Annex 2: Climate change schemes – the Environment Agency's approach to applying civil penalties

Question 1

Section A: Environment Agency’s penalty setting approach for the climate change schemes

Accepted Answer

Once we have determined that a person is liable to a civil penalty, where the legal framework allows, we can apply our discretion and decide whether to:

waive (not apply) the civil penalty
reduce the civil penalty

We use a stepped approach to make this decision which is based on those in the Definitive Guideline for the Sentencing of Environmental Offences (known as the Guideline). We have adjusted these steps so that they are appropriate for the climate change civil penalties. The Guideline applies to criminal offences with no statutory maximum levels in the Crown Court; therefore we cannot follow it entirely.

We cannot apply the stepped approach to the breaches set out in section B, paragraphs B3.1 and B3.4, section F and section G, paragraphs G5.1, G5.3, G5.6 and G5.9 due to their nature and legal requirements. See our approach to these breaches in those sections.

Where the legislation requires us to apply a mandatory penalty we cannot apply our discretion. Sections B to F set out our approach to mandatory penalties.

When we impose a civil penalty, the notice will include the date by which the penalty must be paid. If we consider it appropriate to do so, we may extend the time for payment.

How the Environment Agency sets the penalty level

When we can apply our discretion we carry out the following steps to make our decisions:

Step 1 – determine the statutory maximum penalty for the breach.

Step 2 – decide whether to waive the penalty or set the initial penalty amount by assessing the nature of the breach and any other enforcement positions in line with sections B, C, D, E, G and H.

Step 3 – if we decide to impose a penalty, work out the penalty starting point and penalty range based on culpability (blame) and size of the organisation or size of aviation operation.

Step 4 – set the final penalty amount by assessing the aggravating and mitigating factors and adjust the starting point as appropriate.

Set the initial penalty amount: steps 1 and 2

We will first determine the statutory maximum penalty available for the breach.

We will then consider our normal nature of the breach assessment and any other enforcement positions set out for each breach in sections B, C, D, E, G and H. We may decide to waive the penalty. Where we decide to impose a penalty, we will set the initial penalty amount at the statutory maximum or at a lower amount in line with sections B, C, D, E, G and H.

Work out the penalty starting point and penalty range: step 3

This calculation is based on culpability (blame) and size of the organisation or size of aviation operation.

Culpability

We will determine culpability in line with the following categories as set out in the Guideline.

Deliberate

This means one of the following:

intentional breach of or flagrant disregard for the law by the person or where it relates to an organisation, the person(s) whose position of responsibility in the organisation is such that their acts/omissions can properly be attributed to the organisation
deliberate failure by the person or organisation to put in place and to enforce such systems as could reasonably be expected in all the circumstances to avoid commission of the breach or offence

Reckless

This means one of the following:

actual foresight of, or wilful blindness to, risk of breach or offending but risk nevertheless taken by the person or, where it relates to an organisation, the person(s) whose position of responsibility in the organisation is such that their acts/omissions can properly be attributed to the organisation
reckless failure by the person or organisation to put in place and to enforce such systems as could reasonably be expected in all the circumstances to avoid commission of the breach or offence

Negligent

This means failure by the person or organisation as a whole to take reasonable care to put in place and enforce proper systems for avoiding commission of the breach or offence.

Low or no culpability

This means a breach or offence committed with little or no fault on the part of the person or organisation as a whole. For example, one of the following:

by accident or the act of a rogue employee despite the presence and due enforcement of all reasonably required preventive measures
where such proper preventive measures were unforeseeably overcome by exceptional circumstances

Size of the organisation

With the exception of any penalty to be imposed on an aircraft operator or aeroplane operator, we will determine the size of the organisation by its turnover or equivalent (such as the annual revenue budget for public bodies) in line with the following categories in the Guideline:

large – £50 million and over
medium – between £10 million and £50 million
small – between £2 million and £10 million
micro – not more than £2 million

We will normally determine the turnover or equivalent of the organisation at the time of the breach.

When we assess the turnover for CRC and ESOS, we will consider the turnover or equivalent of the ‘participant’.

If the non-compliant person is an individual, we will assess turnover or income, whichever is appropriate.

Where we are imposing a penalty on an aircraft operator under the EU ETS or UK ETS, or an aeroplane operator under CORSIA, we will use the size of its aviation operation to determine which category it is in. Our assessment will be based on its CO2 emissions from Annex I flights for EU ETS, its full-scope flights for UK ETS, or its international flights for CORSIA, as follows:

large – annual CO2 emissions of 500,000 tonnes or over
medium – annual CO2 emissions of 25,000 to 499,999 tonnes
small – annual CO2 emissions of 10,000 to 24,999 tonnes
micro – annual CO2 emissions of less than 10,000 tonnes

Starting point and penalty range

We will use tables 1 and 2 to work out the penalty starting point and penalty range.

Table 1 shows the penalty factor we will use to calculate the penalty starting point based on the culpability category and size of the organisation or size of aviation operation. We will apply this to the initial penalty amount.

Table 1

Breach category	Large	Medium	Small	Micro
Deliberate	1	0.4	0.1	0.05
Reckless	0.55	0.22	0.055	0.03
Negligent	0.3	0.12	0.03	0.015
Low or no culpability	0.05	0.02	0.005	0.0025

If after applying the penalty factor the starting point is less than £1,000 we will round it up to £1,000. Otherwise the starting point will be too low to reflect the nature of the breach.

Table 2 shows the penalty range factors we will use based on the culpability category and size of the organisation or size of aviation operation. We will apply this to the initial penalty amount. In step 4, we will normally adjust the penalty starting point within the penalty range.

Table 2

Breach category	Large	Medium	Small	Micro
Deliberate	0.45 to statutory maximum	0.17 to statutory maximum	0.045 to 0.4	0.009 to 0.095
Reckless	0.25 to statutory maximum	0.1 to 0.5	0.024 to 0.22	0.003 to 0.055
Negligent	0.14 to 0.75	0.055 to 0.3	0.013 to 0.12	0.0015 to 0.03
Low or no culpability	0.025 to 0.13	0.01 to 0.05	0.0025 to 0.02	0.0005 to 0.005

We have developed the factors in these tables for the climate change penalties because we cannot use the tables in the Guideline, which uses different legislative provisions and a different assessment of harm. Our factors and ranges are derived from the penalty levels under ‘harm’ category 1 in step 3 of the Guideline. This recognises that ‘harm’ will already have been considered at the point that the factors are applied. To calculate our penalty factors and ranges, the starting points for each of the different sizes and culpability levels have been divided by £1 million. Our penalty factors cannot exceed 1 because the maximum climate change penalties are set in law and so the ranges are capped.

At the end of step 3 we will have adjusted the initial penalty amount to reflect culpability and the size of the organisation or size of aviation operation.

Set the final penalty amount: step 4

We may adjust the penalty from the starting point within the penalty range by assessing the following aggravating and mitigating factors:

financial gain – whether or not a profit has been made or costs avoided as a result of the breach
history of non-compliance – this includes the number, nature and time elapsed since the previous non-compliance(s)
attitude of the non-compliant person – the person’s reaction, including co-operation, self-reporting, acceptance of responsibility, exemplary conduct and steps taken to remedy the problem
personal circumstances – including financial circumstances (such as profit relative to turnover), economic impact and ability to pay (only if sufficient evidence is provided). Also, for a public or charitable body, whether the proposed penalty would have a significant impact on the provision of its service (which will only be considered if sufficient evidence is provided)

These factors differ to those listed in the Guideline. We have selected applicable factors from the list. We have also taken factors from other steps in the Guideline. We have then adjusted and simplified them so they are relevant to the climate change schemes.

We will normally adjust a penalty within the range but, in some circumstances, we may move outside the range, including waiving the penalty.

If a public or charitable body provides sufficient evidence to show that the proposed penalty would have a significant impact on the provision of its services, we will normally substantially reduce the penalty from the starting point.

At the end of step 4 we will have calculated the final penalty amount.

Examples of final penalty amount calculations

UK Emissions Trading Scheme

Breach: failure to return allowances in accordance with a notice to return allowances under article 34V of the Greenhouse Gas Emissions Trading Scheme Order 2020.

Penalty: a non-escalating penalty of £20,000 and if an initial notice is given, a daily penalty of £1,000 until the person complies with the requirements of the notice to return allowances, beginning with the day on which the initial notice is given.

The person:

did not return any allowances by the deadline in the notice to return allowances
returned allowances 10 days after an initial notice was given
falls within the size category medium
is assessed as having negligent culpability

Step 1 – determine the statutory maximum penalty available for the breach

Non-escalating penalty of £20,000.

Daily penalty of £10,000 (£1,000 × 10 days).

Statutory maximum = £30,000.

Step 2 – set the initial penalty amount by assessing the nature of the breach

Under section G, paragraph G5.16 – Failure to return allowances, the nature of the breach assessment is that we will normally impose a penalty for this breach. (The additional enforcement position does not apply.)

Initial penalty amount = £30,000.

Step 3 – work out the starting point and range for the penalty using the correct factors in tables 1 and 2

For a size category of medium with negligent culpability, the penalty factor in table 1 is 0.12. The penalty range in table 2 is 0.055 to 0.3.

£30,000 × 0.12 = £3,600.

£30,000 × 0.055 = £1,650.

£30,000 × 0.3 = £9,000.

Penalty starting point = £3,600.

Penalty range = £1,650 to £9,000.

Step 4 – set the final penalty amount by assessing the aggravating and mitigating factors

Penalty starting point decreased by an appropriate amount to take account of the case-specific mitigating factors.

Final penalty amount = £2,520.

Energy Savings Opportunity Scheme

Breach: failure to undertake an energy audit under Chapter 3 of Part 4 of the Energy Savings Opportunity Scheme Regulations 2014.

Penalty: an initial penalty of £50,000 and a daily penalty of £500 up to a maximum of 80 working days, plus publication.

The person:

failed to undertake an energy audit
falls within the size category large
is assessed as having negligent culpability

Step 1 – determine the statutory maximum penalty available for the breach

Initial penalty of £50,000

Daily penalty of £40,000 (£500 × 80 days)

Statutory maximum = £90,000

Step 2 –set the initial penalty amount by assessing the nature of the breach

Under section D, paragraph D2.4, the nature of the breach assessment is that we will normally impose a penalty for this breach.

Initial penalty amount = £90,000

Step 3 – work out the starting point and range for the penalty using the correct factors in tables 1 and 2

For a size category of large with negligent culpability, the penalty factor in table 1 is 0.3. The penalty range in table 2 is 0.14 to 0.75.

£90,000 × 0.3 = £27,000.

£90,000 × 0.14 = £12,600.

£90,000 × 0.75 = £67,500.

Penalty starting point = £27,000.

Penalty range = £12,600 to £67,500.

Step 4 – set the final penalty amount by assessing the aggravating and mitigating factors

Final penalty amount determined, taking into account the case-specific aggravating and mitigating factors, including eventual compliance.

Final penalty amount = £47,250.

Question 2

Section B: EU Emissions Trading Scheme (EU ETS)

Accepted Answer

Section B explains:

how we normally assess the nature of the breach for each EU ETS breach
our additional EU ETS enforcement positions

You must read this with section A which explains our general civil penalty setting principles for the climate change schemes.

B1: The types of EU ETS civil penalties

Under the Greenhouse Gas Emissions Trading Scheme Regulations 2012 (the GGETS Regulations), we may impose civil penalties for certain breaches. The penalty that applies to each breach is set out in GGETS Regulations 52 to 70.

The penalty can be:

a fixed sum only
a fixed sum and an additional daily penalty up to a set maximum
calculated with a formula

The Environment Agency can impose an additional daily penalty for the following breaches – failure to:

comply with a condition of a permit
submit or resubmit an application for an emissions plan
comply with a condition of an emissions plan
monitor aviation emissions
report aviation emissions
return allowances
comply with an enforcement notice
comply with an information notice

An additional daily penalty starts to accumulate from the day after the date that the initial notice of civil penalty is served. It stops accumulating on the date the person puts the breach right or the maximum amount payable (if applicable) is reached (read paragraph B5 which explains the procedure).

We use the additional daily penalty:

to encourage timely compliance
if there is a continuing breach which can be put right

We will not use it if the breach cannot be put right or has already been put right.

We may apply our discretion to the fixed sum and/or the additional daily penalty where the law allows.

B2: When and how the Environment Agency will apply discretion to EU ETS penalties

We cannot apply our discretion to the penalty for failure to surrender sufficient allowances to cover reportable emissions by the statutory deadline (the Excess Emissions Penalty). Read paragraph B3.3 which explains the Excess Emissions Penalty.

We have a specific approach to applying discretion for:

the exceedance of emissions targets by excluded installations – read paragraph B3.4
carrying out a regulated activity without a permit – read paragraph B3.1

Otherwise we will apply discretion as explained in section A.

B3: Civil penalties for installations and aviation

Paragraphs B3.1 to B3.20 list the GGETS Regulations breaches and state the maximum civil penalty available for each breach.

Each paragraph states the breach and explains our normal ‘nature of the breach’ assessment and other enforcement position (if there is one) for that breach.

Our nature of the breach assessment may state that we will not normally impose a penalty (waive the civil penalty) or it will state the normal ‘initial penalty amount’ (as explained in section A).

However, before we set the initial penalty amount we will take account of any representations we receive – see section 6.2 of the enforcement and sanctions policy.

B3.1: Carrying out a regulated activity without a permit

GGETS Regulation 52 provides a formula for calculating a penalty for this breach. We must use the formula and follow a Secretary of State’s Direction which tells us how to estimate certain factors in the formula.

Our penalty setting approach

We will normally impose a penalty for this breach.

The formula for each affected scheme year is A + (B × C) where:

A is the estimated amount of the costs avoided in that year as a result of carrying out a regulated activity without such authorisation
B is the estimated amount of reportable emissions from the installation in the period during which a regulated activity was carried out without such authorisation
C is the carbon price for that year

We must work out the ‘total costs avoided’ element of the penalty. This is:

A – avoided monitoring, reporting and verification (MRV) costs plus avoided fees
B × C – the cost of allowances to cover emissions during the non-compliance period

We may increase the resulting figure by 5% to ensure the penalty exceeds the amount of any economic benefit obtained from the non-compliance. This is known as the ‘punitive element’ of the penalty.

Normally we will only reduce the ‘total costs avoided’ element if the operator can demonstrate it has not avoided some or all of these costs. This is because the calculation should reflect all the costs avoided by not having a permit. By paying this sum it puts the operator into the same position as it would have been had it complied.

We will pro-rata the calculation of A (not including the permit variation fee) to take account of the number of days the operator carried out a regulated activity without a permit in any one year. This will be from the start date of the regulated activity in the first year of non-compliance to the effective date of the permit in that year or a following year.

To calculate avoided fees we must include the permit variation fee. But, if a regulated activity at an installation started after 1 January 2013, we will normally reduce the penalty by £430 (the variation fee). This is because the variation fee is intended to cover varying a Phase II permit to a Phase III permit. So if activities started after 1 January 2013, there would have been no Phase II permit to vary. Therefore it is not an avoided fee.

To calculate the MRV element of the costs we will use £8,000 for the first year of non-compliance and for all following years of non-compliance. The Direction suggests using £15,000 for the first year of non-compliance (to account for set up costs) and £8,000 for all following years of non-compliance.

We have removed the set up cost element because they are not normally avoided by the operator. An operator must learn about the scheme, invest in systems and pay the permit application fee whether they are applying for a permit on time or later.

We will normally reduce the MRV element of the costs avoided if the operator can demonstrate that for the period of non-compliance it has:

monitored its annual emission data
submitted a report
had the data verified

If an operator fails to hold an EU ETS permit and as a result the installation is captured by the CRC for the period of non-compliance, we will normally reduce the total costs avoided element of the penalty by the cost of the CRC allowances purchased by the CRC participant to cover the installation’s:

gas consumption
electricity consumption during Phase II of CRC only

We will not normally take account of a CRC participant’s monitoring and reporting costs incurred through CRC when we determine costs avoided by the operator.

For the punitive element of the penalty, we will apply our discretion as described in section A. The initial penalty amount will be the maximum sum available.

B3.2: Failure to comply with a condition of an EU ETS permit

GGETS Regulation 53 sets the penalty amount for a breach of the majority of permit conditions – they are both of the following:

£3,750
an additional £375 for each day the operator fails to comply with the condition following the service of the initial notice of civil penalty, up to a maximum of £33,750

The penalty for failing to comply with a condition requiring notification of a qualifying significant capacity reduction or a qualifying partial cessation is £5,000.

Our normal ‘nature of the breach’ assessment and other enforcement positions are in the following paragraphs for failing to comply with a condition of:

a greenhouse gas emissions (GHG) permit
an excluded installations emissions (EIE) permit

GHG permit conditions

GHG permit: condition 1

The operator must monitor the annual reportable emissions of the installation in accordance with the Monitoring and Reporting Regulation (Commission Regulation (EU) No 601/2012 of 21 June 2012) and the monitoring plan (including the written procedures supplementing that plan).

Our nature of the breach assessment

The monitoring obligations underpin the reporting and surrender requirements and are vital to the integrity of the scheme.

Our nature of the breach assessment will consider how many emissions have not been correctly monitored and the percentage of the installation’s annual reportable emissions this number represents.

We will determine the installation category (as defined in Article 19(2) of the Monitoring and Reporting Regulation (MRR)) and the relevant threshold using the figures in this table:

Category of installation	Average verified annual emissions (tCO2)	Threshold
A	≤50,000	≥ 1,000 tCO2 or 10% of annual reportable emissions, whichever is the higher
B	>50,000 - 500,000	≥ 5,000 tCO2 or 5% of annual reportable emissions, whichever is the higher
C	>500,000	≥ 50,000 tCO2 or 2% of annual reportable emissions, whichever is higher

Whether we impose a penalty will depend on whether the emissions affected by a breach are above or below the threshold for that category of installation. If they are below the threshold we will not normally impose a penalty because we will not regard the breach as undermining the integrity of the scheme. If they are above the threshold we will normally impose a penalty. We will normally use the statutory maximum as the initial penalty amount.

Our nature of the breach assessment will check whether an operator has back-up methodologies for monitoring failures. This is likely to determine whether an operator can submit a verified emissions report. If, despite the monitoring breach, an operator is able to submit a verified emissions report, there will be less of an impact on the integrity of the scheme. We will normally for a monitoring breach:

leading to a ‘not verified’ emissions report, impose a penalty for the monitoring breach and a penalty for failure to submit a verified emissions report
with a verified emissions report, set the initial penalty amount at 50% of the statutory maximum – we will take account of the time taken to restore compliance and may use an additional daily penalty to do so

GHG permit: condition 2

The operator must, by 31 March each year, submit a verified report of its annual reportable emissions made in the previous year to the regulator, in accordance with the MRR and the Verification Regulation (Commission Regulation (EU) No 601/2012 of 21 June 2012).

Our nature of the breach assessment

Reporting accurately and on time is vital to the effective operation of the scheme. The deadline for reporting is 31 March. Meeting this deadline allows time to obtain allowances and surrender them by 30 April.

An operator will be in breach of this requirement if it:

does not submit an emissions report – the most serious breach, which significantly impacts the integrity of the scheme
submits a ‘not verified’ emissions report – a serious breach which also significantly impacts the integrity of the scheme because there are likely to be material errors or missing data
submits a ‘verified’ emissions report late (after 31 March)– a less serious breach but it still impacts the integrity of the scheme
submits a ‘verified’ emissions report which is later found to be inaccurate – see our approach in B3.3

We will normally impose a penalty for the first 3 breaches.

