EU GHG Emissions Trading Scheme/CRC Energy Efficiency Scheme

Key Legislation:

For more detail on the Legislation relevant to this page, please use the following links:

Supporting Legislation:

Guidance Notes:

Further guidance on the EU Emissions Trading Scheme for offshore installations are available on the following web sites:

CRC Energy Efficiency Order Guidance

Greenhouse gas conversion factors for company reporting 2013: methodology paper for emission factors

  • This report provides the methodological approach, key data sources and the assumptions used to define the emission factors provided in the 2013 Greenhouse Gas (GHG) Conversion Factors.

Climate Change Agreements: eligibility, metering requirements and target setting guidance

  • This new guidance provides further explanation of the Climate Change Agreements (CCA) (Eligible Facilities) Regulations 2012, and in particular, when sub-metering must be installed to remain compliant with the CCA scheme. In addition, the guidance also sets out the standardized methodologies that will be used by the Environment Agency, who administer the scheme, to set performance targets for a) new entrants and b) existing participants who experience changes in the energy consumption covered by their agreement. Further information is available from the BEIS (then DECC) website.

New DEFRA Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance

  • New guidance by DEFRA is designed to help companies in complying with the greenhouse gas (GHG) reporting regulation, as required by the Climate Change Act 2008. The document also provides guidance on voluntary reporting on a range of environmental matters, including voluntary GHG reporting and through the use of key performance indicators.

Carbon emission factors and calorific values

  • The data and information in the spreadsheets downloadable from the BEIS (then DECC) website were produced to assist installations in the EU-ETS that use tier 2 and tier 2b emission factors and calorific values for calculating carbon dioxide emissions.

Energy Savings Opportunity Scheme (ESOS)

  • The ESOS is a mandatory energy assessment and energy saving identification scheme for operators (and their corporate groups). The scheme applies to the offshore oil and gas industry operating within UKCS. DECC have published guidance notes to assist the offshore oil and gas industry. Further information is available from the BEIS (then DECC) website (PDF document).

The Environment Agency is the UK scheme administrator for ESOS; a mandatory energy assessment scheme for organisations in the UK that meet the qualification criteria (link here).

Draft legislation (Corporation Tax); this draft legislation details the new high pressure high temperature (HPHT) cluster area allowance (link here).

Valuation of energy use and greenhouse gas (GHG) emissions

BEIS have offered supplementary guidance notes to the HM Treasury Green Book on Appraisal and Evaluation in Central Government; available here (PDF document).

Greenhouse gas reporting – Conversion factors 2016

BEIS have released the emission conversion factors required when reporting on 2016 greenhouse gas emissions by UK based organisations of all sizes. User guidance is also accessible through the link provided.

Consent Needed: Any installation with a combustion plant that on its own or in aggregate with any other combustion plant has a rated thermal input exceeding 20 MW (th) is required to be registered under the EU ETS. There are two parts to the EU ETS:a) The requirement to be registered under the scheme and the receipt of a permit (GHG Permit) under the EU ETS;b) Application for an allowance.Any new relevant installation that is not permitted is classed as a new entrant and must apply for allowance under the New Entrants Reserve (NER).Facilities not receiving an allocation under the EU ETS will be required to purchase allowances through the Trading Scheme (see Performance Standards tab).Allowances for existing operators under Phase III have been notified following an extensive data collection and benchmarking exercise. As of 30 June 2011, all other applicants will now need to apply through the New Entrants Reserve (NER) (see How to Apply below).Also see the Performance Standards tab for any requirements under the CRC Energy Efficiency Scheme Order 2010The EU ETS permit also requires submission of a Monitoring and Reporting (M&R) Plan (see Sampling/Monitoring Requirements tab). Applicants must also open an EU ETS UK Registry account to enable trading (see Performance Standards tab).
How to Apply – GHG Permit: Application for a GHG Permit under the EU ETS should be done via the relevant regulator, details available here. Guidance notes are also available here. Information required includes:

  • Installation/facility details (including any tie-backs) and description of activities covered by the permit (i.e. combustion plant with an aggregated thermal rating of > 20 MW (th))
  • Details of fuels used
  • Existing PPC permit details
  • Outline of planned monitoring and reporting measures, confirming arrangements that will be implemented
  • Non-technical summary of installation/facility details.
How to Apply – Allowances: An application for an allocation from the New Entrants Reserve (NER) will also be required. Application is through BEIS NER Application Form available on the BEIS website. Guidance on completion of the NER and calculation of allowances is also available on the Environment Agency website. Installations that entered under Phase I or Phase II will already have new allocations issued under Phase III.There are two phases to NER applications:

  • Phase 1 – before “normal” operations – allocations based on independently verified emissions
  • Phase 2 – after start of “normal” operations – allocations based on average of two months of highest activity in a 90 day period after start of “normal” operations x 12.

