Eamon Ryan (Dublin Bay South, Green Party)
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Directive 2023/959 extends the Emissions Trading System to the Buildings, Road Transport and Additional (mainly small industry) sectors (ETS II). The latter sector includes manufacturing industries and construction. The Environmental Protection Agency will be the competent authority for ETS II in Ireland.

Directive 2023/959 provides that ETS II activities would be regulated via a release for consumption method. The regulated entities would be the ‘upstream’ suppliers, such as fuel importers and distributors. The regulated entities will be required to surrender emissions allowances in respect of each year (from 2027), equivalent to the CO2 emissions associated with the fossil fuels used. The triggering of the compliance obligation is the release on the market of the eligible fuels for consumption in the sectors set out in Annex III to the Directive

While supporting the increased ambition for the EU ETS, the Directive extends emissions trading to sectors of the economy that are currently covered by Ireland’s domestic carbon tax. Ireland has therefore notified for a derogation under the Directive, which allows for a Member State with a carbon tax equivalent or higher than the average ETS II auction rate, to be exempted from the obligation on regulated entities to surrender ETS II allowances for the years 2027-2030. This derogation requires an initial successful notification to the European Commission and periodically thereafter. The Commission’s assessment of the derogation notification is expected shortly.

In the event of the application of the derogation, regulated entities will not be obliged to hold and surrender allowances and will not be expected to incur any significant additional costs that may be passed on to end-users and consumers. Any additional costs for the regulated entities would relate to the administrative costs of monitoring and reporting fuel usage to the EPA as the Competent Authority.