We will normally set the initial penalty amount for the fixed sum and additional daily penalty (if applicable) as shown in this table:

Type of breach	Normal fixed penalty amount	Normal additional daily penalty (where applicable)
No report submitted	£3,750	£375
Submission of a ‘not verified’ report	£3,750	£375
Submission of a late verified report	£2,750	£275

Our assessment will:

not take account of the level of emissions or size of the operator because this does not affect how seriously the breach impacts on the integrity of the scheme – however, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
not be more lenient for the first year an operator has been required to comply with the reporting obligation
reflect the extent of the lateness of the report in the additional daily penalty amount

We will aim to issue an ‘initial notice of civil penalty’ (see paragraph B5) within one week of the 31 March deadline to all operators who have not submitted an emissions report.

GHG permit: condition 3

The operator must satisfy the regulator, if an emission factor of zero has been reported in respect of the use of bio liquids, that the sustainability criteria set out in Article 17(2) to (5) of the Renewable Energy Directive have been fulfilled in accordance with Article 18(1) of that Directive.

Our nature of the breach assessment

If an operator fails to satisfy us as required by this condition, we will determine the reportable emissions. We will substitute the emissions factor reported for an emissions factor greater than zero. This power is set out in GGETS Regulation 44(1)(b). We will not normally impose a penalty in these cases, as it does not significantly impact the integrity of the scheme.

We will normally impose a penalty if an operator used a zero emissions factor in its verified annual emissions report and we later found out it had not met the sustainability criteria. We will normally use the statutory maximum as the initial penalty amount.

GHG permit: condition 4

The operator must, by 30 April in each year, surrender a number of allowances in the registry equal to the annual reportable emissions of the installation made in the previous year.

Our approach to penalty setting

Our approach is explained in paragraph B3.3: Failure to surrender allowances.

GHG permit: condition 5

Where an operator proposes to make a significant modification to its monitoring plan under Article 15 of the MRR, the operator must apply to the regulator for a variation of its permit at least 14 days prior to making the change or, where this is not practicable, as soon as possible thereafter and such application must:

include a description of the change
set out how it affects the information contained in the monitoring plan

Our nature of the breach assessment

We will not normally impose a penalty if the operator submits an application to vary its permit in time to enable verification of its annual emissions report by 31 March. Doing this will not significantly impact the integrity of the scheme.

Our additional enforcement position

We will normally impose a penalty if an operator repeatedly breaches this condition. We will normally use the statutory maximum as the initial penalty amount.

The operator may be in breach of permit condition 1 if the change to its monitoring plan is not in line with the MRR. An early application will help resolve any issues and avoid potential breach.

GHG permit: condition 6

Where an operator makes a change to its monitoring plan under Article 14 or 58(4) of the MRR that is not a significant modification, the operator must notify the regulator by 31 December in the year in which the change occurred and such notification must:

include a description of the change
set out how it affects the information contained in the monitoring plan
explain how the change is in accordance with the MRR

Our nature of the breach assessment

We will not normally impose a penalty if an operator fails to notify us of a ‘non-significant’ change to its monitoring plan as this will not significantly impact the integrity of the scheme.

GHG permit: condition 7

Where the name of the operator changes, the operator must apply to the regulator for a variation of its permit in order to reflect the change as soon as practicable following the change.

Our nature of the breach assessment

We will not normally impose a penalty for breach of this condition as it does not significantly impact the integrity of the scheme. A name change is not a change of legal entity (which requires a permit transfer).

GHG permit: condition 8

Where the operator does not apply at least the tiers required or applies a fall-back methodology pursuant to the MRR, the operator must submit a report to the regulator in accordance with the requirements specified in Article 69(1) of the MRR by the following deadlines, starting in the case of a new operator with 30 June in the year following that in which the permit is granted and for any other operator, with 30 June 2013:

for a category A installation, by 30 June every 4 years
for a category B installation, by 30 June every 2 years
for a category C installation, by 30 June every year

Our nature of the breach assessment

We will normally impose a penalty for this breach. We consider this breach less serious than failing to submit a verified report of annual reportable emissions. But it does impact the integrity of the scheme and may have serious consequences. We will normally set the initial penalty amount at £1,500.

Our additional enforcement position

For an operator’s first breach of this condition, we will not normally impose a penalty if we receive the report within 10 working days of the deadline.

GHG permit: condition 9

Where a verification report states outstanding non-conformities or recommendations for improvements as specified in Article 69(4) of the MRR, the operator must submit a report to the regulator in accordance with the requirements of that Article by 30 June of the year in which the verification report is issued.

Our nature of the breach assessment

Verifiers can state 2 types of improvements, a:

non-conformity – this must be rectified because the operator has not conformed with its plan or the MRR
recommendation for improvement – the operator must consider the improvement but does not have to implement it because it is a suggestion on how to improve methodology

There is less impact on the integrity of the scheme if an operator fails to submit an improvement report relating to a recommendation for improvement at all or by 30 June than if it fails to submit one relating to a non-conformity.

We will normally impose a penalty for these breaches. We will normally set the initial penalty amount for the fixed sum (or waive the penalty) as shown in this table:

Type of breach	Normal initial penalty amount
First failure to submit an improvement report relating to a non-conformity if submitted within 10 working days of the deadline	waived
Failure to submit an improvement report relating to a non-conformity	£1,500
First failure to submit an improvement report relating to a recommendation	waived
Subsequent failure to submit an improvement report relating to a recommendation	£1,500

If an operator fails to submit an improvement report relating to a non-conformity in one year and then fails to submit a report relating to a recommendation in a future year, we will normally impose a penalty for the later failure. We will normally set the initial penalty amount as £1,500.

Our assessment will:

not take account of the level of emissions or size of the operator because it is difficult to identify the proportion of emissions affected by the stated improvements; however, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
reflect the extent of the lateness of the report in the additional daily penalty – the normal additional daily penalty amount will be £150 per day

We will issue an ‘initial notice of civil penalty’ (see paragraph B5) as soon as possible after 10 working days from the deadline.

GHG permit: condition 10

The operator must notify the regulator in accordance with the MRR at least 14 days prior to commencement of any of the circumstances in paragraphs (1) to (4) below or, where this is not practicable, as soon as possible thereafter:

where there is a temporary change to its monitoring methodology as specified in Article 23 of the MRR
where tier thresholds are exceeded or equipment is found not to conform to requirements which require corrective action as specified in Article 28(1) of the MRR
where a piece of measurement equipment is out of operation as specified in Article 45 of the MRR
where an installation with low emissions exceeds the relevant threshold as specified in Article 47(8) of the MRR

Our nature of the breach assessment

We will not normally impose a penalty for breach of this condition because the operator only needs to notify us of a change. It does not significantly impact the integrity of the scheme.

If an operator does notify us of a change to its monitoring and the change could cause it to breach permit condition 1 (a more serious breach), then we will notify them of the potential breach. This will give the operator the opportunity to ensure their monitoring complies with permit condition 1.

GHG permit: condition 11

Except in the case of installations not eligible for an allocation, where a sub-installation has had a qualifying significant capacity reduction, the operator must, by the later of (a) the end of the period of 7 months following the change of capacity, (b) 31 December in the year in which that change occurred or (c) 1 February 2013 (the relevant date), submit a notice to the regulator containing both of the following:

a statement of the reduced capacity and the installed capacity of the sub-installation after taking into account the capacity reduction
a statement that the data under paragraph (a) have been verified except that, where the relevant date is before 30 May 2013, the statement required in (b) above need only be submitted by 30 May 2013.

GHG permit: condition 12

Except in the case of installations not eligible for an allocation, where a sub-installation had a qualifying partial cessation which occurred in any year other than 2012, the operator must, by the later of (a) 31 December in the year in which the reduction occurred or (b) within one month after the date on which it occurred, notify the regulator that a reduction in activity level has occurred, stating the amount of that reduction and the sub-installation to which it applies.

GHG permit: condition 13

Except in the case of installations not eligible for an allocation, where a sub-installation had a qualifying partial cessation which occurred during 2012, the operator must, by 1 February 2013, notify the regulator that a reduction in activity level has occurred, stating the amount of that reduction and the sub-installation to which it applies.

Our nature of the breach assessment for conditions 11, 12 and 13

We will not normally impose a penalty if the operator notifies us of a significant capacity reduction or partial cessation before it is issued with its free allocation of allowances affected by the notification.

In all other cases we will normally impose a penalty as this impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

GHG permit: condition 14

Unless already notified in accordance with other requirements of this permit, the operator must notify the regulator of any planned or effective changes to the capacity, activity level or operation of the installation by 31 December in the year in which the change was planned or has occurred.

Our nature of the breach assessment

We will not normally impose a penalty for breach of this condition. It is unlikely to impact the integrity of the scheme.

GHG permit: condition 15

The operator must keep records of all relevant data and information in accordance with Article 66 of the MRR.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. The operator must be able to provide adequate records. The quality of the operator’s data and information impacts the integrity of the scheme.

Excluded installations emissions (EIE) permit conditions

EIE permit conditions 1, 3, 4, 5, 6 and 7 are the same as those in the GHG permit. Our assessments are the same.

EIE permit: condition 2

The operator must, by 31 March each year, submit to the regulator a report of its annual reportable emissions made in the previous year, in accordance with the relevant provisions of the MRR that is either:

verified in accordance with the Verification Regulation
accompanied by a notice declaring that:
in preparing the report, the operator has complied with the relevant provisions of the MRR
the operator has complied with the monitoring plan
the report is free from material misstatements

Our nature of the breach assessment

An operator will be in breach of this requirement if:

it does not submit a report
it submits a ‘not self-verified’ report – one that does not include a notice declaring the requirements of (b) above
it submits a report late
we find the notice submitted with the report is incorrect because the operator has not complied with the relevant provisions of the MRR and its monitoring plan or the report does contain material misstatements

We will normally impose a penalty for all of these breaches because they impact the integrity of the scheme. It is vital that operators report accurately and on time. But the requirement is slightly less significant for EIE permit holders than for GHG permit holders because excluded installations are not required to surrender allowances to cover their emissions.

We will normally set the initial penalty amounts for both the fixed sum and the additional daily penalty (if applicable) as shown in this table:

Type of breach	Normal fixed penalty amount	Normal additional daily penalty (where applicable)
No report submitted	£3,250	£325
Submission of a ‘not self-verified’ report	£3,250	£325
Submission of a late report	£2,250	£225
Notice is incorrect	£3,250	£325

Our assessment will:

not take account of the level of emissions or size of the operator because this does not affect how seriously the breach impacts on the integrity of the scheme – however, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
not be more lenient for the first year an operator has been required to comply with the reporting obligation
reflect the extent of the lateness of the report in the additional daily penalty

We will aim to issue an ‘initial notice of civil penalty’ (see paragraph B5) within one week of the deadline to all operators who have failed to submit a report.

EIE permit: condition 8

Where the installation does not primarily provide services to a hospital, the operator must notify the regulator if the annual reportable emissions from the installation in any year exceed the maximum amount, by 31 March in the following year.

EIE permit: condition 9

Where the installation primarily provides services to a hospital, the operator must notify the regulator if the installation ceases to do so in any year, by 31 March in the following year.

Our nature of the breach assessment for conditions 8 and 9

Read paragraph B3.7 for our assessment on when an operator fails to notify us that its excluded installation no longer meets the rules for being excluded.

EIE permit: condition 10

The operator must keep records of all relevant data and information in accordance with Article 66 and in relation to any notice submitted under condition 2.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. We audit excluded installations and will require the operator to provide records so that we can confirm the annual emissions report is correct.

EIE permit: condition 11

Unless notification has been given under condition 8 and where the operator operates an installation which primarily provides services to a hospital, the operator must:

maintain records demonstrating that it continues to primarily provide services to a hospital
comply with requests from the regulator to inspect those records for the purpose of verifying the accuracy of the records and of the emissions report

Our nature of the breach assessment

We will not normally impose a penalty for this breach. If an operator cannot demonstrate it primarily provides services to a hospital then it must re-enter EU ETS as a GHG permit holder. The financial and administrative cost of this is higher than the cost of imposing a penalty.

B3.3: Failure to surrender allowance

We are required to impose the Excess Emissions Penalty if an operator or UK administered operator fails to surrender allowances equal to its annual reportable emissions in the Union Registry by the statutory deadline.

GGETS Regulation 54 sets the Excess Emissions Penalty. The starting point for the penalty is the sterling equivalent of €100 for each allowance the person failed to surrender. The amount is converted to sterling by the first rate of conversion to be published in September of the year preceding the scheme year in which the person is liable to the penalty in the C series of the Official Journal of the European Union (see GGETS Regulation 54(7)).

From 2013 onwards, we must adjust this figure as a result of the Harmonised Index of Consumer Prices for the Member States of the European Union (HICP) published by Eurostat. If the last HICP published before the end of April in the year the breach took place shows an average percentage price increase compared with the last HICP published before the end of April 2012, then we will increase the sterling equivalent by the same percentage.

We cannot apply our discretion to this breach because the Excess Emission Penalty is mandatory. The amount of the penalty and the requirement to impose it are set in the EU ETS Directive (2003/87/EC).

However, an operator or UK administered operator may be liable to a reduced penalty if it submitted its verified emissions report (or its emissions are determined by us) for a particular year and later it does all of the following:

finds out it has under-reported its annual reportable emissions in that report or determination
corrects the error
co-operates with us

The penalty is the sterling equivalent of €20 for each allowance it failed to surrender by the statutory deadline. We may apply our discretion to this penalty.

To calculate the €20 per allowance penalty, we must use the same definition of ‘sterling equivalent’ as applies to the Excess Emissions Penalty (see above). In part of the calculation, we must determine the scheme year in which an operator or UK administered operator is liable to the penalty. For under-surrenders relating to emissions in:

the scheme years before 2013, an operator or UK administered operator is liable to the penalty on 31 January 2014, being the date on which the relevant provisions of the GGETS Regulations came into force
2013 onwards, an operator or UK administered operator is liable to the penalty on 30 April in the year in which it failed to surrender sufficient allowances

Our nature of the breach assessment

We will normally impose a penalty where the €20 per allowance penalty applies. We will normally use the statutory maximum as the initial penalty amount.

Our assessment will not take account of the level of unreported emissions compared to the total reportable emissions. It is the most serious breach under the scheme. This breach significantly impacts the integrity of the scheme, regardless of how many emissions have been unreported. Also, the penalty is €20 multiplied by the number of allowances not surrendered (normally the amount of unreported emissions). So the calculation itself already takes account of the level of unreported emissions.

Our additional enforcement position

We will not normally impose a penalty if the statutory maximum penalty for this breach is €1,000 or less when the operator:

did not deliberately under-report
had no serious management failure
put the errors right quickly
co-operated with us

This is because the cost of imposing the penalty normally outweighs the public interest in imposing it. But we may impose a penalty if the opposite applies, as it may be in the public interest to do so.

If, after submitting a verified emissions report, an operator or UK administered operator finds it has under-reported its emissions, it is likely to also have breached the requirement to:

monitor emissions in line with the MRR and its monitoring plan
submit a verified emissions report in line with the MRR and Verification Regulation

This is because, in most cases, incorrect monitoring and reporting will have led to the under-report.

If we impose a penalty for a failure to surrender allowances because of an under-report, we will normally waive the penalties for breach of the associated monitoring and reporting requirements. The penalty will be large enough to penalise the operator or UK administered operator and deter other operators or UK administered operators and so is proportionate.

B3.4: Exceeding an emissions target for an excluded installation

Excluded installations are set emissions targets. If the operator’s emissions are greater than their target, GGETS Regulation 55 sets a civil penalty. The penalty is (A - B) × C, where:

A is the amount of annual reportable emissions arising in the scheme year
B is the emissions target for that year
C is the carbon price for that year

Our penalty setting approach

When we apply our discretion to this breach we will not use the stepped approach explained in Section A.

We do not think this penalty is a sanction for non-compliance. Rather than surrendering allowances to cover their emissions, excluded installations must make sure that their emissions do not exceed their emissions target.

Where an excluded installation exceeds their emissions target the penalty is designed to cover the payment of the excess emissions. The European Commission agreed the Opt-out Scheme based on it delivering equivalent emissions reductions to installations within the full EU ETS. So the penalty is essential for the Opt-out Scheme to operate effectively and plays an important part in reducing emissions.

We may, in exceptional circumstances, reduce the penalty, for example, if an error in the emissions target is discovered after the compliance deadline.

We may extend the time for payment of a penalty, where payment by the set payment deadline would cause financial hardship.

We will not normally publicise these penalties.

B3.5: Failure to pay a penalty for exceeding an emissions target for an excluded installation

GGETS Regulation 56 sets the civil penalties – they are both of the following:

10% of the penalty imposed under Regulation 55
an additional £150 for each day that the operator fails to pay that penalty following service of the initial notice of civil penalty, up to a maximum of £13,500

Our nature of the breach assessment

We will normally impose a penalty for this breach as it significantly impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

B3.6: Under-reporting of emissions from an excluded installation

GGETS Regulation 57 sets the civil penalty. It is A + (B × C) where:

A is £3,750
B is the amount of the unreported emissions
C is the carbon price for that year

Our nature of the breach assessment

We will not normally impose a penalty for this breach if an operator:

notifies us that it has under-reported its emissions
corrects the error
submits an accurate report
pays any applicable penalties for breaching its emissions target

In all other circumstances, we will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount.

B3.7: Failure to notify when an excluded installation ceases to meet the criteria for being excluded

If an operator no longer meets the criteria for being excluded, it must notify us and re-enter EU ETS as a GHG permit holder. GGETS Regulation 58 sets the penalty for not notifying us.

If an operator does not notify us by 31 March in the relevant year, the penalty is £2,500. For the first and each following year the operator still fails to notify us by 31 October in that year, the penalty is set higher than the cost saved by the operator by not re-entering the EU ETS as a GHG permit holder.

Our nature of the breach assessment

We will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

We will not normally impose a penalty if the operator tells us they no longer meet the exclusion criteria in time for us to notify the operator (under Schedule 5, paragraph 8(1) to the GGETS Regulations – the regulator notice) and vary its permit, so that it takes effect on 1 January in the scheme year after the year that the regulator notice was given.

B3.8: Failure to notify when an excluded installation has had a significant capacity reduction or partial cessation

If an excluded installation is to re-enter the EU ETS, the operator must notify us of relevant significant capacity reductions or partial cessations at the installation. GGETS Regulation 58A sets the civil penalty for not notifying us – it is £5,000.

Our nature of the breach assessment

We will not normally impose a penalty if the operator notifies us of the significant capacity reduction or partial cessation before it is issued with its free allocation of allowances.

We will normally impose a penalty for this breach in all other cases as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

B3.9: Failure to notify when the operator of an excluded installation has suspended the carrying out of regulated activities

If an excluded installation is to re-enter the EU ETS, the operator must notify us if it has suspended carrying out regulated activities at the installation during the relevant period. The civil penalty for not notifying us is set by GGETS Regulation 58B – it is £3,750.

Our nature of the breach assessment

We will not normally impose a penalty for this breach unless the failure to notify results in the issue of allowances to which the installation is not entitled. In that case, we will use the statutory maximum as the initial penalty amount.

B3.10: Failure to surrender a permit

GGETS Regulation 59 sets the civil penalty for this breach – it is £5,000.

Our nature of the breach assessment

We will not normally impose a penalty for this breach if the operator does not gain anything from holding the permit, such as receiving allowances to which it is not entitled.

