EU states agree Brexit safeguard measure for carbon market

BRUSSELS (Reuters) - EU member states agreed on Thursday to protect the bloc’s carbon market from a hard Brexit by invalidating UK-issued allowances from 2018 unless Britain ensures its companies meet their obligations under the scheme before it leaves the bloc.

Britain has said it wants to remain in the European Union’s Emissions Trading System (ETS), which charges power plants and factories for every tonne of carbon dioxide (CO2) they emit, until at least the end of 2020 when the current trading phase ends.

Under the so-called Brexit safeguard measure agreed on Thursday, carbon permits issued by Britain would be marked so they can be identified.

British permits would also be restricted from use in the scheme from January 2018 unless Britain ensures that its allowances are surrendered at least before March 15, 2019, weeks before Britain is scheduled to quit the EU, the European Commission said in a statement.

The European Commission originally proposed the measure to prevent a sell-off of carbon permits by British companies whose compliance obligations under the scheme were unclear once Britain leaves the EU.

Traditionally compliance takes place by April 30 each year, while Britain is due to leave the European Union on March 29, 2019.

The Commission said Britain had informed other member states of its intention to adopt a law by the end of the year to bring forward the compliance deadline for 2018 to before the date it quits the bloc.

“Should that be confirmed, allowances issued by the United Kingdom for 2018 would not be marked and would be accepted for surrender,” the statement said.

Britain is the EU’s second-largest emitter of greenhouse gases and its utilities are among the largest buyers of carbon permits.

Speaking on Tuesday Britain’s climate minister Claire Perry called the Brexit amendments “tit for tat” measures.

“We do not have to leave the ETS as we negotiate to leave the structure of the EU,” she said, speaking to lawmakers in a British parliamentary committee.

“It’s something we want to remain part of as we go through the [Brexit] negotiations,” she said.

The benchmark European carbon contract was down 2 percent at 7.54 euros/tonne at 1552 GMT.

Additional reporting by Susanna Twidale in London; editing by Foo Yun Chee and Adrian Croft