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Tips for surviving the EU ETS compliance deadline

Navigating the EU ETS Compliance Deadline: Key Considerations and Deadlines

The fast-approaching 30th April deadline for compliance with the EU ETS is a critical time for companies across Europe. To avoid penalties of €100 per tonne for non-compliance, it is important to adhere to the following deadlines:

31st March: This is the deadline for verified emissions reporting and sign-off within the EU registry system. Most companies should have a good idea of their emissions by year-end and be ready to sign off on their verified emissions. Missing this deadline will result in a blocked registry account, limiting certain processes.

30th April: This is the deadline for surrendering EUAs equal to the verified tonnes of CO2 by 31st March. However, since the 30th of April is a Sunday and EUA transfers can only occur on working days, the effective deadline for surrendering allowances is actually the 28th of April at 16:00h (CEST).

In addition to meeting these deadlines, there are other decisions that need to be made:

  • Buying allowances: Considering the current market price and forecasts for lower prices in the future, companies must decide whether to buy allowances now or borrow recently allocated allowances for 2017 emissions.
  • Purchase timing: Companies must determine whether to buy allowances in one transaction or spread purchases over a period of time to avoid timing-related risks.
  • Account representatives: It is crucial to have both an Account Representative (AR) and an Additional Account Representative (AAR) in place to make transfers for compliance. Ensuring this arrangement is in order is important for both experienced participants and new entrants.

As the deadline approaches, there are two additional important considerations:

Timing of deliveries: It takes 26 hours to make the delivery between trading accounts and untrusted operator-holding accounts. Therefore, the mentioned 28th April deadline should be 26th April or possibly earlier. Being well-prepared in advance is essential.

Improvement report: Every installation must submit an improvement report by 30th June each year, notifying the national regulator of any changes to the installation and potential efficiency improvements.

Looking ahead, it is important to recognize the changes coming to the EU ETS. The implementation of the Market Stability Reserve in 2019 is expected to increase prices significantly, coinciding with a greater number of installations needing to buy allowances. Free allocations will continue to decrease, and companies must be prepared for the financial impact of higher prices and reduced free allocation.

To navigate these challenges, gaining a thorough understanding of longer-term financial carbon risk is essential. Staying informed about market developments and political factors is crucial for success in carbon markets.

Redshaw Advisors is a company dedicated to helping companies understand and manage their financial exposure to carbon markets, providing carbon risk solutions to mitigate risks effectively.

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