibility Regulations.

The way to respond is by completing an online survey on the Department for Environment, Food and Rural Affairs (DEFRA) website.

Deposit Return Scheme for drink bottles and cans

There are also plans for Introducing a Deposit Return Scheme (DRS) for drink bottles and cans, where the cost of the deposit would be added to the price of the drinks included in the scheme, made from PET, HDPE, aluminium and glass.

The way to respond is by completing an online survey on the DEFRA website.

Waste and recycling

The Consultation on Waste and recycling: making recycling collections consistent in England aims to ensure each local authority in England collects the same kind of recycling waste materials, as well as ensure separate food and garden waste collections.

The preferred way to respond is by completing an online survey on the DEFRA website.

Closing date for responses

All the above Consultations are open for responses from 18 February until 12 May 2019.

Government comment

These changes will make up a key part of the Government's upcoming Environment Bill, which is to be introduced early in the second session of Parliament.

The Environment Secretary, Michael Gove said:

"We are committed to going further and faster to reduce, reuse, recycle and cut waste. That's why we are leading the way to move away from being a "throw-away" society and drive up domestic recycling.

"Through our plans we will introduce a world-leading tax to boost recycled content in plastic packaging, make producers foot for the bill for handling their packaging waste, and end the confusion over household recycling.

"We are committed to cementing our place as a world leader in resource efficiency, so we can be the first generation to leave our environment in a better state than we inherited it."

The Chancellor of the Exchequer Philip Hammond also commented:

"Plastic packaging makes up two-thirds of all the plastic waste that pollutes the country and wreaks havoc on our environment. It's our responsibility to do something about it and that's why we will introduce a new tax on the producers of plastic packaging that don't use enough recycled material.

"This action, coupled with the other measures we are bringing in, will help drive up recycling, cut the amount of new plastic being used and protect our environment for future generations."

New Guidance for Pollution Prevention (GPP) has been published, to help anyone who is responsible for storing and handling drums and Intermediate Bulk Containers (IBCs).

GPP 26 applies to Scotland and Northern Ireland, it has not been reviewed for Wales yet, although it provides good practice advice. It does not apply to England.

Scope

These guidelines provide information on storing liquids, such as oils and chemicals in:

  • small containers;
  • drums, up to 205 litres; and
  • IBCs up to 1000 litres.

It applies to any number of containers which could vary in size. These containers must not be directly connected in any part to a manufacturing system.

This guidance provides information on:

  • safe drum and IBC storage;
  • spill prevention and management;
  • primary and secondary containment systems;
  • special storage requirements for COSHH, COMAH (if the quantity does not exceed the Control of Major Accident Hazards Regulations (COMAH) Regulations SI 2015/483), pesticides and flammables;
  • delivery and handling of drums and IBCs;
  • storage of waste.

It provides information on legal requirements that must be met when dealing with drums and IBCs as well as recommendations and good practice that should be followed to minimise the risk and avoid incidents.

This guidance does not cover:

  • containers above 1000 litres;
  • bulk storage in fixed tanks or mobile bowsers;
  • underground oil and chemical storage;
  • fire prevention and control;
  • air quality;
  • dangerous substances under the Control of Major Accident Hazards Regulations (COMAH) Regulations SI 2015/483;
  • regulations about transporting goods;
  • labelling of containers and confined spaces.

These are covered in different guidance documents provided by the Health and Safety Executive (HSE), Health and safety Executive for Northern Ireland (HSE NI), Fire and rescue Service (FRS) and local councils.

For more information, see:

The Department for the Environment, Food and Rural Affairs (DEFRA) seeks views on the draft UK National Air Pollution Control Programme (NAPCP).

The programme sets out how the UK will meet legally binding emission reduction commitments for:

  • nitrogen oxides (NOx);
  • ammonia (NH3);
  • non-methane volatile organic compounds (NMVOCs);
  • particulate matter (PM); and
  • sulphur dioxide (SO2).

Under the National Emissions Ceiling Regulations SI 2018/129, the Secretary of State is required to prepare and publish a UK National Air Pollution Control Programme by 1 April 2019, which must also be subject to a public consultation. That programme must also be submitted (subject to EU Exit negotiations) to the European Commission on that date.

Scope

This Consultation seeks views on the preparation and implementation of the:

It seeks views on the draft NAPCP and the use of estimates of abatement associated with the policy measures and also asks for any additional analysis of evidence that could be used.

Responding to this Consultation

This Consultation is open for responses from 14 February 2019 until 14 March 2019.

The way to respond is by completing an online survey on DEFRA's website.

For more information, see the:


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