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EFTA-like ETS deal unlikely for UK after EU exit

06 Mar 2018 15:54 GMT
EFTA-like ETS deal unlikely for UK after EU exit

Amsterdam, 6 March (Argus) — The UK is unlikely to strike a deal to participate in the EU Emissions Trading Scheme (ETS) in the same way that European Free Trade Association (EFTA) states do, following its exit from the EU, delegates heard at the Argus European Emissions conference today.

EFTA states Iceland, Liechtenstein and Norway are in the EU ETS without being in the EU, but are required to allow the free movement of labour — a sticking point for the UK government in negotiations over its EU exit.

"Politically it would be very difficult for the UK to join [the EU ETS] in the same way as Norway," EFTA Surveillance Authority's internal market affairs deputy director Gabrielle Somers said.

It is "totally unrealistic" that the UK could become part of the EFTA agreement without accepting free movement, she added.

Another option would be for the UK to set up a domestic ETS, which could link with the EU carbon market following its exit from the EU.

But "time is running out" for the UK government to put in place a domestic scheme and begin linkage negotiations, UK utility Drax's EU affairs manager Ross McKenzie said.

Switzerland began negotiations in 2010 to link its domestic carbon market with the EU ETS, but an agreement was not signed until November last year.

The UK is already "fully compliant" with the scheme —having already been part of the EU ETS — which could help fast-track linkage negotiations and present "an opportunity to find a bespoke link to the EU ETS that hasn't been done before", McKenzie added.

But the EU has signalled that any future agreement linking its ETS with a domestic carbon market would be subject to European Court of Justice rule. "This may or may not be a sticking point" for the UK government, Somers said.

The UK is scheduled to exit the EU on 29 March 2019. The UK and EU have adopted short term measures to protect the EU ETS from the impact of the UK's potential departure in the 2018 compliance year, which ends after the UK's scheduled EU exit. But they have made no decisions on what will happen after 2019.