There are a number of new sanctions for 2013, and it is important for businesses to understand their obligations and what the pitfalls could be if they get their responsibilities wrong. This blog will briefly look at Environment Agency (EA) Civil Penalties in relation to the Emissions Trading Scheme.

The European Union Emissions Trading Scheme (EU ETS) was the first trading scheme of its type in the world and it remains the largest. The purpose of its launch in 2005 was to combat climate change. A cap is set for each operator under the scheme for the amount of greenhouse gases they are allowed to emit. Allowances are then auctioned off or allocated for free and these can then be traded. If an operator requires more it can purchase them, if it does not require all its allowances it can sell them.

In a Direction published in February 2013 by the Secretary of State, calculations for penalties for operating an EU ETS activity without a permit were set out.

The penalty will ensure that the operator will pay more than the economic benefit that they have gained as a result of carrying on the activity without a permit. The EA can recover from the operator the costs that have resulted from estimating their emissions and serve separate notices for penalties if the operator fails to provide information.

5% will be added to the total penalty to ensure that it is higher than the costs that the operator would have been liable for had they obtained a permit. Penalties therefore can be significant and could have a real financial impact for businesses that are not compliant with the legislation.

Our view is that it will take some time before these type of penalties are regularly enforced but this is a message that non-compliance is being taken seriously and that this regime now has some serious teeth.