We will normally impose a penalty if the operator does gain from this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

B3.11: Failure to submit or resubmit an application for an emissions plan

A UK administered operator must submit and, if necessary resubmit an application for an emissions plan on time or provide a satisfactory explanation as to why it cannot. GGETS Regulation 60 sets the civil penalty for failing to do this – they are both of the following:

£1,500
an additional £150 for each day the application or resubmission of an application is not provided following the service of an initial notice of civil penalty, up to a maximum of £13,500

Our nature of the breach assessment

A UK administered operator performing aviation activities must obtain an emissions plan. This is to make sure its emissions are accurately monitored and reported. We will normally impose a penalty for this breach if:

the application affects the UK administered operator’s ability to report accurately and on time for the first scheme year in which it becomes a UK aircraft operator
the UK administered operator submits an emissions report without first applying for an emissions plan

This breach impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

B3.12: Failure to notify the regulator if an emissions plan is not applied for

GGETS Regulation 61 sets the civil penalty for this breach – it is £5,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach because it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

This requirement is important as it enables us to monitor the UK administered operators on the European’s Commission list that have not yet performed aviation activities. We can also check that all UK administered operators that should be complying are doing so.

B3.13: Failure to comply with a condition of an emission plan

GGETS Regulation 62 sets the penalty amount for this breach – they are both of the following:

£1,500
an additional £150 for each day the UK administered operator fails to comply with the condition following the service of the initial notice of civil penalty, up to a maximum of £13,500

Emission plan condition 1

Where the emissions plan holder proposes to make a significant modification to its emissions plan under Article 15, the emissions plan holder must apply to the regulator for a variation of its emissions plan at least 14 days prior to making the change or, where this is not practicable, as soon as possible thereafter and such application must:

include a description of the change
set out how it affects the information contained in the emissions plan
explain how the change is in accordance with the MRR

Our nature of the breach assessment

We will not normally impose a penalty if the UK administered operator submits an application to vary its emission plan in time to enable verification of its annual emissions report by 31 March. Doing this will not significantly impact the integrity of the scheme.

Our additional enforcement position

We will normally impose a penalty for this breach if a UK administered operator repeatedly breaches this condition. We will normally use the statutory maximum as the initial penalty amount.

The UK administered operator may be in breach of GGETS regulation 35(1) if the change to its monitoring plan is not in line with the MRR. An early application will help resolve any issues and avoid potential breach.

Emission plan condition 2

Where the emissions plan holder makes a change to its emissions plan under Article 14 or 58(4) that is not a significant modification, the emissions plan holder must notify the regulator by 31 December in the year in which the change occurred and such notification must:

include a description of the change
set out how it affects the information contained in the emissions plan
explain how the change is in accordance with the MRR

Our nature of the breach assessment

We will not normally impose a penalty if a UK administered operator fails to notify us of a ‘non-significant’ change to its emissions plan as this will not significantly impact the integrity of the scheme.

Emission plan condition 3

Where the name of the emission plan holder changes, the emission plan holder must apply to the regulator for a variation of its emissions plan in order to reflect the change as soon as practicable following the change.

Our nature of the breach assessment

We will not normally impose a penalty for this breach as it does not significantly impact the integrity of the scheme. A name change is not a change in legal entity.

Emission plan condition 4

Where the emissions plan holder uses any of the tools referred to in Article 54(2) and exceeds the threshold referred to in Article 54(1), the emissions plan holder must notify the regulator within 14 days of exceeding the threshold or, where this is not practicable, as soon as possible thereafter.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. It will impact the integrity of the scheme if a UK administered operator does not notify us it has exceeded the small emitter’s threshold.

Emission plan condition 5

Where a verification report states outstanding non-conformities or recommendations for improvements as specified in Article 69(4), the emissions plan holder must submit a report to the regulator in accordance with the requirements of that Article by 30 June of the year in which the verification report is issued.

Our nature of the breach assessment

Verifiers can state 2 types of improvements, a:

non-conformity – this must be rectified because the UK administered operator has not conformed with its plan or the MRR
recommendation for improvement – the UK administered operator must consider the improvement but does not have to implement it because it is a suggestion on how to improve methodology

There is less impact on the integrity of the scheme if a UK administered operator fails to submit an improvement report relating to a recommendation for improvement at all or by 30 June than if it fails to submit one relating to a non-conformity.

We will normally impose a penalty for these breaches. We will normally set the initial penalty amount for the fixed sum (or waive the penalty) as shown in this table:

Type of breach	Normal initial penalty amount
First failure to submit an improvement report relating to a non-conformity if submitted within 10 working days of the deadline	waived
Failure to submit an improvement report relating to a non-conformity	£1,500
First failure to submit an improvement report relating to a recommendation	waived
Subsequent failure to submit an improvement report relating to a recommendation	£1,500

If an UK administered operator fails to submit an improvement report relating to a non-conformity in one year and then fails to submit a report relating to a recommendation in a future year, we will normally impose a penalty for the later failure. We will normally set the initial penalty amount as £1,500.

Our assessment will:

not take account of the level of emissions or size of the UK administered operator because it is difficult to identify the proportion of emissions affected by the stated improvements – however, we will consider the UK administered operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
reflect the extent of the lateness of the report in the additional daily penalty – the normal additional daily penalty amount will be £150 per day

We will issue an ‘initial notice of civil penalty’ (see paragraph B5) as soon as possible after 10 working days from the deadline.

Emission plan condition 6

The emissions plan holder must keep records of all relevant data and information in accordance with Article 66.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. The UK administered operator must be able to provide adequate records. The quality of the UK administered operator’s data and information impacts the integrity of the scheme.

B3.14: Failure to monitor aviation emissions

GGETS Regulation 63 sets the civil penalties for this breach – they are both of the following:

£1,500
an additional £150 for each day that the UK administered operator fails to monitor aviation emissions following the service of an initial notice of civil penalty, up to a maximum of £13,500

Our nature of the breach assessment

The monitoring obligations underpin the reporting and surrender requirements and are vital to the integrity of the scheme.

Our nature of the breach assessment will consider how many emissions have not been correctly monitored and the percentage of the UK administered operator’s annual reportable emissions this number represents.

We will determine the UK administered operator category and the relevant threshold using the figures in this table:

Category of UK administered operator	Annual reportable emissions (tCO2)	Threshold
A	≤50,000	≥ 1,000 tCO2 or 10% of annual reportable emissions, whichever is the higher
B	>50,000 - 500,000	≥ 5,000 tCO2 or 5% of annual reportable emissions, whichever is the higher
C	>500,000	≥ 50,000 tCO2 or 2% of annual reportable emissions, whichever is higher

The term ‘annual reportable emissions’ means the emissions that a UK administered operator is required to report – this may differ from its total annual emissions.

Whether we impose a penalty will depend on whether the emissions affected by a breach are above or below the threshold for that category of UK administered operator. If they are below the threshold we will not normally impose a penalty because we will not regard the breach as undermining the integrity of the scheme. If they are above the threshold we will normally impose a penalty. We will use the statutory maximum as the initial penalty amount.

Our nature of the breach assessment will check whether a UK administered operator has back-up methodologies for monitoring failures. This is likely to determine whether a UK administered operator can submit a verified emissions report. If, despite the monitoring breach, a UK administered operator is able to submit a verified emissions report, there will be less of an impact on the integrity of the scheme. We will normally:

for a monitoring breach leading to a ‘not verified’ emissions report, impose a penalty for the monitoring breach and a penalty for failure to submit a verified emissions report
for a monitoring breach with a verified emissions report, set the initial penalty amount at 50% of the statutory maximum – we will take account of the time taken to restore compliance and may use an additional daily penalty to do so

B3.15: Failure to report aviation emissions

GGETS Regulation 64 sets the civil penalties for this breach – they are both of the following:

£3,750
an additional £375 for each day that the UK administered operator fails to monitor aviation emissions following the service of an initial notice of civil penalty, up to a maximum of £33,750

Our nature of the breach assessment

Reporting accurately and on time is vital to the effective operation of the scheme. The deadline for reporting is 31 March. Meeting this deadline allows time to obtain allowances and surrender them by 30 April.

A UK administered operator will be in breach of this requirement if it:

does not submit an emissions report – the most serious breach, which significantly impacts the integrity of the scheme
submits a ‘not verified’ emissions report – a serious breach which also significantly impacts the integrity of the scheme because there are likely to be material errors or missing data
submits a ‘verified’ emissions report late (after 31 March) – a less serious breach but it still impacts the scheme
submits a ‘verified’ emissions report which is later found to be inaccurate – see our approach in paragraph B3.3

We will normally impose a penalty for the first 3 breaches.

We will normally set the initial penalty amount for the fixed sum and additional daily penalty (if applicable) as shown in this table:

Type of breach	Normal initial penalty amount	Normal additional daily penalty (where applicable)
No report submitted	£3,750	£375
Submission of a ‘not verified’ report	£3,750	£375
Submission of a late verified report	£2,750	£275

Our assessment will not take account of the level of emissions or size of the UK administered operator because this does not affect how seriously the breach impacts the integrity of the scheme. However, we will consider the UK administered operator’s size and financial circumstances in steps 3 and 4 in our stepped penalty setting approach.

Our enforcement position

For aviation EU ETS, we will not normally issue an ‘initial notice of civil penalty’ (see paragraph B5) immediately after an UK administered operator commits this breach. Instead, we will usually determine its emissions using Eurocontrol Data. We will then serve a notice of determination as soon as possible after the breach. This is to help the UK administered operator comply with the surrender obligation by 30 April.

In these circumstances we will normally impose a fixed sum penalty. We will set the amount to ensure no financial gain is made by not submitting a verified report on time. We will use the statutory maximum as the initial penalty amount because of the cost of verification. We will consider ‘financial gain’ at step 4 of our stepped penalty setting approach. We may also impose penalties for related breaches, such as a failure to monitor.

In exceptional cases we may use an additional daily penalty, for example, if we are unable to accurately determine the emissions of an UK administered operator that performs large-scale aviation activities using Eurocontrol Data.

B3.16: Failure to provide advice and assistance

GGETS Regulation 65 sets the civil penalty for an aerodrome operator failing to provide reasonable advice and assistance – it is £50,000.

Our nature of the breach assessment

We will only impose a penalty for this breach if an aerodrome operator’s behaviour was clearly so unreasonable that it impacted the integrity of the scheme.

B3.17: Failure to comply with a direction relating to an operating ban

GGETS Regulation 66 sets the civil penalty for this breach – it is £50,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. Non-compliance with a European Union operating ban is very serious and severely impacts the integrity of the scheme.

B3.18: Failure to return allowances

If an operator or UK administered operator fails to return allowances to which they are not entitled, GGETS Regulation 67 sets the civil penalty – they are both of the following:

£20,000
an additional £1,000 for each day the operator or UK administered operator fails to return the allowances following the service of an initial notice of civil penalty

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. It significantly impacts the integrity of the scheme.

B3.19: Failure to comply with an information notice

GGETS Regulation 69 sets the civil penalties for this breach – they are both of the following:

£1,500
an additional £150 for each day that a person fails to comply with the requirements of the information notice, following service of an initial notice of civil penalty, up to a maximum of £13,500

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount. Not complying with a request for information impacts the integrity of the scheme.

B3.20: Providing false or misleading information

GGETS Regulation 70 sets the civil penalty for this breach – it is £1,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally use the statutory maximum as the initial penalty amount as it impacts the integrity of the scheme.

B4: Requirement to monitor emissions for installations

An operator must monitor its emissions for each reporting year in line with its specific monitoring plan (including the written procedures supplementing that plan) and the MRR.

Meeting the requirements of both the plan and MRR can cause conflict.

For example, sometimes an operator may need to deviate from monitoring at the tier stated in its approved plan. The MRR allows for the operator, where it is not technically feasible to apply its required tier, to apply the highest achievable tier until the conditions for applying the approved tier are restored. If the operator takes action to promptly restore to the approved tier then the MRR does not consider this to be a breach, even though the temporary deviation is not strictly in line with the monitoring plan.

In these circumstances we agree that the MRR overrides the monitoring plan and will not consider there to be a breach of GHG or EIE permit condition 1.

B5: Procedure for imposing penalties

Our general procedure for imposing penalties is set out in our ESP.

We follow a different procedure when we impose additional daily penalties. See paragraph B1 to find out the breaches for which we can impose these and why we use them.

Where an additional daily penalty applies, we will first serve an initial notice of civil penalty. This will state the:

particular breach
fixed sum amount the operator or UK administered operator is liable for
additional daily penalty amount and that it will escalate from the day this notice is served until the operator or UK administered operator returns to compliance or the maximum amount is reached, if any

This notice is not the final decision, no payment is required and we will not publicise it. We do not apply our discretion at this stage. Once we have determined the total penalty (fixed sum and additional daily penalty amount) we will serve a notice of intent to impose the penalty. At this point the operator or UK administered operator can make representations. Once in receipt of these, we will consider them and set the final penalty amount.

B6: Enforcement notices

We can serve an enforcement notice where we consider any provision of the GGETS Regulations, MRR, permit or aviation emissions plan:

has been contravened
is being contravened
is likely to be contravened

We will generally use these notices:

to restore compliance
where the Regulations provide no specific financial penalty for the breach
to specify actions required to restore compliance
when the maximum additional daily penalty has been reached and the operator or UK administered operator still fails to comply

We are not likely to use them:

where we can use an additional daily penalty
to repeat a deadline to submit an application, report or notification

GGETS Regulation 68 sets the civil penalty amount for failing to comply with an enforcement notice – they are both of the following:

£20,000
an additional £1,000 for each day that a person fails to comply with the notice, following the service of an initial notice of civil penalty, up to a maximum of £30,000

Our nature of the breach assessment

We will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

B7: Revocation of permits

We must revoke a permit where an operator fails to apply to surrender its permit in line with the timescales set out in the GGETS Regulations.

We can revoke a permit (for any other reason) at any time but will only do so in exceptional circumstances.

When an operator of an excluded installation commits a sufficiently serious breach of the conditions of its permit or fails to pay the penalty under GGETS Regulation 56 within one month, we may:

revoke the permit in exceptional circumstances
vary the EIE permit to a GHG permit

We will only revoke a permit in such cases in very exceptional circumstances.

Question 3

Section C: CRC Energy Efficiency Scheme (CRC)

Accepted Answer

Section C explains:

how we normally assess the nature of the breach for each CRC breach
our additional CRC enforcement positions

You must read this with section A which explains our general civil penalty setting principles for the climate change schemes.

C1 When and how the Environment Agency will apply discretion to CRC penalties

CRC Energy Efficiency Order 2010, Article 94

We may apply our discretion to waive or modify a penalty that we have imposed on a participant. We must be satisfied that the participant has provided us with evidence within a reasonable time and that it took all reasonable steps to do one of the following:

comply with the relevant provision of the CRC Order
rectify any failure in compliance as soon as it came to the participant’s notice

In addition, in all the other circumstances it is reasonable to waive or modify the civil penalty.

CRC Energy Efficiency Order 2013, Article 72

We may apply our discretion to waive, impose, modify or withdraw a penalty where we consider it appropriate. We will apply our discretion as explained in section A.

C2 Civil penalties for CRC

Paragraphs C2.1 to C2.7 list the breaches within the CRC legislation and state the maximum civil penalty available for each breach.

Each paragraph states the breach and explains our normal ‘nature of the breach’ assessment and other enforcement positions (if there is one) for that breach.

Our nature of the breach assessment may state that we will not normally impose a penalty (waive the civil penalty) or it will state the normal ‘initial penalty’ (as explained in section A).

However, before we set the initial penalty amount we will take account of any representations we receive – see section 6.2 of the enforcement and sanctions policy.

C2.1 Failure to maintain records in respect of the information used to compile an annual report or relevant to any designated change

The maximum penalties are set by article 102, CRC Order 2010; article 79, CRC Order 2013 – they are both of the following:

a financial penalty of £40 per tCO2, of so much of the CRC emissions of the participant in the annual reporting year immediately preceding the year in which the non-compliance is discovered
publication

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally set the initial penalty as follows:

a financial penalty of £12 per tCO2 (2012/13 compliance year), £24 per tCO2 (2013/14 compliance year), and £40 per tCO2 (2014/15 compliance year onwards)
publication to GOV.UK For new entrants (those newly joining at the start of a phase), we will normally set the initial penalty at £12 per tCO2 (first compliance year), £24 per tCO2 (second compliance year), and £40 per tCO2 (third compliance year onwards).

C2.2 Failure to register or late registration

The maximum penalties are set by article 95(2), CRC Order 2010; article 73(2), CRC Order 2013) – they are both of the following:

£5,000, plus £500 for each working day until the application for registration is made, subject to a maximum of 80 working days
publication

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally set the initial penalty as follows:

a fixed penalty of £5,000
a daily penalty of £500 for each working day until the application for registration is made, subject to a maximum of 80 working days
publication to GOV.UK

C2.3 Failure to include all the meters for which an organisation is responsible when applying for registration

The maximum penalties are set by article 95(4), CRC Order 2010; article 73(3), CRC Order 2013 – they are both of the following:

£500 for each meter not reported
publication

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally set the initial penalty as follows:

£500 for each meter not reported
publication to GOV.UK

C2.4 Failure to provide complete and accurate information when registering

The maximum penalties are set by article 98(2), CRC Order 2010; article 75(2), CRC Order 2013) – they are both of the following:

£5,000
publication

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally set the initial penalty as follows:

£5,000
publication to GOV.UK

C2.5 Failure to provide an annual report or late submission of the report

The due date for the submission of annual reports is by the end of the last working day in July after the end of the annual reporting year.

Our overall nature of the breach assessment

We will normally waive the penalty for a participant with zero emissions in the relevant year.

Our assessment will take account of a very low level of emissions.

C2.5.1 Reports provided no more than 40 working days after the due date

The maximum penalties are set by article 97, CRC Order 2010; article 74, CRC Order 2013 – they are all of the following:

£5,000
£500 for each working day the report is provided after the due date
publication

Our nature of the breach assessment

If a participant submits an annual report late but not more than 40 working days late, we will normally impose a penalty. We will set the initial penalty as follows:

a fixed penalty of £5,000
a daily penalty of £100 for each working day the report is provided after the due date (2012/13 compliance year), £300 daily rate (2013/14 compliance year) and £500 daily rate (2014/15 compliance year onwards)
publication to GOV.UK

When we apply the daily penalty to new entrants, we will normally set the daily penalty as:

£100 for each working day the report is provided after the due date (first compliance year)
£300 daily rate (second compliance year)
£500 daily rate (third compliance year onwards)

Our additional enforcement position

We will not normally impose a penalty if it is a participant’s first breach and a report is submitted less than 10 working days late.

C2.5.2 Reports more than 40 working days after the due date (CRC Order 2010 – Phase 1 April 2010 to March 2014), after the last working day of October (CRC Order 2013 – Phase 2 onwards starting April 2014) or not provided at all

The maximum penalties are:

£45,000
the CRC emissions of that participant for the year to which the annual report relates are either:
double the CRC emissions reported in the annual report of the previous year
where no such report exists, double the CRC emissions which we calculate the participant made in the year for which the annual report is not provided
the participant must immediately acquire and surrender sufficient allowances equal to the CRC emissions which apply under (a) or (b) (or such additional allowances having regard to any allowances surrendered on time for the annual reporting year)
£40 per tCO2 of so much of the CRC emissions which apply under (a) and (b) but -
deducting the emissions represented by those allowances (if any) surrendered by the participant on time for the year to which the annual report relates, and
before the doubling is applied
blocking – this means to prevent or restrict the operation of a compliance account so the participant can only purchase and surrender allowances – they will not be able to sell allowances until the failure is remedied and any financial penalty is paid
publication

Where a participant:

fails to acquire and surrender sufficient allowances equal to the CRC emissions which apply under (a) or (b) (or such additional allowances having regard to any allowances surrendered on time for the annual reporting year) and
continues in the scheme

those allowances required to be surrendered are to be added to the quantity of allowances required to be surrendered in the next compliance year.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We will normally set the initial penalty as follows:

a fixed penalty of £45,000
an additional financial penalty of £12 per tCO2 (2012/13 compliance year), £24 per tCO2 (2013/14 compliance year), £40 per tCO2 (2014/15 compliance year onwards)
blocking
publication to GOV.UK

For the additional financial penalty, the amount of tCO2 is:

1.1 × actual or determined CRC emissions (2012/13 compliance year)
1.3 × actual or determined CRC emissions (2013/14 compliance year)
1.6 × actual or determined CRC emissions (2014/15 compliance year)
2 × actual or determined CRC emissions thereafter

We will only require participants to surrender allowances equal to their actual CRC emissions.

