Carbon Emissions Tax

Added on: 26/02/2019

The Finance Act 2019 introduces a new tax called the Carbon Emissions Tax.The new tax will maintain a carbon price for those stationary emitters currently covered by the EU Emissions Trading Scheme (EU ETS).

It aims to replace the revenue lost from the auctioning of EU Allowances (EUAs) which would result from the UK leaving the EU ETS. It will maintain similar arrangements for industrial installations deemed to be exposed to significant risk of carbon leakage, to support their competitiveness.

All current participants in the EU ETS who are UK operators of stationary installations will be set an annual emissions allowance for the purposes of the tax. For permit holders outside the simplified reporting scheme this will be based on the allocation of free EUAs that would have been allocated to installations under Phase 3 of the EU ETS. For those
currently covered by the simplified reporting arrangements, the allowance will be based on their current emissions target.

The first tax period will run from 1 April 2019 to 31 December 2019 with the first bills sent out by HM Revenue and Customs (HMRC) in 2020 (thereafter tax periods will cover 12 month periods starting in January). Installations will continue to report their activities annually under the existing Monitoring, Reporting and Verification (MRV) scheme and, as at present, this information will establish how many tonnes of greenhouse gases they emit during the reporting period. Emissions above the emissions allowance will be taxed on a carbon equivalent basis with installations required to make one payment a year to cover the tax due. The rate for 2019 will be £16 per tonne