The new legislation would set rules for the period 2021-2030 and seeks to strengthen the cost-effectiveness of emission reductions and investment in low-carbon technologies.
Portugal’s government is poised to transpose into national law the European Parliament and Council Directive on Emissions Trading System (ETS), which is aimed at sharply reducing emissions of greenhouse gases between now and 2030.
The new legislation would set rules for the period 2021-2030 and seeks, according to the directive and the preliminary version of the decree-law, which Lusa has seen, to strengthen the cost-effectiveness of emission reductions and investment in low-carbon technologies.
In the preamble of the document, the government recalls the commitment of the European Union, in 2014, to reduce emissions of greenhouse gases (GHG) by at least 40% from 1990 levels by 2030, and that the ETS should correspond to a reduction of 43% from 2005 levels.
“For the period starting in 2021, which is now regulated, it is important to highlight, firstly, the sharper reduction in the number of emission allowances issued annually in the European Union as a whole (a reduction of 2.2% from the 2008-12 average) and it is also foreseen that the auctioning of emission allowances will continue to be the general rule, with the share remaining at 57%, with free allocation being the exception,” the document states.
The legislation stresses that the market stabilisation reserve is to become operational and that the rules for the free allocation of allowances are now revised.
Free allowances, allocated to encourage GHG reduction and the use of energy-efficient techniques, are being wound down and are to be eliminated by 2030 (with exceptions in cases of risk of carbon leakage).
“From 2021, the rules for adjusting the annual amounts of allowances to be allocated free of charge according to production levels are changed significantly, to achieve a better alignment with annual production levels, and the adjustment will be made symmetrically, considering both the relevant increases and decreases in production,” the draft decree-law says.
The proposal regulates the optional exclusion of installations from the ETS, considering that the country has many plants that are polluting and represent a marginal contribution of GHG emissions.
Work on reducing GHG emissions started in the late the 1990s, after the signing of the Kyoto Protocol, which established several ways to do this. The EU created its ETS from 2005 onwards to reduce emissions.
In general terms, the relevant law, which has been regularly updated, indicates that a company acquires emission permits, each with the right to one ton of GHG emissions, part of which can be free of charge.
The new decree-law regulates, among other matters, applications for gas emission permits, the circumstances under which they can be revoked or forfeited, the allocation of free emission permits, the monitoring of the activity, the auctioning of permits, and penalties and fines. Revenue from the auctions is to go to the Environmental Fund.
Carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulphur hexafluoride are all considered to be GHGs.
Activities in the European emissions trading system include the burning of fuels from certain power plants, the refining of oil, the production of coke, pig iron and steel, the production or processing of ferrous metals, and the production of aluminium.
Other activities partially covered by the system are the production of glass, the manufacture of ceramic products, insulating material, gypsum, paper pulp, nitric and adipic acid and ammonia, among several other products and activities.