(Note: Normal operations is defined as a continuous 90 day period of operating at a minimum of 40% of design capacity.)

For existing installations applying for extensions to allowances, see the Renewal and Variation Tab.

Who to Apply to: Completed EU ETS and NER applications will be submitted electronically to both BEIS Environmental Management Team and DEFRA/Environment Agency by email. Under exceptional circumstances it may be necessary to separately forward hard copies of any supporting documents. Two copies of each document should be submitted. Applications should be emailed to the following email addresses.DEFRA/EA: etapps@environment-agency.gov.uk
BEIS (then DECC): emt@decc.gsi.gov.uk
When to Apply: EU ETS registration (GHG Permit) must be in place before operations commence. Applications for allowances under the New Entrants Reserve must only be made after production has commenced, and no later than 12 months after the start of normal operations.
EU Emissions Trading Scheme – Scope: The EU ETS currently only covers CO2 emissions from power generation and flaring that are of application to the upstream oil and gas industry.
Permit Conditions: The EU ETS Permit includes conditions specifying the activities it covers, the emissions of GHG covered and the permitted emission points. The conditions will also place an obligation on the operator to submit a detailed monitoring and reporting plan confirming the monitoring and reporting arrangements that will be implemented (see Sampling/Monitoring Requirements tab).
UK Registry Account: Each operator will have an account on the UK Registry that enables them to manage their allowances, including transfer and surrender of allowances. The EU ETS works on a “Cap and Trade” basis, with emission caps being set for all installations covered by the scheme. Each installation will then be allocated trading allowances based on the National Allocation Plan (NAP) on 28 February each year. In subsequent years, permitted installations must surrender a number of allocations equal to their emissions from the previous year. Operators must also have their annual emissions externally verified.The EU ETS Registry is an online database that records:

  • Carbon dioxide allowance allocations for installations
  • Annual verified emissions
  • Transaction history of allowance transfers
  • Annual reconciliation of allowances and verified emissions

Application for an EU ETS UK Registry Account must be made online via the Registry Link. Guidance on applying for a Registry Account is also available here.

CRC Energy Efficiency Scheme Order 2010: The CRC Energy Efficiency Scheme Order 2010 requires businesses using more than 6000 MWh of electricity a year to register for the CRC between April and September 2010 and to report and record energy usage. From 2011 the EA will publish an annual league table of the best and worst CRC performers. Poor performers will be penalised whilst top performers will be rewarded. The CRC is an opportunity for large businesses to play their part in reducing dangerous carbon emissions. For businesses the main motivation to cut their energy use will be the bottom line. Businesses cutting energy use stand to benefit from lower energy bills and could be financially rewarded if they perform well in the energy efficiency performance table. Conversely poor ‘green performance’ could be damaging for a business’ reputation.Further information is available on the BEIS and EA Website (see the Guidance section under the Legislation tab). If registered on the CRC Registry, a report on your organisation’s CO2 emissions must be submitted at the end of each reporting year by putting your emissions data into the CRC Registry (see EA Reporting Guidance)
Monitoring and Reporting Plan: One condition of the EU ETS permit is for the operator to submit a Monitoring and Reporting Plan (M&R Plan) to BEIS for approval. Monitoring and Reporting Guidance for the Offshore Sector (PDF document) is available on the BEIS website. The following need to be monitored/measured under the EU ETS:

  • Fuel consumption
  • Flare volumes

Emissions are to be reported either on the basis of calculations or direct measurement. Measurement of emissions shall use standardised or accepted methods.