When we apply the additional financial penalties to new entrants, we will normally use the following:

1.1 × actual or determined CRC emissions (first compliance year), 1.3 × actual or determined CRC emissions (second compliance year), 1.6 × actual or determined CRC emissions (third compliance year), or 2 × actual or determined CRC emissions (subsequent compliance years)
the penalty of £12 per tCO2 (first compliance year), £24 per tCO2 (second compliance year), £40 per tCO2 (third compliance year onwards)

C2.6 Failure to provide an accurate annual report

The maximum penalties are set by article 99, CRC Order 2010; article 76, CRC Order 2013 – they are both of the following:

£40 per tCO2 of so much of those supplies or emissions which were inaccurately reported
publication

This breach only applies where a participant submits an inaccurate report. The term ‘inaccurate’, in the CRC Order 2013, means where any of the supplies or emissions reported differ by more than 5% from the supplies or emissions that should have been reported, ignoring any estimation adjustment under Schedule 1 of the CRC Order.

Our nature of the breach assessment

We will normally only impose a penalty where the error in reporting equates to more than 2,000 tCO2. For participants whose total energy use equates to less than 8,000 tCO2, this figure of 2,000 tCO2 will be at least 25% of the total.

For applicable reporting failures, we will normally impose a penalty. We will set the initial penalty as follows:

£12 per tCO2 of so much of those supplies or emissions which were inaccurately reported (2012/13 compliance year), £24 per tCO2 (2013/14 compliance year), £40 per tCO2 (2014/15 compliance year onwards)
publication to GOV.UK

When we apply the penalty to new entrants, we will normally set the initial penalty as:

£12 per tCO2 of so much of those supplies or emissions which were inaccurately reported (first compliance year)
£24 per tCO2 (second compliance year)
£40 per tCO2 (third compliance year onwards)

Our additional enforcement position

We will normally waive the penalty for participants who identified the error themselves, corrected the error and were co-operative.

C2.7 Failure to surrender sufficient allowances

From 2013 onwards, the due date for surrender of allowances is the last working day of October after the end of the applicable reporting year.

The maximum penalties are set by article 100, CRC Order 2010; article 77, CRC Order 2013 – they are all of the following:

the participant must immediately acquire and surrender the allowances shortfall
£40 per tCO2 of so much of the emissions represented by the allowances shortfall
blocking
publication

Our nature of the breach assessment

Where a participant fails to surrender sufficient allowances and that failure is apparent at the time compliance is required, we will normally impose a penalty. We will set the initial penalty as follows:

require the participant to immediately acquire and surrender the allowances shortfall
apply a penalty of £12 per tCO2 of so much of the emission represented by the allowances shortfall (2012/13 compliance year), £24 per tCO2 (2013/14 compliance year), £40 per tCO2 (2014/15 compliance year onwards)
blocking
publication to GOV.UK

When we apply the penalties to new entrants, we will normally set the initial penalty as:

£12 per tCO2 of so much of the emission represented by the allowances shortfall (first compliance year)
£24 per tCO2 (second compliance year)
£40 per tCO2 (third compliance year onwards)

Our additional enforcement position

If a participant fails to surrender sufficient allowances by the last working day in October, we must serve an enforcement notice so they can buy allowances under a special allocation. We will normally waive the penalty where any of the following apply:

the participant has complied with the conditions of the enforcement notice and it is a first breach of this requirement
we have determined the maximum penalty to be less than £1,000

We think that the cost of imposing a penalty of this amount outweighs the public interest in imposing it.

We have not set a £1,000 or less level as a set threshold. We will consider all the circumstances and will regard it:

not to be in the public interest to pursue if the late surrender did not result from a serious management failure, the participant then did surrender the allowances and co-operated with us
may be in the public interest to pursue despite the cost to the public purse if there is a serious management failure, a second or subsequent breach or lack of co-operation

C3 Publication

For the purposes of the CRC Order, ’publication’ means we will publish details of civil penalties imposed on GOV.UK.

As set out in our ESP where we impose a financial civil penalty, we will normally publish details of it.

C4 Criminal offences

CRC Order 2010 (article 106)

Criminal offences apply when a person:

makes a statement which that person knows to be false or misleading or recklessly made
fails to comply with an enforcement notice
fails or refuses to provide facilities or assistance or to permit any inspection when required to do so by an authorised person
prevents any other person from appearing before an authorised person or answering a question from an authorised person
pretends to be an authorised person
refuses to allow the Environment Agency or an authorised person access to premises for inspection purposes

CRC Order 2013 (article 82)

From 1 April 2014, the only criminal offences that apply are when a person:

makes a statement which that person knows to be false or misleading or recklessly made
fails to comply with an enforcement notice
pretends to be an authorised person
refuses to allow the Environment Agency or an authorised person access to premises for inspection purposes

We will consider the use of criminal sanctions as explained in our ESP. These could be:

a warning
a formal caution
prosecution

Question 4

Section D: Energy Savings Opportunity Scheme (ESOS)

Accepted Answer

Section D explains our:

normal ‘nature of the breach’ assessment for each ESOS breach
our additional ESOS enforcement positions

You must read this with section A, which explains our general civil penalty setting principles for the climate change schemes.

D1 When and how the Environment Agency will apply discretion to ESOS penalties

We will apply discretion as explained in section A.

D2 Civil penalties for ESOS

Paragraphs D2.1 to D2.5 list the breaches within the Energy Savings Opportunity Scheme Regulations 2014 (ESOS Regulations) and state the maximum civil penalties available for each breach. Unless otherwise stated, references to regulations are to the ESOS Regulations.

Each paragraph states the breach and explains our normal ‘nature of the breach’ assessment for that breach.

Our nature of the breach assessment may state that we will not normally impose a penalty (waive the civil penalty) or it will state the normal ‘initial penalty amount’ (as explained in section A).

However, before we set the initial penalty amount we will take account of any representations we receive – see sections 6.2 of the enforcement and sanctions policy and D4.

D2.1 Failure to notify

A UK organisation that qualifies for ESOS must notify the Environment Agency that it has complied with its ESOS obligations (regulation 29). Regulation 43 sets the maximum penalties for failing to do this – they are all of the following:

an initial penalty of up to £5,000
a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the penalty notice, subject to a maximum of 80 working days
the publication penalty

Our nature of the breach assessment

We will normally impose a penalty for failure to notify, whether an organisation has also failed to undertake an energy audit (see section D2.3) or not. Notification is a key requirement of the ESOS, and failure to comply impacts the scheme’s integrity. We will normally take the statutory maximum as the initial penalty amount.

If the organisation has also failed to undertake an energy audit, we will normally impose a penalty for that failure as well.

D2.2 Failure to maintain records

Regulation 28 requires responsible undertakings to maintain records. Regulation 44 sets the maximum penalties for failing to do so – they are all of the following:

an initial penalty of up to £5,000
a sum representing the cost to the compliance body of confirming that the responsible undertaking has complied with the Scheme
the publication penalty
any steps the compliance body requires the responsible undertaking to take to remedy the breach

Our nature of the breach assessment

We will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

D2.3 Failure to undertake an energy audit

Chapter 3 of Part 4 requires responsible undertakings to undertake an energy audit, where alternative routes to compliance (in Part 6) do not apply. Regulation 45 sets the maximum penalties – they are all of the following:

an initial penalty of up to £50,000
a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the compliance notice, subject to a maximum of 80 working days
the publication penalty
any steps the compliance body requires the responsible undertaking to take, including conducting or completing an ESOS assessment, to remedy the breach

Our nature of the breach assessment

Undertaking an energy audit is a key requirement of ESOS. This breach impacts on the integrity of the ESOS, and we will therefore normally issue a penalty for failure to undertake an energy audit. Subject to the next paragraph, we will normally use the statutory maximum as the initial penalty amount.

For new entrants to ESOS, in the compliance period in which they first enter the scheme, we will normally impose a lower initial penalty of up to £5,000 for failure to undertake an energy audit. (In subsequent compliance periods the responsible undertaking will no longer be a new entrant, and we will therefore normally use the statutory maximum as the initial penalty amount.)

D2.4 Failure to comply with a notice

This breach means failing to provide information or take the steps required by a compliance, enforcement or penalty notice.

Regulation 46 sets the maximum penalties – they are all of the following:

an initial penalty of up to £5,000
a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the penalty notice, subject to a maximum of 80 working days
the publication penalty

Our nature of the breach assessment

We will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

D2.5 False or misleading statement

This breach means, providing a false or misleading statement when:

notifying information to the Environment Agency or a compliance body
providing information required by a compliance, enforcement or penalty notice

Regulation 47 sets the maximum penalties – they are both of the following:

up to £50,000
the publication penalty

Our nature of the breach assessment

We will normally impose a penalty for this breach as it significantly impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

D3 Specific Environment Agency enforcement positions

D3.1 Zero energy consumption

Organisations that qualify for ESOS but have zero energy consumption need to declare this by the compliance deadline. If we receive a satisfactory declaration, we will not normally enforce other elements of the scheme.

D3.2 Low energy users

We accept that an organisation needs to make sure its compliance work is proportionate to the potential benefits of the scheme.

If an organisation’s energy use is at a domestic level we will not normally enforce the requirement to:

produce a fully compliant energy audit or alternative route to compliance
complete a lead assessor review

But the organisation will need to:

notify us by the compliance deadline and confirm its energy use is at a domestic level or lower
consider and document opportunities to reduce energy consumption, such as a green deal assessment or display energy certificate
record its compliance approach in its evidence pack

D4 Procedure for imposing ESOS penalties

We will normally impose a penalty for each separate breach of the ESOS Regulations. Our general procedure for imposing penalties is set out in our ESP.

Where an additional daily penalty applies for the breaches in D2.1 and D2.4, we follow a different procedure. We will first serve an initial notice of civil penalty which will state all of the following, the:

particular breach
the maximum initial penalty for which the responsible undertaking is liable
the amount of the additional daily penalty, and that it will accumulate from the day after the date of the notice, until the responsible undertaking returns to compliance, or it reaches the statutory maximum number of days (80)

The notice is not the final decision, no payment is required at this point and we will not publicise it. We will not apply our discretion at this stage. Once we have determined the total penalty (initial and daily penalties) we will serve a notice of intent to impose the penalty, setting out our proposed final penalty amount. At this point the organisation can make representations, which we will take into account in determining the final penalty.

For breach D2.3, the additional daily penalty starts accumulating on the day after service of a compliance notice. We do not issue an initial penalty notice, so our normal procedure applies.

Question 5

Section E: Fluorinated Greenhouse Gases (F Gas)

Accepted Answer

Section E explains our:

normal ‘nature of the breach’ assessment for all F Gas breaches
additional F Gas enforcement positions

You must read this with section A, which explains our general civil penalty setting principles for the climate change schemes.

E1 When and how the Environment Agency will apply discretion to F Gas penalties

We will apply discretion as explained in section A.

E2 Civil penalties for F Gas

We may impose civil penalties for numerous breaches referred to in Regulation 31A of the Fluorinated Greenhouse Gas Regulations 2015 (the F Gas Regulations). They are all of the following:

failing to comply with any of the provisions of Regulation (EU) No 517/2014 of the European Parliament of the Council on fluorinated greenhouse gases (the 2014 Regulation) set out in Schedule 2 to the F Gas Regulations with the exception of Article 17(1) of the 2014 Regulation
causing or permitting another person to breach specified provisions of the 2014 Regulation
failing to comply with specified provisions of certain European Commission Regulations relating to certification, attestation, labelling, fire protections systems and stationary equipment
failing to comply with various specified provisions of the F Gas Regulations

In total we can impose civil penalties for around 80 breaches. They relate to:

intentional release of F gas
placing F gas on the market
the F gas quota
the use of F gas
reporting and record keeping
fire protection checking
failure to comply with relevant requirements or notices or to provide assistance
F gas leakage and recovery

Schedule 4 to the F Gas Regulations sets out the civil penalty that applies to each breach.

Our normal ‘nature of the breach assessment’ (see E2.1) and additional enforcement position (see E2.2) apply to all F Gas breaches.

Our nature of the breach assessment states when we will not normally impose a penalty (waive the penalty) or it explains how we will determine the normal ‘initial penalty amount’ (as explained in section A).

However, before we set the initial penalty amount we will take account of any representations we receive – see section 6.2 of the enforcement and sanctions policy.

E2.1 Our nature of the breach assessment

We will normally impose a civil penalty for all breaches referred to in Regulation 31A of the F Gas Regulations subject to the additional enforcement position (see E2.2).

We will normally use the statutory maximum as the initial penalty amount. This is because the civil penalties in the F Gas Regulations have been set based on the seriousness of the breach taking into account the:

impact the breach has on the integrity of the scheme
environmental effect of the breach, where relevant

However, we may decide to use an initial penalty amount lower than the statutory maximum where we consider the breach warrants this, for example when:

a breach is serious because of its potential for environmental harm but the actual harm caused is much less
we impose a civil penalty for failure to comply with an enforcement notice and we don’t think the statutory maximum of £200,000 is justified

E2.2 Additional enforcement position

We may not impose a civil penalty where:

we consider giving advice and guidance will be sufficient to rectify the breach
punishment or future deterrent is not necessary

If after we have given advice and guidance the breach is not rectified, we may then impose a civil penalty.

Question 6

Section F: Climate Change Agreements (CCAs)

Accepted Answer

Section F explains our penalty setting approach for CCA financial civil penalties.

CCAs are voluntary agreements between operators and the Environment Agency. They are an incentive to operators to reduce energy use and carbon dioxide emissions. We will always work with operators to achieve compliance. We will only impose a financial civil penalty if the breach undermines the integrity of the scheme.

F1: When and how the Environment Agency will apply discretion to CCA penalties

We may impose a financial civil penalty for the breaches set out in regulation 15(1) of the Climate Change Agreement (Administration) Regulations 2012 (the CCA Regulations). We may decide not to impose a penalty and will apply our discretion by considering:

the nature of the breach – explained in the introduction of section A
culpability (blame) – assessed in line with the categories described in section A, step 3
the 4 aggravating and mitigating factors – set out in section A, step 4

We do not apply the stepped approach to penalty setting (as explained in section A) to CCA penalties.

Where we do decide to impose a penalty we cannot apply discretion on the level of the penalty – the CCA Regulations state how they must be calculated.

F2: How the Environment Agency calculates the penalty amount

For breaches set out in CCA Regulation 15(1)(a), (c) and (d) the penalty will be the greater of £250 or 0.1 × (X - Y), where:

× is the amount of climate change levy that would have been payable on supplies of taxable commodities to the target unit during the base year if the supplies were not reduced rate supplies
Y is the amount of levy that would have been payable on supplies of taxable commodities to the target unit during the base year if the supplies were reduced rate supplies

For target units that include greenfield facilities, if we serve a penalty notice within 12 months of the start of an agreement, we will estimate the amount of levy payable.

We will first calculate the penalty amount using the:

energy use information in the CCA Register for the base year
rate of the climate change levy and discount for that base year

We will then check if there has been any structural or other changes to the target unit since the agreement was made. See the technical annex of the agreement for a definition of ‘structural change’. We will recalculate the amount of the penalty if necessary.

To calculate the penalty we will use the best information we have on the target unit set up at the time of the breach rather than at the time the penalty is imposed.

Operators have the opportunity to provide further information about the target unit in line with the procedure for imposing penalties, as outlined in our ESP.

For breaches set out in CCA Regulation 15(1)(b) the penalty will be the greater of £250 or £12 per tCO2 equivalent of the difference between the actual emissions and the reported emissions for the target period.

F3: Civil penalties for CCAs

Paragraphs F3.1 to F3.5 list breaches within the CCA Regulations and explain our normal initial assessment for each breach.

However, before we make our final decision we will take account of any representations we receive – see section 6.2 of the enforcement and sanctions policy.

F3.1 Failure to report progress against CCA targets at all or by the specific date

CCA Regulation 15(1)(a) applies if an operator fails to report performance of its target unit on or before 1 May following the end of a target period.

Our assessment

We will normally impose a penalty for this breach. Not reporting performance impacts the integrity of the scheme because there is no evidence of progress towards targets.

If an operator submits a report:

10 working days or less late and it is a first breach of this requirement, we will not normally impose a penalty
more than 10 working days late but before 1 July, there is no history of non-compliance and there are strong mitigating circumstances, we will not normally impose a penalty
on or after 1 July, we will normally impose a penalty

We will not normally impose a penalty if an operator fails to report its performance when it has terminated its agreement after the end of a target period and before a certification period. But the relevant facilities cannot re-enter the scheme until we are satisfied the target unit has progressed against its target.

We will not certify facilities in target units whose operator does not report its performance for the new certification period.

F3.2 Failure to provide information about progress against a target or compliance with an underlying agreement

CCA Regulation 15(1)(a) applies if an operator does not provide information when requested (such as during an audit) so that we can determine progress for its target unit against its target or compliance with the terms of its underlying agreement.

Our assessment

We will normally impose a penalty for this breach.

This breach impacts the integrity of the scheme, as there is insufficient evidence of the performance of the target unit against the target or compliance with the agreement.

F3.3 Failure to notify that a facility is no longer eligible

CCA Regulation 15(1)(d) applies if an operator does not notify us within 20 working days that a facility may no longer be eligible to be included in the agreement.

Our assessment

This breach is fundamental and significantly impacts the integrity of the scheme. The operator is potentially gaining the benefits of certification to which it is not entitled.

If an operator:

notifies us more than 20 working days late and it is a first breach of this requirement, we will not normally impose a penalty
notifies us more than 20 working days late and it is a second or subsequent breach of this requirement, we will normally impose a penalty, unless both of the following apply:
- there are strong mitigating circumstances for the failure
- the operator satisfies us that it has not claimed the CCA discount on the climate change levy (CCL) since the facility ceased to be eligible or it pays any CCL due
does not notify us and we discover the breach through another means more than 20 working days after the facility becomes ineligible, we will normally impose a penalty unless one of the following applies:
- the operator provides us with evidence that it has ceased trading
- there are strong mitigating circumstances and the operator satisfies us that it has not claimed the CCA discount on the CCL levy

We will terminate an agreement (or part of the agreement) when we are aware that a facility has ceased to be eligible.

F3.4 Failure to notify us of an error in the base year data

CCA Regulation 15(1)(d) applies if an operator does not notify us within 20 working days that there is an error in their base year data.

Our assessment

If an operator breaches this requirement, their target unit’s target will be incorrect and it may have gained benefits to which it is not entitled. It may therefore significantly impact the integrity of the scheme.

If an operator does not benefit from the error, we will not normally impose a penalty.

If an operator benefits from the error, we will normally impose a penalty, subject to the following positions. If an operator:

notifies us more than 20 working days late and it is a first breach of this requirement, we will not normally impose a penalty
notifies us more than 20 working days late, it is a second or subsequent breach of this requirement and there are strong mitigating factors, we will not normally impose a penalty

In all other circumstances, we will normally impose a penalty.

F3.5 Providing inaccurate information in a target period report

CCA Regulation 15(1)(b) applies where an operator provides inaccurate information about progress of its target unit towards its targets in its target period report.

Our assessment

This breach impacts the integrity of the scheme. Inaccurate information may lead to an operator gaining benefits to which it is not entitled.

