Emissions Trading

Emissions trading is designed to incentivise certain large industries to reduce their emissions by giving allowances for the amount of pollutants they email annually. Industries which emit less than the target can sell their allowances and do not have to purchase from others. Conversely those that exceed their targets must purchase allowances from others.

Directive 2003/87/EC established the emissions trading scheme. Part of each state’s responsibility for emission reductions is applicable to individual emitters of greenhouse gases in particular large industrial and power producing facilities. Greenhouse gases are primarily carbon dioxide (CO2), nitrous oxide (N20), and perfluorinated compounds (PFCs) from aluminium production.

There is a cap on the permitted emissions in the given industry per period. Allowances may be traded to options. Industries covered by the scheme must submit allowances to cover their emissions. Otherwise they must pay a penalty. The cap on emissions is reduced gradually over 2005 levels to 20 20 x 1.74% per year. The purpose is to require emitters to emit less greenhouse gases and move to carbon neutral energy sources.

The European Communities (Greenhouse Gas Emissions Trading) Regulations 2004 and 2005 implemented Directive 2003/87). The European Communities (Greenhouse Gas Emissions) (Amendment) Regulations 2010 partly transpose Directive 2009/29. The EPA administers the  Emissions Trading Scheme under the Regulations.

The European Communities (Greenhouse Gas Emissions Trading) Regulations 2004places responsibility for the scheme implementation in Ireland on the Environmental Protection Agency.
Directive 2003/87 requires states to allocate these 90% of allowances free of charge in the first phase of the emissions trading scheme 2080 2012. The value of these allowances has been specified.

Electricity generators participating in the single electricity market are subject to the levy. European Communities (Greenhouse Gas Emissions Trading) Regulations 2004 (S.I. No. 437 of 2004)provides for the methodology for pricing of allowances and levies.

CEO has a certain flexibility in setting the levy and pricing. Generators subject to the public service obligation order are exempt from the levy as the principles are priced into the order.

Electricity generators must make returns to the CER (CRU after 2016) for each levy period. They must specify the emissions within the period for each generator. The format of returns may be specified by regulations made by CER (CRU). CER (CRU) may require evidence to verify information set out in returns.CER (CRU) gives notice of the levy.

CER (CRU) is to place the proceeds of the levy into an account. This may only be used for certain specified purposes. The Minister for Finance may after consultation with the Minister for Communications Energy and Natural Resources pay an amount into the account from dividends received from ESB. Funds in the account are to be disposed of as directed by the Minister with the consent of the Minister for finance.

The Kyoto Protocol Flexible Mechanisms Regulations 2006 designated EPA as the  body to approve projects under the Joint Implementation (JI) or Clean Development Mechanisms (CDM) of the Kyoto Protocol.

Approximately one third of Irish greenhouse gas emissions were subject to trading. Approximately one third related to  emissions and two thirds relate to combustion.  The  Government decides on a that the traded sector would be responsible for 3.2 million tonnes per annum of the Irish reduction target and the non-traded sector would be responsible for 4.154 million tonne of the rest.


Ireland’s National Allocation Plan 2007 which applied for the 2008-2012 period covered over 100 installations subject to the Emissions Trading Scheme . It was intended that the cost of carbon dioxide usage would be passed on by concerns in the energy sector to customers f carbon dioxide in their prices.

The EPA allocated allowances firstly at the sector level and then to individual plants. Approximately 1/10 of the total allowances were retained for new entrants.

The various electricity installations were allocated approximately two thirds their “relevant emissions”, based on historic emissions in 2003 or projected emissions.

The EPA projected that renewables would  grow from 4.3 per cent in 2003 to 15 per cent in 2020 and 33 per cent by 2030. Under the all-island market for electricity generators have to bid in the wholesale market at prices that represent their short-run marginal costs

Consumers pay most  of the costs of the carbon emitted in the retail price or a Public Service Obligation applied on their electricity bills. This is designed to incentivise use of lower carbon emitting providers

Because of lower output than envisaged,  the Electricity Regulation (Amendment) (Carbon Levy) Act 2010, sought to recover about €70 million a year for some of the free carbon allowances that had been allocated to electricity generators who were allowed to pass on the notional cost of their carbon to consumers.

The levy applies only to electricity generators subject to the Single Electricity Market (SEM) and  bound by the Trading Settlement Code. It does not apply to certain  generators subject to the PSO and under their PSO supported output.

The four largest cement installations received 96 per cent of their relevant allowances on the basis of pro rata allocation, The cement industry has sought to  minimise carbon emissions by measures including fuel switching and other efficiencies.

The second National Allocation Plan 2008-2012 envisaged that ETS participants will have to purchase 2.040 Metric Tonnes (MT) of allowances or find low costs abatement options in order to meet targets set for emission reductions, but the Carbon Budget Report 2009 stated that improvements in energy saving in IPPC facilities and the recession since 2008 have meant that emissions from this sector were merely 0.41 Mt above the amount allocated to existing installations and 1.9 Mt below the total allowable allocation in 2008. As anticipated in Ireland’s National Climate Change Strategy 2008-2012, Ireland did not host Joint Implementation (JI) projects.

