Main climate regulations, policies and authoritiesInternational agreements
Do any international agreements or regulations on climate matters apply in your country?
Portugal is a party to the United Nations Framework Convention on Climate Change (UNFCCC) and ratified the Kyoto Protocol on 25 March 2002 and the Paris Agreement on 30 September 2016, having assumed the obligations in accordance with them.
As a European Union member state, EU climate change regulations apply in Portugal. For instance, Directive 2003/87/EC, as amended, among others, by Directive 2004/101/EC, of 27 October, Directive 2009/29/EC, of 23 April, and Directive 2018/410/EC, of 14 March, has been implemented through Decree-Law No. 233/2004, of 14 December, on the establishment of a scheme for the trading of greenhouse gas (GHG) allowances, and complementing regulations. Decree-Law No. 233/2004, of 14 December, which was the cornerstone for GHG allowances in Portugal, has been subsequently revoked by Decree-Law No. 38/2013, of 15 March, which transposed Directive 2009/29/EC of 23 April.
Portugal is also a party to the United Nations Framework Convention on Climate Change and to the Convention on Long-Range Crossborder Air Pollution.International regulations and national regulatory policies
How are the regulatory policies of your country affected by international regulations on climate matters?
Article 8 of the Portuguese Constitution establishes the principle of direct applicability of EU law in national territory, meaning that EU directives and regulations may apply directly in Portugal and in fact will prevail in case of a positive conflict with national law. In light of this, Portuguese regulatory policies on climate change matters shall always be subject to and comply with EU regulations.
As for other international regulations outside EU law, such as the UNFCCC, these are legally binding on the Portuguese state insofar as they are ratified by the Portuguese parliament. The ratification process crystallises international regulations as national law.
Although one cannot ascertain that through the ratification process of international treaties or regulations its compliance by the Portuguese state is ensured, the influence that such regulations have on the law-making process is real.Main national regulatory policies
Outline recent government policy on climate matters.
To achieve the goals undertaken under international treaties (such as the Kyoto Protocol and the Paris Agreement), Portugal has implemented several multi-annual programmes and plans.
The key instrument of climate policies implemented at a national level is the Strategic Framework for Climate Policy (QEPiC), which establishes the vision and objectives of national climate policy within the 2020-2030 period. On the mitigation side, the QEPiC includes the National Climate Change Programme 2020/2030 (PNAC 2020/2030), and on the adaptation side, the QEPiC establishes the National Climate Change Adaptation Strategy 2020 (ENAAC 2020). Further to the QEPiC, the Portuguese state has implemented a National Low Carbon Roadmap (RNBC), the objective of which is the study of the technical and economic feasibility of reducing GHG emissions in Portugal until 2050.
In addition, the Portuguese state has approved the Carbon Neutrality Roadmap 2050 (RNC 2050), through Resolution of the Council of Ministers No. 107/2019, of 1 July, with the aim of technically supporting the long-term commitment of GHG emissions neutrality in Portugal by 2050. The Portuguese state is also preparing the National Energy-Climate Integrated Plan 2021-2030 (PNEC 2030), pursuant to Regulation 2019/1999, of 11 December, which shall be the central energy and climate policy instrument for the next decade.
Portugal has implemented a set of green fiscal rules in sectors such as energy and emissions, transport, water, waste, planning, forests and biodiversity, and has also introduced taxes over plastic bags and incentives to car scrapping.
Finally, the Portuguese Environmental Fund, established by Decree-Law No. 42-A/2016, of 12 August, as amended, supports environmental policies aimed at the pursuit of sustainable development objectives, and to contribute to the achievement of national and international objectives and commitments on environment, including those related to climate change, protection of water resources and nature conservation and biodiversity.Main national legislation
Identify the main national laws and regulations on climate matters.