The M&R Guidance sets tiers for monitoring requirements based on accuracy of the monitoring method. The guidelines require that the highest tier approach shall be used by operators to determine parameters for monitoring and reporting purposes. Only if it is shown to the satisfaction of BEIS that the highest tier approach is not technically feasible or will lead to unreasonably high costs, may a next lower tier be used.

A new monitoring plan will be required under Phase III. Draft EU Regulations are currently with the European Parliament and Council for approval. Guidance on Phase III monitoring plans (PDF document) was published in on 31st July 2012.

Improvement Plans: In addition, operators must submit an Improvement Plan on an annual basis, to demonstrate how they intend to achieve monitoring and reporting requirements. There are no set requirements for Improvement Plans, as each installation is likely to pose different challenges.Step 1 – Quantify current measurement uncertainty.Step 2 – Identify necessary improvements.Step 3 – Undertake necessary cost and engineering studies.Step 4 – Schedule and implement necessary improvements (including allocation of necessary time and resources).If there are problems with meeting the Improvement Plan, BEIS should be contacted as soon as possible to be advised of the delay and amended timetable. Also see the Snippets tab.
Metering Requirements: For large volume users of gaseous fuels (CO2 emissions of > 500,000 tonnes per annum), Tier 4 metering accuracy shall be achieved unless it would not be technically feasible or would lead to unreasonably high costs.  Tier 4 requires that the uncertainty in fuel consumption is less than ±1.5%. For lower volume users of gaseous fuels, Tier 3 should be achieved. Tier 3 requires that fuel consumption is metered with a maximum permissible uncertainty of less than ± 2.5%. Meters should be located in order to remove the need for calculation, e.g. immediately upstream of turbines.Similar metering requirements exist for diesel metering. Flare gas metering (EU ETS) operators will be expected to meet Tier 2 requirements (± 12.5% accuracy). Meters are to be located to ensure accurate measurement and excluding non-reportable activities (e.g. downstream of flare pilot offtake). Flare gas sampling is not required (as agreed by BEIS).
What to Report: A number of annual reports are required to be submitted:

  • Annual report on improvements towards the use of the highest tier approach for monitoring of major resources (ETS5/6)
  • Annual emissions report (ETS7)

The annual emissions report (ETS7) shall include:

  • Installation/activity details
  • For each relevant activity for which emissions are calculated data to be provided on emissions factors, oxidation factors, total emissions and uncertainty
  • For each relevant activity for which emissions are measured, data is to be provided on total emissions, reliability of the measurement methods and uncertainty

Permit conditions will also include a requirement to report any breakdown or malfunction of any monitoring or reporting equipment.

Annual reports must undergo external verification before submission.

Any unused allowances at the end of each year must be surrendered (see Performance Standards tab).

Also see Performance Standards for reporting requirements under the CRC Energy Efficiency Scheme Order 2010 (for registered organisations).

How to Report: The annual report on improvements towards the use of the highest tier approach for monitoring of major resources should be undertaken using form ETS5/6 (Excel File). Guidance on completion of ETS5/6 (Excel file) is also available here (Word document). Annual emissions under EU ETS must be reported annually using Commission templates available here (under sub-section Monitoring and Reporting Regulation (MRR) Guidance and Templates). BEIS have identified that the ETS7 form does not fully conform to Phase III requirements (discussed here).  Guidance on completion of ETS7 for the offshore oil and gas industry is also available from BEIS website. Monitoring and Reporting Guidance for the Offshore Sector (Word document) and Q&A about Phase III (pdf document) are available. Additional guidance is available on the Environment Agency Website.
Who to Report to: Completed forms should be submitted to BEIS (LCU OED) by email at emt@decc.gsi.gov.uk
When to Report:
  • Annual emissions report (ETS7) to be prepared (end December/January) each year
  • Submission of verified annual emissions report (ETS7) – 31 March each year
  • Surrender allowances (from UK Registry) – 30 April each year
  • Submission of annual monitoring improvements reports (ETS5/6) – 30 June each year
EU ETS: Operators of installations that do not surrender sufficient allowances to cover their annual emissions will be liable to a penalty.
EU ETS Permit – Variation: Notification must be given to BEIS at least 14 days before making a change to the operation that will affect the description of the installation and its GHG emissions. The EU ETS application form (see Consent Needed tab) may be used to apply for a new permit or to apply for a variation to an existing permit.Note that if additional allowance is required, that this will need to be applied for from the New Entrants Reserve (see Consents Needed tab), which is strictly limited. Where no allowance is available, allowances will need to be purchased through the Trading Scheme. BEIS advises that, during Phases I and II of the EU ETS, it has received requests to retrospectively approve changes impacting the Greenhouse Gases Emissions Permits at the time of verification of the annual returns. BEIS makes it clear that it will not be prepared to issue retrospective approvals following the commencement of Phase III of the EU ETS on 1 January 2013.It warns that this could result in the verifier refusing to approve the annual emissions report, which could lead to a significant cost penalty. As such, permit holders are reminded that they must immediately notify any changes that are relevant to their permit.
Signficant Extensions – allowances under NER: For existing installations with significant extensions applying for allowance under the NER:

