EU confirms Brexit-adjusted carbon market permit removals for 2021

The European Commission confirmed late on Friday how many pollution permits will be removed from the European Union carbon market in 2021 due to Britain's departure from the scheme at the end of this year.

The carbon market is the EU's flagship climate policy, forcing power plants, industry and airlines running intra-EU flights to buy permits when they emit planet-warming greenhouse gases.

Britain is set to exit the scheme at the end of 2020, when an 11-month Brexit transition period expires.

The Commission said in a statement that the carbon market's Market Stability Reserve (MSR), which removes excess permits from the system, would withdraw fewer permits in 2021 to reflect Britain's departure.

The MSR will remove 307,663,518 permits from carbon market auction volumes from Sep. 1 2020 to Aug. 31 2021, and hold them in a reserve. The MSR had previously been scheduled to remove 332,519,080 permits in the period.

The amount of permits in the carbon market is based on the emissions of installations covered by the scheme. The EU has said it will adjust the supply of permits in 2021, to reflect the exit of British installations. The MSR reduction is based on this adjusted supply.

The Commission confirmed on Friday that the number of permits issued to the aviation sector will be roughly 24.5 million in 2021. The majority of those permits, roughly 20.7 million, will be handed to airlines for free.

Power plants in Northern Ireland will continue to be covered by the carbon market from 2021, under electricity market rules agreed in the EU-UK Withdrawal Agreement.

EU carbon market auctions in 2021 will start in late January or early February, the Commission said.