If there is a hard Brexit on 29 March 2019 the UK will no longer be able to participate in the EU ETS. The EU and the UK government have put measures in place to mitigate the impact this could have on the scheme. Operators with a number of EU ETS installations are likely to be aware of and planning for the upcoming changes. However, businesses for which EU ETS is not a core concern (for example which have only one EU ETS installation) should consider the impact of a hard Brexit on their compliance obligations and participation in the scheme.

Before Brexit

Compliance deadlines for the 2018 compliance year have been brought forward so that they fall before the proposed Brexit date of 29 March 2019. UK operators are required to report emissions by 11 March 2019 and surrender allowances by 15 March 2019.

As of 1 January 2019, the European Commission has suspended the UK's participation in the EU ETS. Under the terms of the suspension the UK is currently not able to allocate or auction allowances. However, operators are still able to access their registry accounts to surrender, buy and sell allowances. Government guidance advises that operators take this into account when planning to meet 2018 compliance obligations.

After Brexit

On a hard Brexit, the UK will cease to participate in the EU ETS from the point of withdrawal from the EU. Operators holding UK accounts in the EU ETS registry will lose access to their accounts at this point. Government guidance advises that operators wishing to retain access to their allowances after the withdrawal date should consider opening an account in another member state's registry for this purpose, and should consider the amount of time this is likely to take. However, this process may be subject to national law registration requirements and may not be straightforward for operators without a presence in another EU member state.

The Greenhouse Gas Emissions Trading Scheme (Amendment) (EU Exit) Regulations 2019 provide that following a hard Brexit UK operators will no longer be required to surrender allowances for the 2019 compliance year onwards, but will still need to comply with the monitoring, reporting and verification requirements of the regime. Instead, from 1 April 2019, operators will be subject to a carbon emissions tax to be introduced in the Finance Act 2019.