  • Considered a significant extension – if:
    • One or more changes increasing capacity by at least 10%, or
    • One or more changes leading to increased allocation >50,000 allowances and >5% of allowances (must satisfy both tests)
  • Capacity increase is calculated as the difference between:
    • Initial capacity = average of highest two months fuel use in 2005-2008 x 12, and
    • New capacity = average of higest two months in first six months of normal operation
  • Cannot apply until after start of normal operations and must apply within 12 months of start of normal operations
  • Capacity reductions must also be declared and will lead to allowance reductions.
EU ETS Permit – Closure of Installation: Installations that have ceased production must notify BEIS in order to surrender its permit. Where a temporary period of closure is argued, BEIS will consider these on a case-by-case basis. Installations that permanently cease production will retain their allowance for the remainder of the year in which closure occurs and may continue trading. Allocations for following years will not be issued and will be returned to the “pot” for New Entrants and revised permit applications.
Greenhouse Gas Emissions Trading Scheme (Amendment) and National Emissions Inventory (Amendment) Regulations 2014: These regulations (PDF document) are due to come into force on 1 February 2015. 
CLIMATE CHANGE (EMISSIONS TRADING) – The CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2013: These Regulations revoke and replace the CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2012 [S.I. 2012/1386]. These regulations (PDF document) will come into force on the 1 February 2014.
Greenhouse Gas and EU ETS Public Consultation: A public consultation relating to amendments to UK greenhouse gas (GHG) European Union emissions trading scheme (EU ETS) and national emissions inventory regulations. This consultation has been issued by DECC and the Environment Agency, and addresses a number of proposed technical amendments to the GHG Trading Scheme Regulations 2012. A document produced by DECC detailing these consultations can be obtained here.Views are being sought from interested parties on the draft GHG emissions trading scheme and National Emissions Inventory (Amendment) Regulations 2013, which will amend the 2012 and Inventory Regulations. The aim of this amendment is to:

  1. Clarify the civil penalties level to be imposed on operators carrying out unauthorised EU ETS activities.
  2. Bring the penalty for under-reporting EU ETS emissions prior to 2013 into line with the penalty from 2013.
  3. Implement the EU’s 2013 Registries Regulation (Commission Regulation (EU) No 389/2013 of 2 May 2013).
  4. Replace the National Emissions Inventory’s system of criminal sanctions with a civil penalty scheme and remove the associated powers of entry.

The consultation closed on 19 September 2013.

Small Emitters: In May 2012, the UK Government launched its consultation on the UK’s Small Emitter and Hospital Opt Out Scheme (PDF document) to enable installations to be excluded from the EU ETS for Phase III (2013 – 2020). Consultations closed on 18 July 2012. A list of installations that applied to opt out has been submitted by the UK Government to the European Commission for approval to be excluded. A decision from the European Commission is pending.Operators who applied to opt out should continue to prepare for the beginning of Phase III as normal, including by providing information to the regulator on request so that an up to date permit can be issued for the installation for Phase III.
EU ETS Phase III: Phase III will run 2013-2020 and will include year on year reductions in allowances with a driver of reducing EU emissions by 21% between 2005 and 2020 (linear reduction of 1.75% per annum). However, the oil and gas industry is currently an exception to this rule, with flat rates of allowances being given between 2013 and 2020.  This is still subject to final EU approval. It is also not clear if this flat rate of allowances will apply to New Entrants. There are also important changes in what will and what will not receive free trading allowances:

  • Any CO2 generated from electricity generation will not get any trading allowance at all.
  • CO2 generated by combined heat power (CHP) will get free allowances.
  • There will be free allocations for safety flaring.
  • There will be free allocations for energy used to generate heat (including waste heat recovery) and for direct drives.
  • There will be no free allocations for routine/maintenance flaring and incineration.
  • There will be no allocation for inherent CO2 in fuel gas.
  • Partial free allocation will be given at 80% of verified baseline emissions (2005-2007). This does not apply to New Entrants.

For Carbon Capture and Storage a separate Directive has been published. Credit will be given under EU ETS for CO2 captured and stored.

EU ETS Consultation – Amendments to GHG Regulations 2012 DECC published a summary of responses to their consultation earlier in 2015. Following this consultation, DECC will now lay these regulations before Parliament.
Updated Energy and Emissions projections: 2015 A report detailing projections of the UK emissions performance against national greenhouse gas targets under existing policies has been released by BEIS. It includes projections of the demand for each type of fuel for different sectors of the economy. The report includes projected energy demand for electricity and indicates what mix of generation will meet it (link here).

Climate Change – Enforcement and Sanctions Guidance:

This consultation explains the Environment Agency’s proposed approach to enforce the European Union Emissions Trading System, CRC Energy Efficiency Scheme and Climate Change Agreements, which concludes on the 21st March 2014. Further details are available on the Environment Agency’s website.

Amendments to UK greenhouse gas emissions trading scheme & national emissions inventory regulations:

The government response to this public consultation was published in December 2013.

The response document can be downloaded from the UK Government website. (PDF document)

Consultation on amendments to UK greenhouse gas emissions trading scheme and national emissions inventory regulations:

This consultation relates to a number of technical amendments to the Greenhouse Gas Emissions Trading Scheme Regulations (ET ETS) SI 2012/3038 which aim to simplify and harmonise EU ETS penalties in the transition to Phase III, improve clarity and reduce the burden for businesses.

Further details are available on the BEIS website.

Know your greenhouse gas (GHG): inventory factsheets:

BEIS (then DECC) produced a GHG inventory summary factsheet for common gas emissions, which can be downloaded from the BEIS website.

UK rallies 12 EU countries behind backloading twin track EU-ETS reform:

In July 2013, Energy and Environment Ministers from 12 EU Member States issued a joint statement calling for MEPs to support the ‘backloading’ proposals due to be voted on in Strasbourg on 3 July 2013, and for the EC to bring forward legislative proposals in delivering structural reform of the EU-ETS by the end of the year. Further details are available on the UK Government’s website.

Heat, Safety Flaring and Process Emissions under EU ETS Phase III: Heat Benchmarks – applicable to the oil and gas sector if heat could be metered. Some operators included calculated heat in their benchmark data collection to cover steam generation and Waste Heat Recovery (WHR). Safety flaring – definition based on dialogue with OGP appears to allow free allocation for all flaring as non-electricity fuel use. Process emissions – reservoir carbon dioxide may be eligible for free allocation, and the Commission is currently considering this issue.
DECC EU ETS Phase III & CRC Seminar Wed 26th May 2010: Presentations made by BEIS (then DECC) at this seminar include:

In addition, a Q&A fact sheet (PDF document) is provided.

Improvement Plans: BEIS will not allow operators to submit improvement plans that do not demonstrate progress towards meeting the required measurement or reporting tiers under EU ETS. BEIS will use enforcement notices and impose deadlines on operators as necessary to ensure compliance. Where operators cannot meet imposed tiers, verifiers will be forced to confirm “non verified” annual reports. Where operators submit “non verified” annual reports, emissions levels will be set based on historical data or maximum levels of uncertainty.
Carbon Reduction Commitment (CRC) performance league: The Environment Agency has published a final Carbon Reduction Commitment (CRC) performance league table. The league table ranks just over 2,000 organisations in order of their energy efficiency performance for the year 2011/2012. The table ranks relative performance of CRC Energy Efficiency Scheme participants against the three weighted metrics: Early Action Metric, Absolute Metric and Growth Metric.