When an operator discovers an error in its report, it must notify us, correct the error and pay any extra buy-out.

Generally, if an operator has over-reported its target unit’s emissions, we will not normally impose a penalty. If an operator has under-reported its target unit is emissions, we will normally impose a penalty.

However, we will apply the following positions – where:

an under-report of emissions is a first breach of this requirement, we will not normally impose a penalty
either an over or under-report of emissions relating to one target period is notified to us more than one target period later, we will normally impose a penalty, even if it is a first breach of the requirement – for example, if we are notified in target period 3 or later of an error in target period 1 data, we will normally impose a penalty

F4: Remedial action

As well as the financial penalty we may require the operator to remedy the breach. In the notice of financial civil penalty we serve we must include the steps that need to be taken to remedy the breach and the deadline for doing so.

F5: Failure to comply with a penalty notice

We will normally terminate the underlying agreement, if the operator fails, by the specified deadline to:

pay the penalty
remedy the breach

The operator will:

lose its entitlement to the Climate Change Levy discount until it enters into a new underlying agreement
not be entitled to recover any discount it has lost in the meantime

If a new operator takes over a facility with unpaid penalties, it will not be able to enter into a new agreement until all outstanding penalties are paid.

F6 Removing access to the CCA register

The Environment Agency can suspend, restrict or terminate access to the CCA Register. See the terms of conditions of use of the Register for when we can do this.

Question 7

Section G: UK Emissions Trading Scheme (UK ETS)

Accepted Answer

Section G explains:

our approach to mandatory penalties
our penalty setting approach for UK ETS breaches where we cannot apply the stepped approach
our approach to multiple breaches
where we apply the stepped approach, how we normally assess the ‘nature of the breach’ for each UK ETS breach
our additional UK ETS enforcement positions
where we may use enforcement or revocation notices as an alternative or in addition to civil penalties

You must read this with section A which explains our general civil penalty setting approach for the climate change schemes.

G1: The types of UK ETS civil penalties

Under the Greenhouse Gas Emissions Trading Scheme Order 2020 (the Order), we may impose civil penalties for certain breaches of the scheme obligations. The civil penalty that applies to each breach is set out in articles 50 to 68 of the Order.

The penalty can be:

a non-escalating penalty only – a non-escalating penalty is a fixed sum specified in the Order for a particular breach or a penalty calculated using a formula
a non-escalating penalty plus a daily penalty (subject to a set maximum in some cases)

We can impose a daily penalty for the following breaches – failure to:

comply with a condition of a permit
apply or submit a revised application for an emissions monitoring plan
comply with a condition of an emissions monitoring plan
monitor aviation emissions
report aviation emissions
pay a civil penalty for exceeding an emissions target (hospital or small emitters (HSE))
return allowances
comply with an enforcement notice
comply with an information notice

A daily penalty starts to accrue from the day the ‘initial notice’ is given. It stops accruing on the day the person comes back into compliance or the maximum amount payable (if applicable) is reached (see paragraph G2 – Procedure for imposing penalties which explains the procedure).

We use the daily penalty as an incentive for a person to come back into compliance quickly, but only where a person can take action to bring themselves back into compliance.

G2: Procedure for imposing penalties

Our general procedure for imposing penalties is set out in our enforcement and sanctions policy (ESP).

We follow a different procedure when we impose daily penalties. See paragraph G1 – The types of UK ETS civil penalties to find out the breaches for which we can impose these and why we use them.

Where we may wish to impose a daily penalty, we will first give an ‘initial notice’. This will state:

the grounds for the liability
the non-escalating amount that may be imposed
that the daily penalty that may be imposed begins to accrue on the day the initial notice is given
the maximum daily rate of the daily penalty and any limit on the amount that can accrue

The purpose of the initial notice is to inform a person that a potential daily penalty is accruing and to encourage them to comply with the outstanding obligation as quickly as possible. It is not a notification of a penalty decision, does not impose a penalty or require any payment and will not be made public.

We do not apply our discretion to decide on the penalty amount at this stage. Once we have calculated the total penalty (non-escalating penalty plus daily penalty), we will serve a notice of intent to impose that penalty. At this point the operator or aircraft operator can make representations, which we will consider when determining the final penalty amount.

G3: When and how the Environment Agency will apply discretion to UK ETS penalties

We may apply our discretion to the non-escalating penalty and the daily penalty where the law allows.

We are not permitted under the Order to apply our discretion to the penalty for:

failure to surrender sufficient allowances equal to reportable or aviation emissions by the statutory deadline (the excess emissions penalty) – see paragraph G5.14 which explains the excess emissions penalty
HSEs exceeding emissions targets, except where we consider that the installation’s emissions target was incorrectly calculated – see paragraph G5.3
ultra-small emitters (USE) reportable emissions exceeding the maximum amount – see paragraph G5.8

We have a specific approach to applying discretion for:

carrying out a regulated activity without a permit – see paragraph G5.1
failing to notify when ceased to meet criteria to be a HSE – see paragraph G5.6
failing to notify where reportable emissions of a USE exceed the maximum amount – see paragraph G5.9

Otherwise, we will apply discretion in line with section A.

G4: Multiple breaches

An operator or aircraft operator may be in breach of multiple obligations.

Where multiple breaches have occurred, we may apply our discretion to waive one or more penalties if we consider that the largest penalty or penalties are sufficient to penalise the operator or aircraft operator and deter it and others from failing to comply in future. For example, if we impose a penalty for a failure to surrender allowances, we will normally waive the penalties for the breach of the associated monitoring and reporting requirements.

G5: Civil penalties for installations and aviation

Paragraphs G5.1 to G5.19 list the breaches in the Order and state the maximum civil penalty available for each breach.

Where we apply the stepped approach, each paragraph explains our normal ‘nature of the breach’ assessment and any other enforcement positions for that breach.

While each paragraph explains our normal assessment, there may be circumstances in which we would assess the nature of the breach differently.

Our nature of the breach assessment will state the normal ‘initial penalty amount’ (as explained in section A) or state that we will not normally impose a penalty, in which case it will be waived.

However, before we set the initial penalty amount, we will take account of any representations we receive – see section 6.2 – Representations and appeals of the ESP.

G5.1: Installations: carrying out a regulated activity without a permit

An operator is liable to a civil penalty for this breach if:

it does not hold a permit for an installation
it holds a permit, but certain parts of the installation are not covered by the permit

Article 50 of the Order provides a formula for calculating a penalty for this breach. We must use the formula and follow a Secretary of State’s Direction, which tells us how to estimate certain factors in the calculation.

The formula in relation to each affected scheme year is CA + (RE × CP) where:

CA is an estimate of the costs avoided in that scheme year as a result of carrying out a regulated activity without the authorisation of a permit
RE is an estimate of the installation’s reportable emissions in the part of the scheme year during which a regulated activity was carried out without the authorisation of a permit
CP is the carbon price for that scheme year

The amount calculated in accordance with the formula is known as the ‘total costs avoided element’ of the penalty.

We may increase this amount (that is, the maximum amount of total costs avoided before any reduction of that element is considered) by an amount to ensure the penalty exceeds the value of any economic benefit obtained from the non-compliance. This is known as the ‘punitive element’ of the penalty.

Our penalty setting approach

We will normally impose a penalty for this breach.

We must work out the total costs avoided element of the penalty. This is:

CA – avoided monitoring, reporting, verification and other administrative (MRV) costs plus avoided charges
RE × CP – the cost of allowances to cover reportable emissions during the non-compliance period

In accordance with the Direction:

in relation to avoided charges, we will calculate any annual subsistence fees that would have been payable by the operator in each year of non-compliance
in relation to MRV costs, we will base our estimate on an annual figure of £17,700 multiplied by an inflation factor and applied for each year of non-compliance. In circumstances where the operator is liable to the civil penalty because it held a permit, but certain parts of the installation were not covered by the permit, there are likely to be no avoided MRV costs

We will pro-rata the calculation of CA to take account of the number of days the operator carried out a regulated activity without a permit in any one year. This will be from the start date of the regulated activity in the first year of non-compliance to the day before the effective date of the permit in that year or a following year.

In calculating RE, we will estimate the reportable emissions of the installation from the start date of regulated activities up until the day before the operator is granted a permit. But if the operator is liable to a civil penalty because it held a permit but certain parts of the installation were not covered by the permit, we will estimate the reportable emissions from the part of the installation which is not covered by the permit from the start date of regulated activities at that part of the installation up until the day before the missing parts are included in the permit.

In accordance with the Direction, in calculating CA and RE, we will not take into account the value or number of any allowances that might have been allocated free of charge to the installation under the Order in respect of the period of non-compliance if an application for free allocation had been made and approved.

Normally we will only reduce the total costs avoided element if the operator can demonstrate it has not avoided some or all of these costs. This is because the calculation should reflect all the costs avoided by not having a permit. By paying this sum it puts the operator into the same position as it would have been had it complied.

We will normally reduce the MRV element of the costs avoided if the operator can demonstrate that, for the period of non-compliance, it has:

monitored its annual emissions data
submitted a report
had the data verified

In relation to the punitive element of the penalty, the Direction states that we may add to the total costs avoided element the higher of:

10% of the maximum amount of total costs avoided
£2,500

For the punitive element of the penalty, we will normally impose a minimum sum of £2,500. This breach has a significant impact on the integrity of the scheme and the penalty amount needs to deter non-compliance.

If the calculation of the punitive element (10% of the maximum total costs avoided before we apply any discretion to this amount) results in a sum of more than £2,500, we will apply our discretion to this sum using the stepped approach described in section A. The initial penalty amount will be the maximum sum available. If, after following the stepped approach, the final penalty amount is less than £2,500, we will round it up to £2,500.

G5.2: Installations: failure to comply with a condition of a UK ETS permit, surrender notice and revocation notice

Article 51 of the Order sets the civil penalty for a breach of the majority of permit conditions. It also applies to a breach of the requirements of a surrender or revocation notice. The civil penalty is the following:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the operator complies with the condition or requirement, beginning with the day the initial notice is given, up to a maximum of £45,000

Our normal nature of the breach assessment and other enforcement positions are in the following paragraphs for failing to comply with a condition of a:

greenhouse gas emissions (GHGE) permit
HSE permit

The surrender or revocation notice breaches are included under the corresponding permit condition breach headings.

The same statutory maximum applies to breaches of all permit conditions, even though some breaches have a more serious impact on the integrity of the scheme than others. Therefore, in this section, we reflect the seriousness of each particular breach in the related nature of the breach assessment.

GHGE permit: condition 1

The operator must monitor the reportable emissions of the installation in accordance with the Monitoring and Reporting Regulation and the monitoring plan (including the written procedures supplementing that plan)

Our nature of the breach assessment

The monitoring obligations underpin the reporting and surrender requirements and are important to the integrity of the scheme.

This assessment applies to a breach of the monitoring obligations in a GHGE permit and the similar obligations in a surrender or revocation notice.

Our nature of the breach assessment will consider the percentage of the installation’s annual reportable emissions that have not been correctly monitored.

We will determine the installation category (as defined in Article 19(2) of the Monitoring and Reporting Regulation (MRR)) and the relevant threshold using the figures in Table 3.

Table 3: Installation category and thresholds

Category of installation	Average verified annual reportable emissions (tCO2)	Threshold
A	≤50,000	10% of annual reportable emissions
B	>50,000 to 500,000	5% of annual reportable emissions
C	>500,000	2% of annual reportable emissions

Whether we impose a penalty will depend on whether the emissions affected by a breach are above or below the threshold for that category of installation. If they are below the threshold, we will not normally impose a penalty. If they are above the threshold, we will normally impose a penalty. We will normally set the initial penalty amount at £10,000 and, if applicable, the daily penalty at £250.

We consider that the thresholds are appropriate because they are a reasonable indication of the impact of the breach on the integrity of the scheme. Monitoring emissions accurately and in accordance with the operator’s monitoring plan and MRR is important to uphold the trust in, transparency and reliability of the data. Monitoring accurately also makes sure that emissions are reported accurately. We consider that there is less impact if a monitoring breach affects only a small proportion of the installation’s emissions, as there is not likely to be a fundamental issue which led to the breach. There is a lower percentage threshold for the larger installations because this percentage will represent a higher level of emissions, which has the potential to impact the integrity of the scheme more seriously.

Our nature of the breach assessment will also check whether an operator has back-up methodologies for monitoring failures. This is likely to determine whether an operator can submit a verified emissions report. If, despite the monitoring breach, an operator is able to submit a verified emissions report, there will be less of an impact on the integrity of the scheme. We will normally:

for a monitoring breach leading to a ‘not verified’ emissions report, impose a penalty for the monitoring breach and a penalty for failure to submit a verified emissions report
for a monitoring breach with a verified emissions report, set the initial penalty amount at £5,000 – we will take account of the time taken to restore compliance and may use a daily penalty to do so

Our additional enforcement position

We will not normally impose a penalty if the emissions that have not been correctly monitored are less than 1,000 tonnes of carbon dioxide equivalent.

GHGE permit: condition 2

The operator must prepare in accordance with the Monitoring and Reporting Regulation a report of the installation’s reportable emissions in each scheme year that is verified as satisfactory in accordance with the Verification Regulation and must submit the report (and the verification report) to the regulator on or before 31 March in the following year.

Our nature of the breach assessment

Reporting accurately and on time is vital to the effective operation of the scheme. The deadline for reporting is 31 March. Meeting this deadline allows time to obtain allowances and surrender them by 30 April.

This assessment applies to a breach of the reporting obligations in a GHGE permit and the similar obligations in a surrender or revocation notice.

An operator will be in breach of this requirement if it:

does not submit an emissions report – the most serious breach, which significantly impacts the integrity of the scheme
submits a ‘not verified’ emissions report – a serious breach which also significantly impacts the integrity of the scheme because there are likely to be material errors or missing data
submits a ‘verified’ emissions report late (after 31 March) – a less serious breach but it still impacts the integrity of the scheme
submits a ‘verified’ emissions report which is later found to be inaccurate – a serious breach because the data is inaccurate

We will normally impose a penalty for the first 3 breaches.

In relation to the fourth breach, if the operator:

submits a ‘verified’ emissions report which is later found to under-report emissions and the breach results in a penalty for failure to surrender allowances – see our approach in paragraph G5.14 – Failure to surrender allowances
submits a ‘verified’ emissions report which is later found to under or over-report emissions by 50 tonnes CO2 or more and the breach does not result in a penalty for failure to surrender allowances, we will normally impose a penalty – the breach still impacts the integrity of the scheme
submits a ‘verified’ emissions report which is later found to over-report emissions by less than 50 tonnes CO2, we will not normally impose a penalty. If there is an under-report of less than 50 tonnes CO2, we will not normally impose a penalty unless there are repeated breaches

Where we impose a penalty, we will normally set the initial penalty amount for the non-escalating penalty and daily penalty (if applicable) as shown in Table 4.

Table 4: Non-escalating and daily penalty amounts

Type of breach	Normal non-escalating penalty amount	Normal daily penalty (where applicable)
No report submitted	£20,000	£500
Submission of a ‘not verified’ report	£17,500	£450
Submission of a late verified report	£15,000	£400
Submission of inaccurate report – under or over-report of 50 tonnes CO2 or more	£10,000	Not applicable

Our assessment will:

in relation to the first 3 breaches, not take account of the level of emissions or size of the operator because this does not affect how seriously the breach impacts the integrity of the scheme. However, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
not be more lenient for the first year an operator has been required to comply with the reporting obligation
reflect the extent of the lateness of the report in the daily penalty

We will not give an initial notice (to start the daily penalty accruing) to all operators who have not submitted an emissions report until at least one week after the report deadline.

GHGE permit: condition 3

The operator must surrender allowances equal to the installation’s reportable emissions in a scheme year on or before 30 April in the following year.

Our penalty setting approach

The penalty for failure to comply with a permit condition does not apply to this breach. The penalty that does apply and our approach is explained in paragraph G5.14 – Failure to surrender allowances. It applies to the surrender obligations in the GHGE permit and similar obligations in a surrender or revocation notice.

GHGE permit: condition 4

The operator must modify its monitoring plan in accordance with Articles 14 and 59(4) of the MRR and:

(a) where the operator proposes to make a significant modification as defined in Article 15(3) or as referred to in Article 66(1) of the MRR, it must apply to the regulator for a variation of its permit at least 14 days before making the modification or, where this is not possible, as soon as reasonably practicable and such application must:

i. include a description of the change; and

ii. set out how it affects the information contained in the monitoring plan; or

(b) where the operator makes a change to its monitoring plan that is not a significant modification, it must notify the regulator on or before 31 December in the year in which the change occurred and such notification must:

i. include a description of the change;

ii. set out how it affects the information contained in the monitoring plan; and

iii. explain how the change is in accordance with the Monitoring and Reporting Regulation.

Our nature of the breach assessment

We will not normally impose a penalty for a breach of permit condition 4(a) (failure to apply to vary a permit). The breach may have an impact on the integrity of the scheme but, if it does so, it is likely to have led to breaches of other permit conditions. We will therefore have regard to our approach to multiple breaches – see paragraph G4 – Multiple breaches.

However, if an operator repeatedly breaches condition 4(a) (failure to apply to vary a permit), we will normally impose a penalty. We will normally set the initial penalty amount at £5,000.

We will not normally impose a penalty if an operator fails to notify us of a non-significant modification to its monitoring plan because the breach does not normally have a significant impact on the integrity of the scheme.

However, if an operator repeatedly breaches condition 4(b) (failure to notify of non-significant modification) and this impacts on the integrity of the scheme, we will normally impose a penalty. We will normally set the initial penalty amount at £2,500.

GHGE permit: condition 5

Where the name of the operator changes, the operator must apply to the regulator for a variation of its permit to reflect the change as soon as reasonably practicable following the change.

Our nature of the breach assessment

We will not normally impose a penalty for a breach of this condition as it does not significantly impact the integrity of the scheme. A name change is not a change of legal entity (which requires a permit transfer).

If we do impose a penalty for this breach, we will normally set the initial penalty amount at £2,500.

GHGE permit: condition 6

Where the operator does not apply at least the tiers required by or applies a fall-back methodology pursuant to the Monitoring and Reporting Regulation, the operator must submit a report to the regulator in accordance with the requirements specified in Articles 69(1) to (3) of the MRR by the following deadlines (unless an alternative deadline has been approved by the regulator in writing pursuant to Article 69(1) of the MRR and, in which case, that deadline applies), starting in the case of a new operator with 30 June in the year after that in which the permit is granted and for any other operator, 30 June 2021:

(a) for a category A installation, on or before 30 June every 4 years

(b) for a category B installation, on or before 30 June every 2 years

(c) for a category C installation, on or before 30 June every year

Our nature of the breach assessment

We will normally impose a penalty for this breach. This breach impacts the integrity of the scheme.

However, for an operator’s first breach of this condition, we will not normally impose a penalty if we receive the report within 10 working days of the deadline.

Our assessment will:

not take account of the level of emissions or size of the operator because it is difficult to identify the proportion of emissions affected by the relevant improvements. However, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
reflect the extent of the lateness of the report in the daily penalty – we will normally set the daily penalty at £250

We will normally set the initial penalty amount for the non-escalating penalty at £10,000.

We will not give an initial notice (to start the daily penalty accruing) until at least 10 working days after the improvement report deadline.

GHGE permit: condition 7

Where a verification report states outstanding non-conformities or recommendations for improvements (or in relation to an installation with low emissions, non-conformities only) as specified in Article 69(4) of the MRR, the operator must submit a report to the regulator in accordance with the requirements of that Article on or before 30 June of the year in which the verification report is issued, unless the operator has, before the relevant 30 June deadline:

resolved such non-conformities or recommendations; and
submitted a variation application covering the related modifications in accordance with condition 4(a).

