Template:M summ EUA Annex EEP: Difference between revisions

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The {{euaprov|Excess Emissions Penalty}} is made flesh in [https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32003L0087 Article 16] of the [[EU ETS Directive|EU ETS directive]].
The {{euaprov|Excess Emissions Penalty}} is made flesh in [https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32003L0087 Article 16] of the [[EU ETS Directive|EU ETS directive]].
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'''Article 16: Penalties'''<br>
'''Article 16: Penalties'''<br>
:1. Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify these provisions to the Commission by 31 December 2003 at the latest, and shall notify it without delay of any subsequent amendment affecting them.
:1. Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify these provisions to the Commission by 31 December 2003 at the latest, and shall notify it without delay of any subsequent amendment affecting them.

Revision as of 17:32, 21 December 2022

The Excess Emissions Penalty is made flesh in Article 16 of the EU ETS directive.

Article 16: Penalties

1. Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that such rules are implemented. The penalties provided for must be effective, proportionate and dissuasive. Member States shall notify these provisions to the Commission by 31 December 2003 at the latest, and shall notify it without delay of any subsequent amendment affecting them.
2. Member States shall ensure publication of the names of operators who are in breach of requirements to surrender sufficient allowances under Article 12(3).
3. Member States shall ensure that any operator who does not surrender sufficient allowances by 30 April of each year[1] to cover its emissions during the preceding year shall be held liable for the payment of an excess emissions penalty. The excess emissions penalty shall be EUR 100 for each tonne of carbon dioxide equivalent emitted by that installation for which the operator has not surrendered allowances. Payment of the excess emissions penalty shall not release the operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year.
4. During the three-year period beginning 1 January 2005, Member States shall apply a lower excess emissions penalty of EUR 40 for each tonne of carbon dioxide equivalent emitted by that installation for which the operator has not surrendered allowances. Payment of the excess emissions penalty shall not release the operator from the obligation to surrender an amount of allowances equal to those excess emissions when surrendering allowances in relation to the following calendar year.

Note: the excess emissions penalty falls on those operators who actually emit carbon dioxide. To the extent you are a financial, and your business is in the trading, liquidity and market making of EUAs themselves, and not offsetting real-world carbon emissions they are designed to control, then EEPs are not likely to come high up your list of priorities. That being said, there is an indirect implication for financial-only counterparties if they fail to deliver to operators in time so operators can surrender to the authorities by the Reconciliation Deadline, since the former’s settlement failure brings a real world penalty charge on the later. Therefore you may wish to consider the otherwise rather perplexing Failure to Deliver language in the Annex dealing with that contingency.

“Specified as applicable”

And herein lies the folly of over-labouring your drafting. We know what to do it EEP is specified as applicable, and we know what to do if EEP is specified as inapplicable — but what to do if the parties neglect to specify anything at all? On this, the agreement, for all its wretched over-articulation, is quite mute. We would like to think, the onus of proof generally being on she who makes an existential claim and all, it would default to EEP not applying — but the JC has been surprised at conclusions English Courts have reached on matters less contentious than that, so we would not like to say.

And if you forget to specify whether EEP applies, you are hardly likely to remember to designate an EEP Risk Period, are you? The EEP Risk Period is relevant to the consequences of a Failure to Deliver when Excess Emissions Penalty applies. In that regard see:

(i) Paragraph (d)(ii)(1)(B)(Y) (yes, seriously) which might have been entitled “Failure to Deliver by Delivering Party where Failure to Deliver is not Rememedied and Excess Emissions Penalty applies”.
(ii) Paragraph (d)(xi), which is entitled Failure to Deliver (Alternative Method) - EEP Applicable.
  1. In ISDA Emissions Annex speak, the “Reconciliation Deadline”.