The rising awareness of global warming caused by the emission of greenhouse gases led to the birth of the Kyoto Agreement.
Under this agreement, the European Union committed itself to reduce its greenhouse gas (GHG) emissions.
In order to involve big industrial businesses in the procedure, the European Union has developed a system of permits and trading of greenhouse gas emission allowances with the aim to control and reduce those emissions.
A greenhouse gas emission permit is required prior to operating any installation used for an activity listed in Annex I of the law on the trading of greenhouse gas emission allowances.The Ministry of Sustainable Development and Infrastructure (Ministère du Développement durable et des Infrastructures) is the competent authority with respect to granting permits and allowances. Applications are processed by the Environment Agency (Administration de l'Environnement).
A GHG emission permit is required prior to operating any installation used for an activity which is likely to produce greenhouse gas emissions in the following sectors:
- energy (major combustion installations, oil refineries, cokeworks);
- production and transformation of ferrous metals (roasting or sintering metal ores, production of cast iron or steel);
- mineral industry (large-scale production of cement slag, lime, glass or ceramics by firing);
- industrial manufacture of paper and cardboard.
A complete list of activities can be found in Annex I of the Law on the trading of greenhouse gas emission allowances (annexe I de la loi établissant un système d'échange de allowances d'émission de gaz à effet de serre).
Any change to the nature, operation or extension of an installation which might require a renewal of the GHG emission permit must be notified to the Minister at least 2 months in advance.
Any of these changes may result in a review of the permit and its amendment where necessary.
Every operator must apply for a greenhouse gas emission permit if the installation emits:
- carbon dioxide (CO2);
- methane (CH4);
- nitrous oxide (N2O);
- hydrofluorocarbons (HFCs);
- perfluorocarbons (PFCs);
- sulfur hexafluoride (SF6).
Submitting the application
The application for a greenhouse gas emission permit drawn up on plain paper and addressed to the attention of the Minister for Sustainable Development and Infrastructure must be sent to the Environment Agency.
The application can be submitted together with the application for an operating permit for classified establishments.
It must contain a description of:
- the installation, the activities and technologies in use;
- raw and auxiliary materials whose use is likely to generate greenhouse gas emissions (CO2, CH4, N2O, HFC, PFC, SF6);
- the sources of the aforementioned greenhouse gas emissions;
- the planned measures to monitor and report the emissions.
The application must include a non-technical summary of all this information.
The Minister grants the permit if he considers that the operator is able to monitor and report the greenhouse gases emitted by his installations.
He will review the greenhouse gas emission permit at least every 5 years and undertake any necessary amendment.
Subsequently, each monitoring plan, each exemption regarding emission levels, each major amendment to the plan as well as each report on the improvement of the monitoring and reporting measures have to be approved by the Minister.
Opening an account on the Emissions Trading Registry
In parallel, the business operator must open an operator holding account in the Luxembourg section of the Union Registry (European Commission Authentication Service – ECAS).
The registry is an electronic database which allows:
- to consult the emission allowances allocated to the operator for the year in question;
- emissions trading;
- to manage the accounts in order to transfer, return or cancel the GHG emission allowances.
The registry enables the Environment Agency to monitor if business operators meet their environmental obligations.
In order to open an account in the registry, the business operator must first contact the Environment Agency in order to obtain the activation form for the operator holding account:
- either by fax: 48 50 78;
- or by email (email@example.com).
Once the form has been completed and signed, the operator must return it together with the required documents.
The user is also required to open an ECAS account (European Commission Authentication Service) and to communicate his user name to the Environment Agency.
Users will receive their activation key, which must be entered in the registry to finalize the activation, by registered mail.
All account holders must inform their registry administrator (Service ETS - Environment Agency) about any changes to the information provided for the account opening within 10 working days of the change.
Moreover, each year and at the latest on 31 December, account holders must confirm that the account information is complete, up-to-date, accurate and truthful.
Allocation of GHG emission allowances
For the period 2013-2020, GHG allocations will be based on harmonised Community rules.
At the latest on 28 February of each year, a certain quantity of greenhouse gas emission allowances is allocated to operators for the current year and deposited on their account.
GHG quota allocations will be adjusted in the event of:
- a significant reduction in the production capacity;
- complete or partial cessation of activity of an installation.
Declaration and verification of GHG emission allowances
After the end of each monitoring year and at the latest on 7 March of the following year, GHG emissions must be evaluated and reported to the Environment Agency.
In order to prepare the annual declaration, business operators have to undertake a verification process around July and contact a verifier who has been accredited by an international association for accreditation.
Around September or October of each monitoring year, the verifier commences his work and carries out an analysis of the performance of the installation and a preliminary assessement of the emissions.
The verification itself starts in early January of the following year.
The verifier analyses the declaration issued by the installation and submits his verification report at the latest by 7 March each year.
At the latest on 31 March, the administrator of the Emissions Trading Registry enters the emissions data which has been verified and validated by the verifier in the GHG emissions registry.
The business operator is also required to submit a report regarding the improvements to the installation as recommeded by the verifier by 30 June of the same year.
Return and cancellation of GHG emission allowances
By 30 April each year at the latest, the operator must return the emission allowances which correspond to the total emissions of the installation during the previous calendar year.
Allowances are returned via the GHG emissions registry by transferring the corresponding number of emission allowances from the user account to the State's account.
If the number of GHG emission allowances to be returned exceeds the number of GHG emission allowances allocated to the operator, the operator has to:
- purchase emission allowances on the market;
- purchase emission allowances on auctions;
- use international credits (emission reduction units – ERU, or certified emission reduction units – CERs).
Where the number of returned emission allowances does not cover the installation's emissions in accordance with the verification for the year concerned, a 100 EUR fine per missing emission allowance will be imposed on the business operator.