- Decree-Law No. 42-A/2016, of 12 August, establishing the Portuguese Environmental Fund;
- Decree-Law No. 38/2013, of 15 March, on the granting of GHG emissions permits and the management of the Portuguese Registry of Emission Permits, which is integrated in the Union Registry, and on the technical management of the Portuguese Carbon Fund (as amended by Decree-Law No. 42-A/2016, of 12 August, Law No. 71/2018, of 31 December, and Decree-Law No. 10/2019, of 18 January) (Decree-Law 38/2013);
- Resolution of the Council of Ministers No. 56/2015, of 30 July, which, among others, approved the QEPiC, which includes the PNAC 2020/2030 and the second phase of the ENAAC 2020;
- Resolution of the Council of Ministers No. 107/2019, of 1 July, which approved the RNC 2050;
- Resolution of the Council of Ministers No. 28/2015, of 30 April, which approved the Green Growth Commitment;
- Law No. 82-D/2014, establishing a set of green fiscal rules;
- Law No. 93/2001, of 20 August, setting out instruments to prevent climate change and its effects; and
- Decree-Law No. 162/2015, of 14 August on the agricultural insurance system, which supports the contracting of insurance against, among others, adverse climatic events.
Identify the national regulatory authorities responsible for climate regulation and its implementation and administration. Outline their areas of competence.
The Portuguese Environment Agency (APA IP) is a public institute with administrative autonomy from the central government responsible for the monitoring and development of climate policy at the national level. In particular, the APA IP is responsible for the award of GHG Emissions Title (see question 10) and for the award of GHG emissions allowances in the context of the ETS.
The Air and Climate Change Inter-ministerial Committee (CIAAC) is a political body created by Resolution of the Council of Ministers No. 56/2015, of 30 July, which monitors climate sectorial policies with impact in the national objectives in matters concerning air and emissions. This body is presided by the Minister of the Environment and includes members from ministries responsible for several sectors, such as energy, finance, agriculture, economy, transport and science. The CIAAC provides political guidelines regarding air and emissions, coordinates and promotes the integration of climate change policies in sectorial policies and monitors and implements measures, programmes and sectorial actions in respect of air and emissions.
Finally, the Portuguese Environmental Fund has been established within the Ministry of Environment and its main goal in respect of climate change is to promote and work in favour of achieving the Paris Agreement targets, notably through actions contributing to the reduction of GHG emissions, adaptation to climate change, and cooperation in order to achieve international commitments. These include sponsoring projects aimed at reducing GHG emissions and improving GHG emissions recording and inventory.
General national climate mattersNational emissions and limits
What are the main sources of emissions of greenhouse gases (GHG) (or other regulated emissions) in your country and the quantities of emissions from those sources? Describe any limitation or reduction obligations. Do they apply to private parties in your country?
The main sources of GHG emissions are the energy sector, the transport sector and the heavy industries sector, representing roughly 70 per cent of overall GHG emissions in Portugal in 2017, according to the Portuguese National Inventory Report on GHG, published by the APA IP on 8 May 2019 under the UNFCCC and the Kyoto Protocol.
Under the Kyoto Protocol and various EU directives Portugal has undertaken to reduce GHG emissions by 20 per cent by 2020, by 40 per cent by 2030 and by 80-90 per cent by 2050. These reductions take into account the levels of GHG of 1990.
No specific limits on GHG emissions apply to private parties in Portugal. However, pursuant to Decree-Law 38/2013, certain activities generating significant GHG must obtain a GHG Emission Title and GHG emissions allowances and must comply with monitoring and information obligations regarding GHG emissions.National GHG emission projects
Describe any major GHG emission reduction projects implemented or to be implemented in your country. Describe any similar projects in other countries involving the participation of government authorities or private parties from your country.
The major GHG emission reduction project implemented at a national level is the PNAC 2020/2030, which is a governmental programme aimed at compliance with GHG emission reduction targets as one of its main objectives. The PNAC 2020/2030 mostly covers non ETS sectors (as these are the ones in which national policies may have a greater influence and impact) and is the main national strategic instrument for compliance with GHG limitation commitments in the context of the Kyoto Protocol and the European Union Burden Sharing Agreement.
The PNAC 2020/2030 sets out guidelines for sectorial policies and measures, defines sectorial GHG emissions reduction objectives and identifies a set of additional policies and measures to be implemented in coordination with relevant sectors (such as transport, energy, agriculture and the forest industry).
