EU Climate Policy
A no deal scenario has the potential to impact the efficient functioning of two important EU climate policy instruments: the EU emissions trading scheme (EU ETS) and the quota system for the placing on the market of hydrofluorocarbons.
Under a no deal scenario the UK will no longer participate in the EU ETS. Emissions allowances allocated by the UK prior to exit may impact the environmental integrity of the scheme as a result of their potential contribution to an allowance oversupply. To protect the environmental integrity of the EU ETS and the smooth functioning of its allowance market, the European Commission adopted a decision on December 19 to temporarily suspend the free allocation of emissions allowances from January 1 2019.
To safeguard the operation of the fluorinated greenhouse gases quota system, the quantities of substance gases legally placed by UK companies on their domestic market should no longer be factored into the allocation of 2019 annual quotas. As the UK will no longer participate in the quota system the EU market will be smaller as of the March 2019. To protect the integrity of the system the European Commission on December 19 adopted measures. The first measure will allow an appropriate annual quota allocation to UK companies for accessing the EU27 market. Secondly, regulation will require that reporting by companies differentiates between the EU market and UK market to allow a correct allocation of quotas in the future.