Our nature of the breach assessment

In a verification report, a verifier can state 2 types of improvements – a:

non-conformity – this must be rectified because it demonstrates that the operator has not conformed with its monitoring plan or the MRR
recommendation for improvement – the operator must consider the improvement but does not have to implement it because this is a suggestion on how to improve methodology rather than a requirement for change

There is less impact on the integrity of the scheme if an operator fails to submit an improvement report relating to a recommendation for improvement at all or by 30 June than if it fails to submit one relating to a non-conformity.

We will normally impose a penalty for these breaches. We will normally set the initial penalty amount for the non-escalating penalty (or waive the penalty) and daily penalty (if applicable) as shown in table 5.

Table 5: Non-escalating and daily penalty amounts

Type of breach	Normal non-escalating penalty amount	Normal daily penalty (where applicable)
First failure to submit an improvement report relating to a non-conformity if submitted within 10 working days of the deadline	Waive	Not applicable
First failure to submit an improvement report relating to a non-conformity if not submitted within 10 working days of the deadline	£10,000	£250
Subsequent failure to submit an improvement report relating to a non-conformity	£10,000	£250
First failure to submit an improvement report relating to a recommendation	Waive	Not applicable
Subsequent failure to submit an improvement report relating to a recommendation	£7,500	£250

If an operator fails to submit an improvement report relating to a non-conformity in one year and subsequently fails to submit a report relating to a recommendation in a future year, we will normally impose a penalty for the subsequent failure.

Our assessment will not take account of the level of emissions or size of the operator because it is difficult to identify the proportion of emissions affected by the relevant improvements. However, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach.

We will not give an initial notice (to start the daily penalty accruing) until at least 10 working days after the improvement report deadline.

GHGE permit: condition 8

The operator must notify the regulator in accordance with the Monitoring and Reporting Regulation at least 14 days before the circumstances referred to in (a) to (d) occur or, where this is not possible, as soon as reasonably practicable:

(a) where there is a temporary change to its monitoring methodology as specified in Article 23 of the MRR;

(b) where tier thresholds are exceeded or equipment is found not to conform to requirements which require corrective action as specified in Article 28(1) of the MRR;

(c) where a piece of measurement equipment is out of operation as specified in Article 45(1) of the MRR; and

(d) where an installation with low emissions exceeds the relevant threshold as specified in Article 47(8) of the MRR.

Our nature of the breach assessment

We will not normally impose a penalty for this breach because the operator only needs to notify us of a change. It does not significantly impact the integrity of the scheme.

If we do impose a penalty for this breach, we will set the initial penalty amount at £2,500.

Our additional enforcement position

If an operator does notify us of a change to its monitoring and the change could cause it to breach permit condition 1 (a more serious breach), we will notify them of the potential breach. This will give the operator the opportunity to make sure their monitoring complies with permit condition 1.

GHGE permit: condition 9

The operator must keep records of all relevant data and information in accordance with Article 67 of the MRR.

Our nature of the breach assessment

We will normally impose a penalty for this breach because there will be an impact on the integrity of the scheme if an operator does not keep records of all relevant data and information in accordance with the MRR.

We will normally set the initial penalty amount at £10,000.

GHGE permit: condition 10

The operator must monitor the activity level of the installation in accordance with the Free Allocation Regulation and the monitoring methodology plan (including the written procedures referred to in Article 8(3) of the FAR).

Our nature of the breach assessment

The monitoring obligations underpin the activity level reporting requirements and are important to the integrity of the scheme. If activity levels are incorrectly monitored and reported, this may lead to an incorrect amount of free allocation.

Our nature of the breach assessment will consider the percentage of the installation’s free allocation affected by the failure to monitor activity levels correctly, as shown in Table 6.

Table 6: Thresholds

Amount of free allocation in year of breach	Threshold
≤50,000	10% of free allocation
>50,000 to 500,000	5% of free allocation
>500,000	2% of free allocation

The amount of free allocation in the table means the amount in the year of the breach, after any adjustment to that year’s allocation has been made in accordance with the Activity Level Changes Regulation (ALCR).

Whether we impose a penalty will depend on whether the amount of free allocation affected by a breach are above or below the threshold for that installation. If they are below the threshold, we will not normally impose a penalty. If they are above the threshold, we will normally impose a penalty. We will normally set the initial penalty amount at £10,000 and, if applicable, the daily penalty at £250.

We consider that the thresholds are appropriate because they are a reasonable indication of the impact of the breach on the integrity of the scheme. Monitoring activity levels accurately and in accordance with the operator’s monitoring methodology plan and the FAR is important to uphold the trust in, transparency and reliability of the data. Monitoring accurately also makes sure that activity levels are reported accurately and that the level of free allocation is correct, fair and does not lead to unjust financial gain by an operator. We consider that there is less impact if a monitoring breach affects only a small proportion of the installation’s free allocation, as there is not likely to be a fundamental issue which led to the breach. There is a lower percentage threshold for installations that receive a higher amount free allocation because this percentage will represent a higher level of free allocation, which has the potential to impact the integrity of the scheme more seriously.

Our nature of the breach assessment will also check whether an operator has back-up methodologies for monitoring failures. This is likely to determine whether an operator can submit a verified activity level report. If, despite the monitoring breach, an operator is able to submit a verified activity level report, there will be less of an impact on the integrity of the scheme. We will normally:

for a monitoring breach leading to a ‘not verified’ activity level report, impose a penalty for the monitoring breach and a penalty for failure to submit a verified activity level report
for a monitoring breach with a verified activity level report, set the initial penalty amount at £5,000 – we will take account of the time taken to restore compliance and may use a daily penalty to do so

Our additional enforcement position

We will not normally impose a penalty if the installation’s free allocation affected by the failure to monitor activity levels correctly is less than £1,000.

GHGE permit: condition 11

The operator must prepare in accordance with the Activity Level Changes Regulation a report of its activity level of each sub-installation of the installation in each scheme year that is verified as satisfactory in accordance with the Verification Regulation and must submit the report (and the verification report) to the regulator on or before 31 March in the following year.

Our nature of the breach assessment

Reporting activity levels accurately and on time is vital to the integrity of the scheme. Changes in activity levels may result in the adjustment of the amount of free allowances allocated to installations. Failures to report accurately and on time may mean that operators are allocated allowances to which they are not entitled and there is uncertainty over whether operators are allocated the correct number of allowances. This breach therefore significantly impacts the integrity of the scheme.

An operator will be in breach of this requirement if it:

does not submit an activity level report – the most serious breach, which significantly impacts the integrity of the scheme
submits a ‘not verified’ activity level report – a serious breach which also significantly impacts the integrity of the scheme because there are likely to be material errors or missing data
submits a ‘verified’ activity level report late (after the deadline) – a less serious breach but it still impacts the integrity of the scheme
submits a ‘verified’ activity level report which is later found to be inaccurate – a serious breach which significantly impacts the integrity of the scheme

We will normally impose a penalty for all these breaches.

We will normally set the initial penalty amount for the non-escalating penalty and daily penalty (if applicable) as shown in Table 7.

Table 7: Non-escalating and daily penalty amounts

Type of breach	Normal non-escalating penalty amount	Normal daily penalty (where applicable)
No report submitted	£20,000	£500
Submission of a ‘not verified’ report	£17,500	£450
Submission of a late verified report	£15,000	£400
Report later found inaccurate	£17,500	Not applicable

Our assessment will:

not take account of the level of emissions or size of the operator because this does not affect how seriously the breach impacts on the integrity of the scheme. However, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
not be more lenient for the first year an operator has been required to comply with the reporting obligation
reflect the extent of the lateness of the report in the daily penalty

GHGE permit: condition 12

The operator of an installation that has ceased operation must notify the regulator on or before 31 December in the year in which the cessation occurs or within one month of the cessation, whichever is later.

Our nature of the breach assessment

We will not normally impose a penalty if the operator notifies us in time to prevent allowances being allocated in error. Installations are not entitled to an allocation of allowances from the year after the installation ceases operation.

We will normally impose a penalty if the opposite applies as this impacts the integrity of the scheme. We will normally set the initial penalty amount at £15,000.

GHGE permit: condition 13

The operator of an installation where a regulated activity is no longer being carried out but where it is technically possible to resume operation must notify the regulator on or before 31 December in the year in which the change occurred.

Our nature of the breach assessment

We will not normally impose a penalty if the operator notifies us in time to prevent allowances being allocated in error. Installations are not entitled to an allocation of allowances from the year after the installation ceases operation. Notification in line with this condition means that we can assess if the installation meets this definition.

We will normally impose a penalty if the opposite applies as this impacts the integrity of the scheme. We will normally set the initial penalty amount at £15,000.

GHGE permit: condition 14

The operator must modify its monitoring methodology plan in accordance with Articles 9(2) and 12(3) of the FAR and:

(a) where an operator proposes to make a significant modification as defined in Article 9(5) of the FAR, it must apply to the regulator for a variation of its permit at least 14 days before making the modification or, where this is not possible, as soon as reasonably practicable and such application must:

i. include a description of the change; and

ii. set out how it affects the information contained in the monitoring methodology plan; or

(b) where an operator makes a change to its monitoring methodology plan that is not a significant modification, it must notify the regulator on or before 31 December in the year in which the change occurred and such notification must:

i. include a description of the change;

ii. set out how it affects the information contained in the monitoring methodology plan; and

iii. explain how the change is in accordance with the Free Allocation Regulation.

Our nature of the breach assessment

We will not normally impose a penalty for a breach of permit condition 14(a) (failure to apply to vary a permit). The breach may have an impact on the integrity of the scheme but, if it does so, it is likely to have led to breaches of other permit conditions. We will therefore have regard to our approach to multiple breaches – see paragraph G4 – Multiple breaches.

However, if an operator repeatedly breaches condition 14(a), we will normally impose a penalty. We will normally set the initial penalty amount at £5,000.

We will not normally impose a penalty if an operator fails to notify us of a non-significant modification to its monitoring methodology plan because the breach does not have a significant impact on the integrity of the scheme.

However, if an operator repeatedly breaches condition 14(b) and this impacts the integrity of the scheme, we will normally impose a penalty. We will normally set the initial penalty amount at £2,500.

GHGE permit: condition 15

The operator must keep records of all relevant data and information in accordance with Article 7(3) and 9(6) of the FAR.

Our nature of the breach assessment

We will normally impose a penalty for this breach because there will be an impact on the integrity of the scheme if an operator does not keep records of all relevant data and information in accordance with the FAR.

We will normally set the initial penalty amount at £10,000.

HSE permit conditions

HSE permit conditions 1, 3, 4 and 5 are similar to the corresponding conditions in the GHGE permit. Our nature of the breach assessments are the same.

HSE permit: condition 2

The operator must prepare in accordance with the Monitoring and Reporting Regulation a report (the emissions report) of the installation’s reportable emissions that is:

(a) verified as satisfactory in accordance with the Verification Regulation, or

(b) accompanied by a declaration that:

i. in preparing the emissions report, the operator has complied with the Monitoring and Reporting Regulation;

ii. the operator has complied with the monitoring plan; and

iii. the emissions report is free from material misstatements,

and to submit the emissions report (and any verification report where (a) applies or declaration where (b) applies) to the regulator on or before 31 March in the following year.

Our nature of the breach assessment

Reporting accurately and on time is vital to the effective operation of the scheme.

An operator will be in breach of this requirement if:

it does not submit a report – the most serious breach, which significantly impacts the integrity of the scheme
it submits a ‘not verified’ report (if it chooses to use a verifier) – a serious breach which significantly impacts the integrity of the scheme because there are likely to be material errors or missing data
it submits a ‘not self-verified’ report (one that does not include a declaration in line with the requirements of (b) above) – a serious breach which significantly impacts the integrity of the scheme because there is uncertainty about the data
it submits a report late – a less serious breach but it still impacts the integrity of the scheme
we find that a declaration submitted with a report is incorrect because the operator has not complied with the MRR and its monitoring plan or the report does contain material misstatements – a serious breach because the data is inaccurate
submits a ‘verified’ emissions report (if it chooses to use a verifier) which is later found to be inaccurate – a serious breach because the data is inaccurate

We will normally impose a penalty for the first 4 of these breaches.

In relation to the fifth breach, if the inaccurate declaration means that the operator:

under-reported emissions, the penalty for failure to comply with a permit condition does not apply. The penalty that does apply and our nature of the breach assessment is set out in G5.5 – Under-reporting of emissions from HSE
over-reported emissions by 100 tonnes CO2 or more, we will normally impose a penalty – the breach still impacts the integrity of the scheme, though it is a less serious breach compared to the similar breach for GHGE permit holders because there is no consequential impact on the surrender of allowances – the threshold for the over-report is therefore higher for HSE permit holders
over-reported emissions by less than 100 tonnes CO2, we will not normally impose a penalty

In relation to the sixth breach, if the operator:

submits a ‘verified’ emissions report which is later found to under-report emissions, the penalty for failure to comply with a permit condition does not apply. The penalty that does apply and our nature of the breach assessment is set out in G5.5 – Under-reporting of emissions from HSE
submits a ‘verified’ emissions report which is later found to over-report emissions by 100 tonnes CO2 or more, we will normally impose a penalty – the breach still impacts the integrity of the scheme, though it is a less serious breach compared to the similar breach for GHGE permit holders because there is no consequential impact on the surrender of allowances – the threshold for the over-report is therefore higher for HSE permit holders
submits a ‘verified’ emissions report which is later found to over-report emissions by less than 100 tonnes CO2, we will not normally impose a penalty.

Where we impose a penalty, we will normally set the initial penalty amounts for the non-escalating and the daily penalty (if applicable) as shown in Table 8.

Table 8: Non-escalating and daily penalty amounts

Type of breach	Normal non-escalating penalty amount	Normal daily penalty (where applicable)
No report submitted	£20,000	£500
Submission of a ‘not verified’ or ‘not self-verified’ report	£17,500	£450
Submission of a late report	£15,000	£400
Submission of inaccurate report or declaration – over-report of 100 tonnes CO2 or more	£10,000	Not applicable

Our assessment will:

in relation to the first 4 breaches, not take account of the level of emissions or size of the operator because this does not affect how seriously the breach impacts on the integrity of the scheme. However, we will consider the operator’s size and financial circumstances in steps 3 and 4 of our stepped penalty setting approach
not be more lenient for the first year an operator has been required to comply with the reporting obligation
reflect the extent of the lateness of the report in the daily penalty

We will not give an initial notice (to start the daily penalty accruing) to all operators who have not submitted an emissions report until at least one week after the report deadline.

HSE permit: condition 6

The operator must keep records of all relevant data and information in accordance with Article 67 and in relation to any declaration submitted under condition 2.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We audit HSEs and require the operator to provide records so that we can confirm the annual emissions report is correct. There will be an impact on the integrity of the scheme if an operator does not keep records of all relevant data and information in accordance with the MRR.

We will normally set the initial penalty amount at £10,000.

HSE permit: condition 7

Where the installation is not a hospital qualifying installation, if the installation’s reportable emissions in a scheme year exceed the maximum amount, the operator must notify the regulator on or before 31 March in the following year.

HSE permit: condition 8

Where the installation is a hospital-qualifying installation, if the installation ceases to be an installation that primarily provides services to a hospital in a scheme year, the operator must notify the regulator on or before 31 March in the following year.

Our nature of the breach assessment for conditions 7 and 8

We will not normally impose a penalty for breaches of these conditions because a specific penalty applies to these notification failures – our approach is explained in paragraph G5.6 – HSEs failure to notify when cease to meet criteria.

HSE permit: condition 9

Where the installation is a hospital-qualifying installation and except where the operator has given notice under condition 8, the operator must:

maintain records demonstrating that it continues to be an installation that primarily provides services to a hospital; and
to comply with requests from the regulator to inspect those records for the purpose of verifying the accuracy of the records and of the emissions report.

Our nature of the breach assessment

We will normally impose a penalty for this breach. We audit HSEs and require the operator to provide records so that we can confirm the criteria to be a HSE are met. The breach therefore impacts the integrity of the scheme.

We will normally set the initial penalty amount at £10,000.

G5.3: HSEs exceeding an emissions target

HSEs are set emissions targets. If the HSE’s emissions are greater than their target, article 54 of the Order sets the civil penalty. It is (RE − ET) × CP, where:

RE is the installation’s reportable emissions in the scheme year
ET is the installation’s emissions target for that year
CP is the carbon price for that year

Our penalty setting approach

We cannot apply our discretion to this breach because it is a mandatory penalty, with one exception.

We may only apply our discretion where we consider that the installation’s emissions target for the scheme year was incorrectly calculated. In circumstances where an error in an emissions target is discovered after the compliance deadline, we may reduce the penalty to reflect the correct emissions target. We will not therefore use the stepped approach explained in section A.

We do not consider this penalty to be a sanction for non-compliance. Rather than surrendering allowances to cover their emissions, HSEs must make sure that their emissions do not exceed their emissions target. Where a HSE exceeds their emissions target, the penalty is designed to cover the payment of the excess emissions. The penalty is therefore an essential element and plays an important part in reducing emissions.

We will not normally publicise these penalties.

G5.4: HSEs failure to pay penalty for exceeding an emissions target

Article 55 of the Order sets the following civil penalty for this breach:

10% of the penalty imposed under article 54
if an initial notice is given, a daily penalty at a daily rate of £150 until the operator pays that penalty, beginning with the day the initial notice is given, up to a maximum of £13,500

Our nature of the breach assessment

We will normally impose a penalty for this breach as it significantly impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

G5.5: Under-reporting of emissions from HSE

Article 56 of the Order sets the civil penalty for this breach. It is £5,000 + (UE × CP) where:

UE is the amount of the unreported emissions in a scheme year
CP is the carbon price for that year

Our nature of the breach assessment

We will normally impose a penalty for this breach. Reporting accurately is vital to the effective operation of the scheme.

This penalty is in addition to any penalty applicable under G5.3 (reportable emissions exceeding emissions target).

We will normally calculate UE × CP (and not add £5,000) and use this sum as the initial penalty amount. If CP is more than £10 per tonne of carbon dioxide equivalent, we will limit CP to £10. If an HSE under-reports its emissions, this has a serious impact on the integrity of the scheme, but we consider it to be less serious than the similar breach for operators in the main scheme under G3.16 (reportable emissions exceeding verified reportable emissions). This is because, if an operator in the main scheme under-reports its emissions, it is likely to result in the under-surrender of allowances, which has a significant impact on the integrity of the scheme.

Our assessment will consider any impact of the banking provisions (article 20 of the Order) as a result of the breach. If the following applies, the breach will have a more serious impact on the integrity of the scheme:

an installation’s emissions target was increased as a result of the banking provisions
the under-report means that the emissions target should not have been increased
we are unable to correct the emissions target because the deadline for assessing compliance with the target has passed
the operator avoided paying a penalty for breaching an emissions target

In these circumstances, we will normally add an amount up to £5,000 to UE × CP and use the total amount as the initial penalty amount.

Our additional enforcement position

We will not normally impose a penalty if the under-report is less than 100 tonnes of carbon dioxide equivalent.

G5.6: HSEs failure to notify when cease to meet criteria

If an installation no longer meets the criteria to be a HSE, it must notify us by 31 March in the relevant year. This may mean that the installation ceases to be a HSE and must comply with a GHGE permit. Article 57 of the Order sets the penalty for not notifying us on time or at all.

If an operator does not notify us by 31 March but does notify on or before 31 October in the relevant year, the civil penalty is £2,500.