However, once approved, the PNEC shall replace the PNAC 2020/2030 (this approval is expected at the end of 2019). The PNEC 2030 has as its main objectives the promotion of the decarbonisation of the economy and the energy transition in order to achieve carbon neutrality. The aim of PNEC 2030 is to reduce GHG emissions by 18-23 per cent in 2020 and 45-55 per cent in 2030, compared to 2005 levels.
In addition to the PNEC, the RNC 2050, published in 2019, considers a number of elements to be taken into account in the planning of actions to tackle climate change. The aim of the RNC 2050 is to reduce GHG emissions by 85-90 per cent in 2050, compared to 2005 levels, in order to achieve a transition to carbon neutrality, for which purpose several guidelines were established. Such goals are to be achieved through measures and policies set out in the PNEC 2030.
Domestic climate sectorDomestic climate sector
Describe the main commercial aspects of the climate sector in your country, including any related government policies.
Over the past decade we have seen a growing political awareness on climate change matters and, in a way, several energy-related decisions and investment projects with an underlying environmental and climate concern. This is most evident in the field of renewable energy, which grew exponentially between 2001 and 2014, strongly supported by attractive feed-in tariffs. As new renewable energy projects do not benefit from feed-in tariffs, new contractual structures have emerged allowing for the development of these projects.
Together with the growth in renewables (mostly wind and solar) there has been a relative decrease of the use of fossil fuels in the generation mix and an inherent reduction in GHG emissions.
General GHG emissions regulationRegulation of emissions
Do any obligations for GHG emission limitation, reduction or removal apply to your country and private parties in your country? If so, describe the main obligations.
Under Directive 2012/27/EU, of 25 October, EU member states have undertaken to reduce GHG emissions by 20 per cent until 2020, increase renewable energy resources in the generation mix also by 20 per cent and to reach a 20 per cent goal on energy efficiency.
These targets have been adopted in Portugal under the National Action Plan for Energy Efficiency 2013-2016 (PNAEE 2016), enacted by Resolution of the Council of Ministers No. 20/2013, of 10 April. The PNAEE 2016 encompasses action plan programmes aimed at the transport sector, housing and services, industry, state and agriculture. These programmes set out specific energy efficiency targets that apply to each of the above sectors and are aimed at complying with Directive 2006/32/EC goals.GHG emission permits or approvals
Are there any requirements for obtaining GHG emission permits or approvals? If so, describe the main requirements.
Pursuant to Decree-Law 38/2013, the activities identified in its Annex II must obtain a GHG Emissions Title and must comply with monitoring and information obligations regarding GHG emissions. These activities include, among others, fuel burning in facilities with a nominal thermal power of over 20MW, facilities refining mineral oil, facilities producing steel that have a production capacity of over 2.5 tonnes per hour, facilities producing paper pulp from timber or similar fibrous materials and facilities producing cement clinker in rotary kilns that have a production capacity of over 50 tonnes per day.
The operator requesting the issuance of the GHG Emissions Title must evidence that it is able to monitor and communicate information regarding GHG emissions in accordance with Regulation (EU) 601/2012 of 21 June.Oversight of GHG emissions
How are GHG emissions monitored, reported and verified?
Pursuant to Decree-Law 38/2013, operators requesting the issuance of an GHG Emission Title must describe the methodology of monitoring and communicating the information on emissions, as well as all elements required pursuant to Regulation (EU) 601/2012 of 21 June. Under this regulation, it is incumbent on these operators to comply with their monitoring and communication obligations pursuant to the principles of exhaustiveness, coherence, comparableness, transparency, accuracy, integrity and continuous improvement.
The monitoring plans proposed by operators are approved by the APA IP. Should the facility generate a low value of GHG, the operator may request the APA IP to authorise the implementation of a simplified monitoring plan.
Operators must report GHG emissions of a given calendar year until 31 March of the following year. This report is submitted to the national system of inventory of emissions, the SNIERPA. The rules applicable to the SNIERPA have been recently updated by Resolution of the Council of Ministers No. 20/2015, of 14 April, which granted added powers to APA IP, which has become the coordinator of SNIERPA and the entity in charge of preparing, drafting and submitting the national inventory of air emissions data to European and international institutions.