Allowances from closed installations are added to the approximately 9% set-aside for new entrants.. Unused allowances in 2012 are retired. The EPA estimated in 2010 that around 5 million allowances remaining in the New Entrant Set-Aside at the end of the Kyoto period will be available for the State to use towards Kyoto compliance and that the remaining allowances in the New Entrant Set-Aside will cover the remaining “gap” of 4.4 MT tonnes of CO2 so that no further purchase of carbon credits will be needed.

The European Communities (Emission Trading) (Amendment) Regulations 2010 amended the 2004 Regulations to improve enforcement and compliance mechanisms. They  empower the EPA to collect a emissions data from the installations that will be covered by the new 13 scheme .

The EPA must  submit the national list of ETS installations  to the EU Commission. Certain smaller installations are subject to  other measures to achieve reductions in emissions.

The Electricity Regulation (Amendment) (Carbon Revenue Levy) Act 2010 appoints the CER (CRU after the 2016 Act) to calculate and administer the levy payable by electricity generators. Generators of electricity receive an allocation annually of carbon allowances without charge. If emissions exceed this figure they must purchase additional allowances. If they are less they may sell the excess allowances which they hold.

The Electricity Regulation (Carbon Revenue Levy) (Amendment) Act 2012 was passed consequent on a Supreme Court decision which overturned the basis on which the CER had calculated prices and the wholesale electricity bids in the single electricity market. CER had determined that the levy was not cost, and this was determined to be incorrect. The 2012 Act confirmed that carbon revenue levy was not to be factored into in wholesale electricity prices bid into the single electricity market.

It is a global objective to reduce emissions and to achieve in the longer term balancing human emissions with sinks in the second half of the 21st century.

Developed countries must continue to assist with climate finance for developing countries for mitigation and adaptation with €500 billion being provided within the following 10 years.

States must come together every five years for a global stocktake to consider progress on emission reduction adaptation and support provided with a view to achieving long-term goals of the agreement.

Following the financial crisis the price of carbon fell significantly and required the system to be reformed. Commission Regulation 176/2014 and EU Decision 2015/1814 established a market stability reserve and a mechanism which may be used if the emission allowances exceed a threshold. In this case part of the allowances are withdrawn from the market and put in the reserve. They may be replaced on the market under other circumstances. This is to stabilise the market.

Commission Delegated Regulation (EU) 2019/331provides for EU rules harmonised for the e allocation of emission allowances. It provides the rules for EU registry to facilitate the system of greenhouse gas emission allowance.

The regulation seeks to counter EU businesses moving production to 3rd countries with lower greenhouse gas standards by re-calculation of allowances.

Commission Implementing Regulation (EU) 2019/1842provides for rules for adjustments to free allocation to emission allowances arising from activity level changes. Businesses operators receiving free allocation of allowances must report annually on the activity level of the relevant segments of the business . The must calculate their average activity level adjust the level of free allocations

The European Union (Greenhouse Gas Emission Reductions, Calculation Methods and Reporting Requirements) (Amendment) Regulations 2019 require vehicle fuel suppliers to reduce the carbon intensity of transport fuels by 6% by 2020 relative to 2010. Greenhouse gas emissions from biofuels must be lower than that for the fossil fuels they replaced.

Biofuel feedstocks used to produce biofuels which count towards greenhouse gas reduction may not emanate from land that was
• A primary forest after 2008
• nature protection area after 2008
• Highly Bio diverse grassland after 2008
• Wetland in 2008
• Continuously forested area in 2008
• Peatland in 2008

Regulation (EU) 2018/1999 on the Governance of the Energy Union and Climate Action obliges states to submit their integrated energy and climate plans by the end of 2018 and thereafter every 10 years. The plans must set out how the states intend to increase the share of energy from renewable sources. They are to include

• An overview of the process followed for establishing the plan description of public consultation and involvement of stakeholders and results and of regional cooperation with other states

• Description of national objectives targets and contributions relative to the dimensions of the energy union

• Description of planned policies and measures in relation to the objectives targets and contributions
• Description of the current status of the five dimensions of the Energy Union in particular with reference to energy system greenhouse gas emissions and removals as well as projections in relation to objectives
• A description of the regulatory and non-regulatory barriers and hurdles to delivering the objectives
• An assessment of the impact of the policies and measures including their consistency with long-term greenhouse gas emission reduction objectives under the Paris agreement
• An annex setting out the latest methodologies and policy measures for achieving energy savings requirements

Ireland’s draft plan 2021 to 2030 was submitted in 2018. Ireland has failed to meet its targets. It failed to meet the 15% share of renewable energy consumption by 2015 achieving 14.3%. the targeted 20% reduction in agriculture transport waste and non-energy intensive industry fell substantially short of reaching 5 to 6%.
This has made achievement of the 2030 target more difficult and leave Ireland vulnerable to fines and sanctions.

Pursuant to the submission of the draft NECP Ireland was requested to increase its objectives to reduce greenhouse gas and sectors outside the emissions trading scheme and improve energy efficiency.

Regulation (EU) 2018/842 , labelled the Effort Sharing Regulation supplements the climate and energy plans. It provides for binding emission reduction targets for states between 2021 and 2030. Ireland is required to reduce emissions by 30%.

States may use a number of ETS allowances and credit taken from action in land use change and forestry sectors for non-ETS sectors. States may use a limited amount of emission removals in land use sectors to meet the targets. The maximum amount of may be transferred as 4% of the ETS emissions.





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