If an operator notifies us after 31 October in a relevant year, the civil penalty is:

if there is no penalty year, £5,000
if there is a penalty year, £5,000 plus 2 × the avoided compliance costs (CA) for each penalty year

The avoided compliance costs, for each penalty year, are ((RE − FA) × CP) − PP, where:

RE is the installation’s reportable emissions in the penalty year
FA is the amount of free allocation the installation would have been allocated in the penalty year if the installation has not been a HSE for the penalty year
CP is the carbon price for the penalty year
PP is, where the penalty referred to paragraph G3.3 has been imposed, the amount of that penalty

A penalty year is a scheme year for which the installation is a HSE but should not have been.

The amount calculated in accordance with the formula is known as the ‘total costs avoided element’ of the penalty.

We consider that the £5,000 sum plus the addition of a further sum representing avoided compliance costs is the ‘punitive element’.

Our penalty setting approach

This breach impacts the integrity of the scheme because, if a HSE no longer meets the criteria, it must comply with a GHGE permit. Failure to notify us on time or at all means that it may continue to hold a HSE permit when it is not entitled to.

If an operator does not notify us by 31 March but does notify on or before 31 October, we will normally impose the statutory maximum penalty of £2,500.

If an operator notifies us after 31 October or does not notify us at all, we will normally impose a penalty.

If there is no penalty year, we will normally impose a penalty of £2,500.

If there is a penalty year, we will work out the avoided compliance costs for this penalty. We will not normally reduce this amount because the calculation should reflect the costs avoided by not holding a GHGE permit. By paying this sum it puts the operator into the same position as it would have been had it complied.

In relation to the punitive element of the penalty, we will not normally impose a further sum representing avoided compliance costs (double the avoided compliance costs). Instead, we will use £5,000 as the initial penalty amount and will apply our discretion to this sum using the stepped approach described in section A. If, after following the stepped approach, the final penalty amount is less than £2,500, we will round it up to £2,500.

G5.7: Installations: failure to surrender a permit

Article 58 of the Order sets a civil penalty for this breach of £5,000. An operator is only required to apply to surrender its permit if it has ceased operation.

Our nature of the breach assessment

We will not normally impose a penalty for this breach if the operator does not gain anything from holding the permit.

We will normally impose a penalty if the operator does gain from this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

G5.8: USEs reportable emissions exceeding maximum amount

If a USE’s reportable emissions in a scheme year exceed a maximum amount (2,499 tonnes of CO2), article 59 of the Order sets the civil penalty. It is (RE − maximum amount) × CP, where:

RE is the installation’s reportable emissions in the scheme year
CP is the carbon price for that year

Our penalty setting approach

We cannot apply our discretion to this breach because it is a mandatory penalty.

G5.9: USEs failure to notify when reportable emissions exceed maximum amount

If a USE’s reportable emissions in a scheme year exceed the maximum amount, it must notify us by 31 March in the relevant year. The operator must then comply with either a GHGE permit or a HSE permit.

Article 60 of the Order sets the civil penalty for not notifying us on time or at all. The penalty includes a formula. We must use the formula and follow a Secretary of State’s Direction, which tells us how to estimate certain factors in the calculation.

For each affected scheme year (or part year) falling within the penalty period, the penalty is the sum of £2,500 and CA + ((RE − FA) × CP) where:

CA is an estimate of costs avoided by the operator in the scheme year as a result of carrying out a regulated activity without the authorisation of a permit
RE is an estimate of the installation’s reportable emissions in that year
FA is the amount of free allocation the installation would have been allocated if the installation has not been a USE in the relevant allocation period
CP is the carbon price for that year

Article 60 of the Order defines the ‘penalty period’.

The amount calculated in accordance with the formula (not including the £2,500 sum) is known as the ‘total costs avoided element’ of the penalty.

We may increase this amount (that is, the maximum amount of total costs avoided before any reduction of that element is considered) by an amount to ensure the penalty exceeds the value of any economic benefit obtained from the non-compliance. This (together with the £2,500 sum) is known as the ‘punitive element’ of the penalty.

Our penalty setting approach

We will normally apply a penalty for this breach.

We must work out the ‘total costs avoided element’ of the penalty. This is:

CA – avoided monitoring, reporting, verification and administrative (MRV) costs plus avoided fees
(RE − FA) × CP – the cost of allowances to cover reportable emissions during the non-compliance period

In accordance with the Direction:

in relation to avoided charges, we will calculate the annual subsistence fees that would have been payable by the operator in each year of non-compliance
in relation to MRV costs, we will base our estimate on an annual figure of:
- £17,700 for GHGE permits
- £3,900 for HSE permits
multiplied by an inflation factor and applied for each year of non-compliance, depending on whether the operator should have held a GHGE permit or a HSE period during the period of non-compliance

We will pro-rata the calculation of CA to take account of the number of days the operator carried out a regulated activity without a permit in any one year. This will be from the start date of the regulated activity in the first year of non-compliance to the effective date of the permit in that year or a following year.

In calculating RE, we will estimate the reportable emissions of the installation from the start date of regulated activities up until the day before the operator is granted a permit (or the last day of the allocation period, if earlier).

We will calculate FA in accordance with article 60 of the Order.

Normally we will only reduce the total costs avoided element if the operator can demonstrate it has not avoided some or all of these costs. This is because the calculation should reflect all the costs avoided by not having a permit. By paying this sum it puts the operator into the same position as it would have been had it complied.

In relation to punitive element of the penalty, the Direction states that we may add to the total costs avoided element the higher of:

10% of the maximum amount of total costs avoided
£2,500

For this breach, the punitive element is the figure in the Direction, plus an additional sum of £2,500. We will not normally impose the additional £2,500 sum.

For the punitive element of the penalty, we will normally impose a minimum sum of £2,500. This breach has a significant impact on the integrity of the scheme and the penalty amount needs to deter non-compliance.

If the calculation of the punitive element (10% of the maximum total costs avoided before we apply any discretion to this amount) results in a sum of more than £2,500, we will apply our discretion to this sum using the stepped approach described in section A. The initial penalty amount will be the maximum sum available. If, after following the stepped approach, the final penalty amount is less than £2,500, we will round it up to £2,500.

G5.10: Aviation: failure to apply or make a revised application for an emissions monitoring plan

An aircraft operator must apply for or, if necessary, make a revised application for an emissions monitoring plan on time. Article 61 of the Order sets the following civil penalty for failing to do so:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the application (or revised application) is submitted, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Failing to apply for an emissions monitoring plan is a serious breach which affects the ability of an aircraft operator to comply with its monitoring, reporting and surrender obligations, so we will normally impose a penalty for this breach.

We will normally use the statutory maximum as the initial penalty amount.

Our additional enforcement position

However, a person does not become a UK ETS aircraft operator with compliance obligations, including the need to apply for an emissions monitoring plan within 42 days, until it exceeds the relevant threshold and has performed a UK ETS aviation activity. As it is possible for a person not to know for some time that it has become an aircraft operator, we will not normally impose a penalty for this breach if we consider the person applied promptly once it was aware or should have been aware that it was an aircraft operator.

G5.11: Aviation: failure to comply with a condition of an emissions monitoring plan

Article 62 of the Order sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the person complies with the condition, beginning with the day the initial notice is given, up to a maximum of £45,000

The same statutory maximum applies to breaches of all emissions monitoring plan conditions, even though some breaches have a more serious impact on the integrity of the scheme than others. Therefore, in this section, we reflect the seriousness of each particular breach in the related nature of the breach assessment.

Emissions monitoring plan: condition 1

Where the emissions monitoring plan holder proposes to make a significant modification to its emissions monitoring plan under Article 15 of the MRR, the emissions monitoring plan holder must apply to the regulator for a variation of its emissions monitoring plan at least 14 days prior to making the change or, where this is not practicable, as soon as possible thereafter and such application must:

(a) include a description of the change; and

(b) set out how it affects the information contained in the emissions monitoring plan.

Our nature of the breach assessment

We will not normally impose a penalty for this breach. However, if the aircraft operator repeatedly breaches the condition, we will normally impose a penalty. We will normally set the initial penalty amount at £5,000.

Emissions monitoring plan: condition 2

Where the emissions monitoring plan holder makes a change to its emissions monitoring plan under Article 14 of the MRR or Article 59(4) of the MRR that is not a significant modification, the emissions monitoring plan holder must notify the regulator by 31 December in the year in which the change occurred and such notification must:

(a) include a description of the change;

(b) set out how it affects the information contained in the emissions monitoring plan; and

(c) explain how the change is in accordance with the MRR.

Our nature of the breach assessment

We will not normally impose a penalty if an aircraft operator fails to notify us of a non-significant modification to its emissions monitoring plan because the breach does not normally have a significant impact on the integrity of the scheme.

However, if an aircraft operator repeatedly breaches the condition and this impacts the integrity of the scheme, we will normally impose a penalty. We will normally set the initial penalty amount at £2,500.

Emissions monitoring plan: condition 3

Where the name or the registered address of the emissions monitoring plan holder is changing or has changed, the emissions monitoring plan holder must notify the regulator either before or as soon as practicable following the change.

Our nature of the breach assessment

We will not normally impose a penalty because this breach does not normally have a significant impact on the integrity of the scheme.

However, if an aircraft operator repeatedly breaches the condition or the breach affects our ability to contact the aircraft operator, we will normally impose a penalty. We will normally set the initial penalty amount at £2,500.

Emissions monitoring plan: condition 4

Where the emissions monitoring plan holder uses any of the tools referred to in Article 55(2) of the MRR and exceeds the threshold referred to in Article 55(1) of the MRR in respect of flights that are within the scope of UK ETS, the emissions monitoring plan holder must notify the regulator within 14 days of exceeding the threshold or, where this is not practicable, as soon as possible thereafter.

Our nature of the breach assessment

If an aircraft operator fails to notify us that it has exceeded the small emitter’s threshold, this may have an impact on the integrity of the scheme.

We will normally impose a penalty for this breach where it affects the ability of the aircraft operator to meet its reporting and surrender obligations.

We will normally set the initial penalty amount at £10,000.

Emissions monitoring plan: condition 5

Where a verification report issued in accordance with Article 27 of the Verification Regulation states outstanding non-conformities or recommendations for improvements as specified in Article 69(4) of the MRR, the emissions monitoring plan holder must submit a report to the regulator in accordance with the requirements of that Article 69 of the MRR by 30 June of the year in which the verification report is issued or by an alternative date set by the regulator.

Our nature of the breach assessment

In its verification report, a verifier can state:

a non-conformity – this must be rectified because it demonstrates that the aircraft operator has not conformed with its emissions monitoring plan or the MRR
a recommendation for improvement – the aircraft operator must consider the improvement but does not have to implement it because this is a suggestion on how to improve methodology rather than a requirement for change

Generally, there is less impact on the integrity of the scheme if an aircraft operator fails to submit an improvement report relating to a recommendation than if it fails to submit one relating to a non-conformity.

We will not normally impose a penalty for a first breach of this condition, but for subsequent breaches, we will normally impose a penalty.

For a breach relating to a non-conformity, we will normally set the initial penalty amount for the non-escalating penalty at £10,000 and daily penalty at £250. For a breach relating to a recommendation, we will normally set the initial penalty amount for the non-escalating penalty at £7,500 and daily penalty at £250.

When assessing the nature of the breach, we do not take into account the level of the aircraft operator’s aviation emissions affected by the non-conformity or recommendation because it is difficult to identify the proportion of emissions affected by the relevant improvements.

We will not give an initial notice (to start the daily penalty accruing) until at least 10 working days after the improvement report deadline.

Emissions monitoring plan: condition 6

The emissions monitoring plan holder must keep records of all relevant data and information in accordance with Article 67 of the MRR.

Our nature of the breach assessment

We will normally impose a penalty for this breach because there will be an impact on the integrity of the scheme if an aircraft operator does not keep records of all relevant data and information in accordance with the MRR.

We will normally set the initial penalty amount at £10,000.

Emissions monitoring plan: condition 7

For Scheme Years 2021 to 2030 (1 January 2021 – 31 December 2030) the emissions monitoring plan holder must report its verified aviation emissions in accordance with Article 33 of the Order.

Our nature of the breach assessment

See section G5.13 below.

G5.12: Aviation: failure to monitor aviation emissions

Article 63 of the Order sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the person monitors aviation emissions correctly, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Monitoring obligations are important for the effective operation of the aviation aspects of the scheme. However, if an aircraft operator fails to monitor correctly, and there is a corresponding failure to report, we are unilaterally able to determine its aviation emissions before the surrender deadline. For this reason, a failure to monitor will not normally have a significant impact on the integrity of the scheme, and we will normally only impose this penalty where there have been repeated breaches.

Where we impose a penalty, we will normally set the initial penalty amount at £5,000.

G5.13: Aviation: failure to report aviation emissions

Article 64 of the Order sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the report is submitted, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Submitting a verified annual emissions report by the deadline of 31 March is very important to the effective operation of the scheme. This will ensure that there is enough time to obtain sufficient allowances and surrender them by 30 April.

An aircraft operator will be in breach of this requirement if, in order of the seriousness of impact on the integrity of the scheme, it:

does not submit a ‘verified’ annual emissions report
submits a ‘not verified’ annual emissions report, which is likely to contain material errors or missing data
submits a ‘verified’ emissions report late (after 31 March)
submits a ‘verified’ emissions report which is later found to be inaccurate – see our approach in paragraph B3.3

We will normally impose a non-escalating penalty for the first 3 breaches.

Our objectives when imposing this penalty are to reflect the importance of the reporting obligation and to ensure that no financial gain is made because the aircraft operator did not submit a verified report. We will normally use the statutory maximum as the initial penalty amount.

We will not normally impose a daily penalty in response to this breach. Instead, we will usually determine the aircraft operator’s aviation emissions using the best available data. We will then serve a notice of determination as soon as possible after 31 March to help the aircraft operator comply with its surrender obligation by 30 April.

In exceptional cases, we may use a daily penalty. For example, if we are unable to determine the emissions of an aircraft operator that performs large-scale aviation activities because of a lack of available data.

When deciding whether to impose a penalty for this breach we will not take into account the level of the aviation emissions for the scheme year to which the report relates, because this does not affect the seriousness of the breach.

G5.14: Failure to surrender allowances

Excess emissions penalty

We are required to impose an excess emissions penalty if:

an operator fails to surrender allowances equal to the installation’s reportable emissions in a scheme year by 30 April in the following year
where a surrender or revocation notice is given, an operator fails to surrender allowances equal to the installation’s reportable emissions in the period referred to in Schedule 6, paragraph 11(4)(b)(i) or Schedule 6, paragraph 12(5)(b)(i) of the Order by the date set out in the surrender or revocation notice
an aircraft operator fails to surrender allowances equal to its aviation emissions in a scheme year by 30 April in the following year

Article 52 of the Order sets the excess emissions penalty. It is £100 (multiplied by an inflation factor) for each allowance the operator or aircraft operator failed to surrender.

The inflation factor is (CPI2 – CPI1) / CPI1 or 1 whichever is greater, where:

CPI2 is the consumer prices index for the most recent March for which the consumer prices index is published when the penalty notice is given
CPI1 is the consumer prices index for March 2021

Consumer prices index means one of the following:

the all-items consumer prices index published by the Statistics Board
if that index is not published for a month, any substituted index or index figures published for that month by the Statistics Board

We cannot apply our discretion to this breach because the excess emissions penalty is mandatory. The amount of the penalty and our obligation to impose it are set out in the Order.

The only circumstance in which we would not impose the excess emissions penalty is where we consider that to do so would be incompatible with a right set out in the European Convention on Human Rights and therefore contrary to section 6(1) of the Human Rights Act 1998.

Reportable or aviation emissions exceed verified reportable or aviation emissions

The discretionary penalty in article 52(10) of the Order of £20 (multiplied by the inflation factor) for each allowance not surrendered (the £20 penalty) applies instead of the mandatory excess emissions penalty in the circumstances set out below.

In relation to installations:

the installation’s reportable emissions in a scheme year exceed its verified reportable emissions for that year
the operator failed to surrender allowances equal to the difference between its reportable emissions and its verified reportable emissions by 30 April in the year following that scheme year (or by the relevant deadline in a surrender or revocation notice)

‘Verified reportable emissions’ are reportable emissions:

verified in accordance with the operator’s permit conditions or the requirements of a surrender or revocation notice
determined by us under article 45 of the Order before the under-report was discovered

In relation to aircraft operators:

the aircraft operator’s aviation emissions in a scheme year exceed its verified aviation emissions for that year
the aircraft operator failed to surrender allowances equal to the difference between its aviation emissions and it verified aviation emissions by 30 April in the year following that scheme year

‘Verified aviation emissions’ are aviation emissions:

verified under article 33(1) of the Order
considered verified under article 33(2) of the Order because the aircraft operator determined its aviation emissions using the small emitter’s tool populated with Eurocontrol Support Facility data
determined by us under article 45 of the Order before the under-report was discovered

Where we have discovered or have been informed that an operator or aircraft operator has under-reported its reportable or aviation emissions, we will determine its reportable or aviation emissions under article 45 of the Order.

We will also re-determine emissions if an error is discovered in our determination of emissions.

The operator or aircraft operator is liable to the £20 penalty calculated by reference to the difference between its verified reportable or aviation emissions and reportable or aviation emissions as determined under article 45 of the Order.

Our nature of the breach assessment

We will normally impose the £20 penalty.

Failure to surrender allowances equal to reportable or aviation emissions is the most serious breach under the scheme. In most cases, this breach significantly impacts the integrity of the scheme, regardless of the level of the under-surrender. The number of allowances that were not surrendered will be reflected by the calculation of the penalty because it is £20 (multiplied by an inflation factor) for each allowance that was not surrendered.

We will normally use the statutory maximum as the initial penalty amount.

Our additional enforcement position

We will not normally impose a penalty if the under-report is less than 50 tonnes of carbon dioxide equivalent.

G5.15: Failure to transfer or surrender allowances where underreporting discovered after transfer

We may give notice to a transferring operator where:

a GHGE permit is transferred to a new operator
we subsequently become aware (following a determination under article 45 of the Order) that there is an error in a report submitted by the transferring operator
the error resulted in the transferring operator failing to comply with its requirement to surrender sufficient allowances

If the transferring operator fails to effect a transfer of allowances in accordance with the notice or the new operator fails to surrender the allowances, article 53 of the Order sets the civil penalty. It is £20 multiplied by an inflation factor (see section G5.14 – Failure to surrender allowances) for each allowance the person fails to transfer or surrender.

Our nature of the breach assessment

Where the transferring operator does not effect a transfer of allowances, we will normally impose a penalty for this breach. This breach significantly impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

If the transferring operator effects a transfer to the new operator and the new operator fails to surrender the allowances, we will normally impose a penalty for this breach. It significantly impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

G5.16: Failure to return allowances

If an operator or aircraft operator fails to return allowances to which they are not entitled in accordance with a notice to return allowances under article 34V of the Order, article 64A of the Order sets the following civil penalty:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £1,000 until the person complies with the requirements of the notice to return allowances, beginning with the day on which the initial notice is given

Our nature of the breach assessment

Subject to our additional enforcement position, we will normally impose a penalty for this breach because it significantly impacts the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

Our additional enforcement position

We will not normally impose a penalty for this breach if the registry administrator has returned all the required allowances from the installation’s operator holding account or aircraft operator’s aircraft operator holding account in accordance with a notice under article 34U of the Order.

G5.17: Failure to comply with an information notice

Article 66 of the Order sets the following civil penalty for this breach:

a non-escalating penalty of £5,000
if an initial notice is given, a daily penalty of £500 until the person complies with the requirements of the information notice, beginning with the day on which the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Subject to the exception relating to the UK ETS Registry set out below, we will normally impose a penalty for this breach because not complying with a request for information normally impacts the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

UK ETS Registry nature of the breach assessment

When acting as the registry administrator of the UK ETS Registry, we can give an information notice to the account holder of an operator holding account, an aircraft operator holding account or a trading account.