GHG emission allowances (or similar emission instruments)Regime
Is there a GHG emission allowance regime (or similar regime) in your country? How does it operate?
As mentioned in question 10, the activities encompassed in Annex II of Decree-Law 38/2013 must obtain a GHG Emissions Title.
This Decree-Law is also the GHG emission allowances regime in place in Portugal. Emission allowances are defined as the right to emit an equivalent tonne of carbon dioxide for a given period.
From 2005 until 2012, the GHG emission allowances regime was ruled by two national plans of emission allowances (the PNALE I and II, approved by the European Commission), which granted GHG emission allowances cost-free. Operators were required to monitor, verify and communicate emissions and subsequently surrender the granted allowances.
Pursuant to Decree-Law 38/2013, from 2013 and until 2020, which is the relevant regulatory period at hand, GHG emission allowances shall make a transition to an auction base, as set out in EU Commission Regulation 1031/2010, of 12 November, as amended by Regulation 1210/2011, of 23 November, by Regulation 784/2012, of 30 August, Regulation 1042/2012, of 7 November, Regulation 1143/2013, of 13 November, Regulation 174/2014, of 25 February, Regulation 1902/2017, of 19 October, and Regulation 7/2019, of 4 January. Portugal was accepted to the EU common auction platform in November 2012.
Notwithstanding the new auction-based system, there will be a progressive phase out from the cost-free system to the auction system between 2013 and 2027 based on EU benchmarking. In fact, GHG emission allowances’ auctions became the rule for the energy sector, but for the remaining industrial sectors the cost-free system should only be totally set aside by 2027.
Portuguese operators eligible to participate in GHG emission auctions are granted access to the Com Xerv EUA Primary Auction Service.Registration
Are there any GHG emission allowance registries in your country? How are they administered?
GHG emission allowances are registered with the Portuguese Registry of Emission Allowances, which is integrated in the EU Registry of the Consolidated System of European Registries, managed by the European Commission.Obtaining, possessing and using GHG emission allowances
What are the requirements for obtaining GHG emission allowances? How are allowances held, cancelled, surrendered and transferred? Can rights in favour of third parties (eg, a pledge) be created on allowances?
As mentioned in question 10, as a prerequisite to obtaining GHG emission allowances, activities encompassed in Annex II of Decree-Law 38/2013 must obtain a GHG Emissions Title.
Title holders are then either granted the cost-free allowances, per sector of activity, or are granted access to the EU auction scheme operating under EU Commission Regulation 1031/2010, of 12 November, as amended by Regulation 1210/2011, of 23 November, by Regulation 784/2012, of 30 August, Regulation 1042/2012, of 7 November, Regulation 1143/2013, of 13 November, Regulation 174/2014, of 25 February, Regulation 1902/2017, of 19 October, and Regulation 7/2019, of 4 January.
Emission allowances issued from 1 January 2013 onwards are valid for successive eight-year periods counting from such date.
Pursuant to Decree-Law 38/2013, the following rules apply to GHG emission allowances:
- the surrender of GHG emission allowances corresponding to the total emissions of the relevant facility is made by the operator until 30 April of the year subsequent to the emissions. Upon receiving such allowances, the APA IP subsequently cancels them;
- non-compliance by the holder of a GHG emission allowance with certain rules of Decree-Law 38/2013 entails the surrender of the GHG emission allowance to the national deposit account;
- the holder of a GHG emission allowance may request its cancellation at any time;
- the transfer of GHG emission allowances is permitted between persons within the EU and between persons within the EU and persons from third countries with which the EU has entered into mutual recognition agreements concerning emission allowances; and
- the pledge of GHG emission allowances is not a clear matter, as it is not expressly permitted nor forbidden under the applicable legislation. There is no relevant experience in this regard in Portugal.
The issuance, ownership, transfer, surrender, delivery and cancellation of emission allowances must be registered at the Portuguese Registry of Emission Allowances.
Trading of GHG emission allowances (or similar emission instruments)Emission allowances trading
What GHG emission trading systems or schemes are applied in your country?
See questions 4, 7, 12 and 14.Trading agreements
Are any standard agreements on GHG emissions trading used in your country? If so, describe their main features and provisions.