If an account holder in the UK ETS Registry does not comply with an information notice, we will not normally impose a penalty for this breach because the failure to comply does not normally have a direct impact on the integrity of the scheme.

However, if the breach is assessed as having an impact on the integrity of the scheme that cannot be addressed by the imposition of a different penalty or another administrative action in the UK Registry by the registry administrator, we will impose the penalty and use the statutory maximum as the initial penalty amount.

Where the penalty relates to an information notice given to an account holder by the registry administrator:

in respect of its operator holding account or aircraft operator holding account, it will be imposed by the regulator of the account holder
where it relates to a trading account, it will be imposed by the Environment Agency

G5.18: Providing false or misleading information

Article 67 of the Order sets a civil penalty for this breach of £50,000.

Our nature of the breach assessment

Subject to the exception relating to the UK ETS Registry set out below, we will normally impose a penalty for this breach. It may have a significant impact on the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

UK ETS Registry nature of the breach assessment

Where the breach relates to the provision of false or misleading information to the registry administrator of the UK ETS Registry by an extant or prospective account holder, the registry administrator will normally, in line with its regulatory powers, refuse an application to open an account, or close or suspend an existing account rather than impose a penalty.

Where the false or misleading information relates to:

an extant or prospective operator holding account or aircraft operator holding account, any penalty will be imposed by the regulator of the account holder
an extant or prospective trading account, any penalty will be imposed by the Environment Agency

G5.19: Inspection: refusal to allow access to premises

Article 68 of the Order sets a civil penalty for this breach of £50,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach. It may have a significant impact on the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

G6: Requirement to monitor emissions for installations

An operator must monitor its emissions for each reporting year in line with its monitoring plan (including the written procedures supplementing that plan) and the MRR.

Meeting the requirements of both the plan and MRR can cause conflict.

For example, sometimes an operator may need to deviate from monitoring at the tier stated in its approved plan. The MRR allows for the operator, where it is not technically feasible to apply its required tier, to apply the highest achievable tier until the conditions for applying the approved tier are restored. If the operator takes action to promptly restore to the approved tier, then the MRR does not consider this to be a breach, even though the temporary deviation is not strictly in line with the monitoring plan.

In these circumstances we consider that the MRR overrides the monitoring plan and will not consider there to be a breach of GHGE or HSE permit condition 1.

G7: Enforcement notices

We can give an enforcement notice to a person where we consider that the person has contravened, is contravening or is likely to contravene a condition of a permit or emissions monitoring plan or any provision of the:

Order
MRR
Verification Regulation (VR)
FAR
ALCR

When acting as the registry administrator of the UK ETS Registry, we can give an enforcement notice to the account holder of an operator holding account, an aircraft operator holding account or a trading account.

We will generally use an enforcement notice:

to restore compliance
where the Order provides no specific penalty for the breach
to specify actions required to restore compliance
when the maximum daily penalty has been reached and the operator or aircraft operator still fails to comply

We will not normally use an enforcement notice:

where we can use a daily penalty
to repeat a deadline to submit an application, report or notification

Article 65 of the Order sets the following civil penalty for failing to comply with an enforcement notice:

a non-escalating penalty of £20,000
if an initial penalty notice is given, a daily penalty of £1,000 until a person fails complies with the requirements of the notice, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Subject to the exception relating to the UK ETS Registry set out below, we will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

UK ETS Registry nature of the breach assessment

If an account holder in the UK ETS Registry does not comply with an enforcement notice, we will not normally impose a penalty for this breach because the failure does not normally have a direct impact on the integrity of the scheme.

However, if the breach is assessed as having an impact on the integrity of the scheme that cannot be addressed by the imposition of a different penalty or an administrative action by the registry administrator in the UK Registry, we will impose the penalty and use the statutory maximum as the initial penalty amount.

Where the penalty relates to an enforcement notice given to an account holder by the registry administrator:

in respect of its operator holding account or aircraft operator holding account, it will be imposed by the regulator of the account holder
where it relates a trading account, it will be imposed by the Environment Agency

G8: Revocation of permits

We must revoke a permit where:

an installation ceases operation and an operator fails to apply to surrender its permit in line with the timescales set out in the Order
a permit is held by an operator whose installation will be a USE for the period 2026-2030 – the permit will be revoked so that it ceases to be in force at the end of 31 December 2025

We may revoke a permit if an operator fails to:

comply with the Order
comply with the MRR
comply with the VR
comply with the FAR
comply with the ALCR
comply with a condition of a permit
pay its subsistence charge

We will only revoke a permit for these reasons in exceptional circumstances.

Question 8

Section H: Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)

Accepted Answer

Section H explains our penalty setting approach for breaches of CORSIA obligations, including:

how we normally assess the nature of the breach
our approach to multiple breaches
our additional CORSIA enforcement positions

You must read this with section A which explains our general civil penalty setting approach for the climate change schemes.

H1: CORSIA civil penalties

Under the Air Navigation (Carbon Offsetting and Reduction Scheme for International Aviation) Order 2021 (the ANO), we may impose civil penalties for certain breaches of CORSIA obligations. The civil penalty that applies to each breach is set out in articles 55 to 63 of the ANO.

The penalty can be:

a non-escalating penalty only – a non-escalating penalty is a fixed sum specified in the ANO for a particular breach
a non-escalating penalty plus a daily penalty (subject to a maximum in some cases)

We can impose a daily penalty for the failure to:

apply for, or submit a revised application for, an emissions monitoring plan
comply with a condition of an emissions monitoring plan
monitor emissions in accordance with an emissions monitoring plan
submit a verified emissions report
comply with an information notice
comply with an enforcement notice

A daily penalty starts to accrue from the day the ‘initial notice’ is given. It stops accruing on the day the person comes back into compliance or, if applicable, the maximum amount payable is reached (see paragraph H2 which explains the procedure for imposing penalties).

We use the daily penalty as an incentive for a person to come back into compliance quickly, but it can only be used where a person is able to take action to bring themselves back into compliance.

H2: Procedure for imposing penalties

Our general procedure for imposing penalties is set out in the ESP.

We follow a different procedure when we impose daily penalties. See paragraph H1 for a list of the breaches where a daily penalty can be imposed and the reason why we use them.

Where we may wish to impose a daily penalty, we will first give an ‘initial notice’. This will state:

the grounds for the liability
the non-escalating amount that may be imposed
that the daily penalty that may be imposed begins to accrue on the day the initial notice is given
the maximum daily rate of the daily penalty and any limit on the amount that can accrue

The purpose of the initial notice is to inform a person that a potential daily penalty is accruing and to encourage them to comply with the outstanding obligation as quickly as possible. It is not a notification of a penalty decision, does not impose a penalty or require any payment and will not be made public.

We do not apply our discretion to decide on the penalty amount at this stage. Once we have calculated the total penalty (non-escalating penalty plus daily penalty) we will serve a notice of intent to impose that penalty. At that point the aeroplane operator can make representations, which we will consider when determining the final penalty amount.

H3: The application of discretion to penalties

We will apply our discretion to the non-escalating penalty and the daily penalty in line with section A and Article 54 of the ANO.

H4: Multiple breaches

An aeroplane operator may be in breach of multiple obligations.

Where multiple breaches have occurred, we may apply our discretion to waive one or more penalties if we consider that the largest penalty or penalties are sufficient to penalise the aeroplane operator and deter it and others from failing to comply in future.

H5: Assessing breaches of the ANO

The breaches in Part 6 of the ANO that attract a civil penalty are considered in paragraphs H5.1 to H5.8 below. In relation to each breach, we explain the maximum civil penalty available, our normal ‘nature of the breach’ assessment and any other enforcement positions that apply.

While each paragraph explains our normal assessment, there may be circumstances in which we would assess the nature of the breach differently.

Our nature of the breach assessment will state the normal initial penalty amount that applies (as explained in section A) or state that we will not normally impose a penalty, in which case the penalty will be waived.

However, before we set the initial penalty amount, we will take account of any representations we receive – see section 6.2 of the ESP.

H5.1: Failure to apply or make a revised application for an emissions monitoring plan

An aeroplane operator must apply for or, if necessary, make a revised application for, an emissions monitoring plan on time. Article 55 of the ANO sets the following civil penalty for failing to do so:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the application (or revised application) is submitted, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Failing to apply for an emissions monitoring plan is a serious breach which affects the ability of an aeroplane operator to comply with its monitoring and reporting obligations, so we will normally impose a penalty for this breach.

We will normally use the statutory maximum as the initial penalty amount.

Our additional enforcement position

However, a person does not become an aeroplane operator with compliance obligations, including the need to apply for an emissions monitoring plan, until it exceeds the relevant thresholds. Therefore, it is possible for a person not to know for some time that it has become an aeroplane operator, and we will not normally impose a penalty for this breach if we consider the person applied promptly once it became aware or should have been aware that it was an aeroplane operator.

H5.2: Failure to comply with a condition of an emissions monitoring plan

Article 56 of the ANO sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the person complies with the condition, beginning with the day the initial notice is given, up to a maximum of £45,000

The same statutory maximum applies to breaches of all emissions monitoring plan conditions, even though some breaches have a more serious impact on the integrity of the scheme than others. Therefore, in this section, we reflect the seriousness of each particular breach in the related nature of the breach assessment.

Emissions monitoring plan: condition 1

The emissions monitoring plan holder must submit to the regulator its verified Emissions Report of annual CO2 emissions and the associated Verification Report in accordance with Article 31 and Schedule 1 of the ANO.

Our nature of the breach assessment

Where an aeroplane operator fails to submit a verified emissions report in accordance with the ANO, this will be assessed under section H5.4 – Failure to submit a verified emissions report, rather than as a breach of a condition of its emissions monitoring plan.

Emissions monitoring plan: condition 2

The emissions monitoring plan holder’s Emissions Report must be verified in accordance with Article 35(2) of the ANO.

Our nature of the breach assessment

Where an aeroplane operator fails to submit a verified emissions report in accordance with the ANO, this will be assessed under section H5.4 – Failure to submit a verified emissions report, rather than as a breach of a condition of its emissions monitoring plan.

Emissions monitoring plan: condition 3

Where the emissions plan holder proposes to make a material or significant change to its emissions monitoring plan under Article 26 or Article 27 of the ANO, the emissions monitoring plan holder must apply to the regulator for approval at least 14 days prior to making the material or significant change, or where this is not practicable, as soon as possible thereafter.

Our nature of the breach assessment

We will not normally impose a penalty for this breach.

However, if an aeroplane operator repeatedly breaches the condition, we will normally impose a penalty. We will normally set the initial penalty amount at £5,000.

Emissions monitoring plan: condition 4

Where the emissions monitoring plan holder makes a change to its emissions monitoring plan referred to in Article 26 or Article 27 of the ANO that is not a material or significant change (other than a change that would affect the regulator’s oversight referred to in Article 26(5) ANO), the emissions monitoring plan holder must notify the regulator by 31 December in the year in which the change occurred.

Our nature of the breach assessment

We will not normally impose a penalty if an aeroplane operator fails to notify us of a modification to its emissions monitoring plan that is not material or significant because the breach does not normally have a serious impact on the integrity of the scheme.

However, if an aeroplane operator repeatedly breaches the condition and this impacts the integrity of the scheme, we will normally impose a penalty and set the initial penalty amount at £2,500.

Emissions monitoring plan: condition 5

Where the emissions plan holder undergoes a change referred to in Article 26(5) that would affect the regulator’s oversight, such as a change in name or address, the emissions monitoring plan holder should notify the regulator either before, or within 14 days of the change.

Our nature of the breach assessment

We will not normally impose a penalty because this breach does not normally have a significant impact on the integrity of the scheme.

However, if an aeroplane operator repeatedly breaches the condition or the breach affects our ability to contact the aeroplane operator, we will normally impose a penalty. We will normally set the initial penalty amount at £2,500.

Emissions monitoring plan: condition 6

Where a verification report submitted in accordance with Article 35(3) of the ANO states outstanding non-conformities or recommends improvements the emissions monitoring plan holder must submit a report on improvements to the regulator in accordance with the requirements of Article 39(2) ANO by 30 June of the year in which the verification report is issued, or by an alternative date set by the regulator.

Our nature of the breach assessment

In its verification report, a verifier can state:

a non-conformity – this must be rectified because it demonstrates that the aeroplane operator has not conformed with its emissions monitoring plan
a recommendation for improvement – the aeroplane operator must consider the improvement but does not have to implement it because this is a suggestion on how to improve methodology rather than a requirement for change

Generally, there is less impact on the integrity of the scheme if an aeroplane operator fails to submit an improvement report relating to a recommendation than if it fails to submit one relating to a non-conformity.

We will not normally impose a penalty for a first breach of this condition, but for subsequent breaches, we will normally impose a penalty.

For a breach relating to a non-conformity, we will normally set the initial penalty amount for the non-escalating penalty at £10,000 and daily penalty at £250. For a breach relating to a recommendation, we will normally set the initial penalty amount for the non-escalating penalty at £7,500 and daily penalty at £250.

When assessing the nature of the breach, we do not seek to take into account the level of the aeroplane operator’s emissions affected by the non-conformity or recommendation because it is difficult to identify the proportion of emissions affected by the relevant improvements.

We will not give an initial notice (to start a daily penalty accruing) until at least 10 working days after the improvement report deadline.

H5.3: Failure to monitor emissions

Article 57 of the ANO sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the person monitors its emissions correctly, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Monitoring obligations are important for the effective operation of the scheme. However, if an aeroplane operator fails to monitor correctly, we are able to estimate its emissions using independent information or tools, such as the CORSIA CO2 Estimation and Reporting Tool (CERT). For this reason, a failure to monitor will not normally have a significant impact on the integrity of the scheme, and we will normally only impose this penalty where there have been repeated breaches.

Where we impose a penalty, we will normally set the initial penalty amount at £5,000.

H5.4: Failure to submit a verified emissions report

Article 58 of the ANO sets the following civil penalty for this breach:

a non-escalating penalty of £20,000
if an initial notice is given, a daily penalty of £500 until the report is submitted, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

Submitting a verified emissions report in accordance with the timeline set out in Schedule 1 of the ANO is important for the effective operation of the scheme.

We will normally impose a non-escalating penalty if the aeroplane operator does not submit a verified emissions report by the deadline in Schedule 1 of the ANO because this affects the reporting of the UK’s emissions to the International Civil Aviation Organization, and therefore has an impact on the integrity of the scheme.

Our objectives when imposing this penalty are to reflect the importance of the reporting obligation and to ensure that no financial gain is made because the aeroplane operator did not have its report verified. We will normally use the statutory maximum as the initial penalty amount.

We will not normally impose a daily penalty in response to this breach. Instead, in line with Article 37 of the ANO, we will engage with the aeroplane operator to try to obtain information about its emissions, and will then estimate its emissions using the best information and tools available, including the CERT.

When deciding whether to impose a penalty for this breach we will not take into account the level of emissions affected by the breach, because this is not material to its seriousness.

H5.5: Failure to keep appropriate records

Article 59 of the ANO sets a non-escalating civil penalty of £50,000 for this breach.

Our nature of the breach assessment

We will normally impose a penalty for this breach because there will be an impact on the integrity of the scheme if an aeroplane operator does not keep records of all relevant data and information in accordance with the ANO.

We will normally set the initial penalty amount at £10,000.

H5.6: Failure to comply with an information notice

Article 50 of the ANO sets the following civil penalty for this breach:

a non-escalating penalty of £5,000
if an initial notice is given, a daily penalty of £500 until the person complies with the requirements of the information notice, beginning with the day on which the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

We will normally impose a penalty for this breach because not complying with a request for information normally impacts the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

H5.7: Providing false or misleading information

Article 62 of the ANO sets a non-escalating civil penalty for this breach of £50,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach, as it may have a significant impact on the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

H5.8: Inspection: refusal to allow access to premises

Article 63 of the ANO sets a non-escalating civil penalty for this breach of £50,000.

Our nature of the breach assessment

We will normally impose a penalty for this breach, as it may have a significant impact on the integrity of the scheme.

We will normally use the statutory maximum as the initial penalty amount.

H6: Enforcement notices

We can give an enforcement notice to a person where we consider that the person has contravened, is contravening or is likely to contravene a condition of its emissions monitoring plan or any provision of the ANO.

We will generally use an enforcement notice:

to restore compliance
where the ANO provides no specific penalty for the breach
to specify actions required to restore compliance
when the maximum daily penalty has been reached and the aeroplane operator still fails to comply

We will not normally use an enforcement notice:

where we can use a daily penalty
to repeat a deadline to submit an application, report or notification

Article 60 of the ANO sets the following civil penalty for failing to comply with an enforcement notice:

a non-escalating penalty of £20,000
if an initial penalty notice is given, a daily penalty of £1,000 until a person fails complies with the requirements of the notice, beginning with the day the initial notice is given, up to a maximum of £45,000

Our nature of the breach assessment

We will normally impose a penalty for this breach as it impacts the integrity of the scheme. We will normally use the statutory maximum as the initial penalty amount.

Cookies on GOV.UK

Applies to England

Section A: Environment Agency’s penalty setting approach for the climate change schemes

How the Environment Agency sets the penalty level

Set the initial penalty amount: steps 1 and 2

Work out the penalty starting point and penalty range: step 3

Culpability

Deliberate

Reckless

Negligent

Low or no culpability

Size of the organisation

Starting point and penalty range

Table 1

Table 2

Set the final penalty amount: step 4

Examples of final penalty amount calculations

UK Emissions Trading Scheme

Step 1 – determine the statutory maximum penalty available for the breach

Step 2 – set the initial penalty amount by assessing the nature of the breach

Step 3 – work out the starting point and range for the penalty using the correct factors in tables 1 and 2

Step 4 – set the final penalty amount by assessing the aggravating and mitigating factors

Energy Savings Opportunity Scheme

Step 1 – determine the statutory maximum penalty available for the breach

Step 2 –set the initial penalty amount by assessing the nature of the breach

Step 3 – work out the starting point and range for the penalty using the correct factors in tables 1 and 2

Step 4 – set the final penalty amount by assessing the aggravating and mitigating factors

Section B: EU Emissions Trading Scheme (EU ETS)

B1: The types of EU ETS civil penalties

B2: When and how the Environment Agency will apply discretion to EU ETS penalties

B3: Civil penalties for installations and aviation

B3.1: Carrying out a regulated activity without a permit

Our penalty setting approach

B3.2: Failure to comply with a condition of an EU ETS permit

GHG permit conditions

GHG permit: condition 1

Our nature of the breach assessment

GHG permit: condition 2

Our nature of the breach assessment

GHG permit: condition 3

Our nature of the breach assessment

GHG permit: condition 4

Our approach to penalty setting

GHG permit: condition 5

Our nature of the breach assessment

Our additional enforcement position

GHG permit: condition 6

Our nature of the breach assessment

GHG permit: condition 7

Our nature of the breach assessment

GHG permit: condition 8

Our nature of the breach assessment

Our additional enforcement position

GHG permit: condition 9

Our nature of the breach assessment

GHG permit: condition 10

Our nature of the breach assessment

GHG permit: condition 11

GHG permit: condition 12

GHG permit: condition 13

Our nature of the breach assessment for conditions 11, 12 and 13

GHG permit: condition 14

Our nature of the breach assessment

GHG permit: condition 15

Our nature of the breach assessment

Excluded installations emissions (EIE) permit conditions

EIE permit: condition 2

Our nature of the breach assessment

EIE permit: condition 8

EIE permit: condition 9

Our nature of the breach assessment for conditions 8 and 9

EIE permit: condition 10

Our nature of the breach assessment

EIE permit: condition 11

Our nature of the breach assessment

B3.3: Failure to surrender allowance

Our nature of the breach assessment

Our additional enforcement position

B3.4: Exceeding an emissions target for an excluded installation

Our penalty setting approach