GHG emissions trading agreements generally follow either the International Swaps and Derivatives Association or the International Emissions Trading Association models without relevant amendments.
Sectoral regulationEnergy sector
Give details of (non-renewable) energy production and consumption in your country. Describe any regulations on GHG emissions. Describe any obligations on the state and private persons for minimising energy consumption and improving energy efficiency. Describe the main features of any scheme for registration of energy savings and for trade of related accounting units or credits.
According to the 2018 data from the Portuguese energy network operator REN, non-renewable energy accounted for 48 per cent of the energy generation mix, which comprises coal (21 per cent), natural gas (27 per cent)and other sources of energy (1 per cent).
Electricity consumption in 2017 was 50.9TWh, a 2.5 per cent increase against 2016, which is 2.5 per cent below the 2010 maximum. Gas consumption was 64.9TWh, a decrease of 6.8 per cent against 2017.
Portugal has several statutes in place in respect of minimising energy consumption and improving energy efficiency, namely in respect of public and private buildings.Other sectors
Describe, in general terms, any regulation on GHG emissions in connection with other sectors.
The National Action Plan for Energy Efficiency 2013 to 2016 (PNAEE 2016) - still applicable at this date - comprises specific programmes on GHG emissions control on the agriculture and forestry sector, industry (mostly heavy) and transportation.
The action programmes aimed at tackling GHG emissions in the transport sector are the following:
- eco cars: comprising measures aimed at vehicles’ efficiency;
- urban mobility: several packages to be put in place so as to encourage people to use public transport instead of personal vehicles; and
- transport energy efficiency system: a system aimed at increasing the use of rail services and at the energy management of the public transport fleet.
On the industry side, the PNAEE 2016 foresees the introduction of an industry efficiency system across the board to improve efficiency in the industrial sector.
Finally, in the agriculture sector the PNAEE 2016 also provides for an energy efficiency programme aimed at reducing the sector’s energy consumption.
Renewable energy and carbon captureRenewable energy consumption, policy and general regulation
Give details of the production and consumption of renewable energy in your country. What is the policy on renewable energy? Describe any obligations on the state and private parties for renewable energy production or use. Describe the main provisions of any scheme for registration of renewable energy production and use and for trade of related accounting units or credits.
According to the 2018 data from the Portuguese energy network operator REN, renewable energy accounted for 52 per cent of energy production in Portugal, distributed across the following sources:
- wind: 23 per cent;
- hydro: 22 per cent;
- biomass: 5 per cent; and
- solar energy: 2 per cent.
Renewable energy sources benefit from an offtake right. Hence all energy produced by these facilities is output to the grid. This system is also behind the increasing relevance of energy in Portugal’s generation mix.
In addition, Portuguese law provides for the issuance of tradeable certificates attesting that the energy is generated by renewable sources. However, to date no such certificates have been issued and a market for these certificates does not yet exist.Wind energy
Describe, in general terms, any regulation of wind energy.
Wind energy has been on the rise in Portugal since mid-2000, with several public tenders for the awarding of injection capacity taking place.
The Portuguese regulations on wind energy are contained in the following statutes:
- Ministerial Order 243/2013, of 2 August sets forth the injection capacity attribution rules and the licensing regime for electric facilities;
- Decree-Law No. 172/2006, of 23 August (as recently amended by Decree-Law No. 76/2019, of 3 June, sets forth the public service electric grid organisation and functioning framework;
- Decree-Law No. 94/2014, of 24 June sets out the rules on the over-equipment electric facilities; and
- Decree-Law No. 189/88, of 27 May, as amended, among others, by Decree-Law No. 168/99, of 19 May, Decree-Law No. 339-C/2001, of 29 December, Decree-Law No. 33-A/2005, of 16 February and Decree-Law No. 225/2007, of 31 May, outlines the rules applicable to licensing and tariffs of renewable energy facilities.
Wind energy is currently remunerated though a market pool scheme (without prejudice to wind farms licensed in the past potentially benefiting from a feed-in tariff).
Wind farms must be awarded production and operation licences by the Directorate-General for Energy and Geology following either a public tender or legally established administrative procedures. In addition, wind farms may also have to be subject to environmental licensing procedures.Solar energy
Describe, in general terms, any regulation of solar energy.
Solar energy is a field of recent development in Portugal, notably further to the 2019 auction for the awarding of 1,400MVA of injection capacity in different predetermined areas of Portugal, through remuneration at a fixed fee or at market prices.
The statutes referred to in question 20 also apply to solar projects. In addition to these, Order No. 5532-B/2019, of 6 June, regulating the awarding of 1,400MVA of injection capacity in the public grid is also noteworthy.
Solar plants do not currently benefit from feed-in tariffs (without prejudice to solar plants licensed in the past potentially benefiting from a feed-in tariff).Hydropower, geothermal, wave and tidal energy
Describe, in general terms, any regulation of hydropower, geothermal, wave or tidal energy.
In addition to the statutes set out in question 20, the following diplomas apply to hydropower, geothermal, wave and tidal energy:
- Decree-Law No. 110/2010, of 14 October sets out the hydraulicity accounting and indexes;
- Decree-Law No. 226-A/2007, of 31 May sets out the water resources use framework; and
- Decree-Law No. 23/2010, of 25 March sets out the remuneration regime applicable to cogeneration (as amended by Decree-Law No. 68-A/2015, of 30 April).
Further to these rules of direct application, there are several governmental plans on the use of hydropower and this has long been the most relevant non-fossil power source in Portugal.
In addition to the electric and environmental licensing procedures applicable to hydro plants, their operation requires a water use title, to be issued by the APA IP.Waste-to-energy
Describe, in general terms, any regulation of production of energy based on waste.
The general rules on the power generation industry referred to in questions 20-22 apply to the waste-to-energy sector, as well as the specific legislation on urban waste treatment and disposal.Biofuels and biomass
Describe, in general terms, any regulation of biofuel for transport uses and any regulation of biomass for generation of heat and power.
In addition to the statues set out in question 20, Decree-Law No. 64/2017, of 12 June, as amended by Decree-Law No. 120/2019, of 22 August, regulating a special and extraordinary regime for the installation and operation of biomass plants by municipalities or associations of municipalities, is also relevant.Carbon capture and storage
Describe, in general terms, any policy on and regulation of carbon capture and storage.
Decree-Law No. 60/2012, of 14 March establishes the legislation and requirements for the storage of carbon in Portuguese soil, which is an activity subject to licensing and environmental licensing procedures.
Climate matters in transactionsClimate matters in M&A transactions
What are the main climate matters and regulations to consider in M&A transactions and other transactions?
In M&A transactions, climate matters are most important when the companies involved operate facilities that surpass the capacity thresholds set out in Decree-Law 38/2013. These facilities require a GHG Emissions Title, must be registered with the Portuguese Registry of Emission Allowances and must hold adequate GHG emission allowances. Other relevant obligations include monitoring, reporting and updating information on GHG emissions.
A failure to comply with the provisions of Decree-Law 38/2013 constitutes an administrative offence, which may result in the application of severe fines and in ancillary penalties, such as the shutdown of facilities. In some circumstances, the administrative offence may also be publicly displayed.
Update and trendsEmerging trends
Are there any emerging trends or hot topics that may affect climate regulation in your country in the foreseeable future?Emerging trends27 Are there any emerging trends or hot topics that may affect climate regulation in your country in the foreseeable future?
Taking into account the recent legislation approved by the EU, namely Regulation 2019/1122, of 12 March, which defines the requirements for the operation and maintenance of the Union Registries regarding GHG emissions trading, an expansion of the GHG emissions trading market is foreseeable.
Additionally, the future trend in Portugal revolves around the solar energy field. According to the PNEC 2030, an increase from 0.5GW in 2015 to 8.1-9.9GW of solar installed capacity until 2030 is envisaged. To achieve this goal, an auction system has recently been put in place under which 1,400MVA of installed capacity was awarded to bidders. According to the government, this system will allow for the collection of €600 million over 15 years - such gains being appropriated by the national electrical system and directed at reducing the tariff deficit. Furthermore, the launch of a new auction for the award of an additional 700MVA of injection capacity in the public grid in January 2020 is expected.