Data centre development: Greenhouse gas permits explained

The EU/UK Emissions Trading Schemes explained

The EU ETS is a cornerstone of the EU's policy to combat climate change and is a key tool for reducing greenhouse gas emissions cost-effectively. It remains the world’s first and biggest major carbon market. 

To carry out an activity covered by the EU ETS, the regulation requires all operators to hold a greenhouse gas emissions permit – in effect, a licence to operate and emit greenhouse gases.

After the UK left the EU, UK operators were required to comply with the EU ETS until the end of the scheme year in April 2021. A new UK Emissions Trading Scheme (UK ETS) launched on 19 May 2021.

The UK ETS scheme works on the ‘cap and trade’ principle:

• A cap is placed on the total amount of certain greenhouse gases that can be emitted
• Contributors receive free allowances within the cap. They can also buy and sell emission allowances at auction, or on the secondary market, which they can trade with other participants as needed.
• This cap decreases over time, with the aim of helping to meet the UK’s commitments in reducing GHG emissions.

As part of the Brexit deal, all GHG permits that were regulated under the European ETS have now been transferred to a UK permit. Any new GHG permits in the UK now fall under the regulated UK structure.

Who does it apply to?

If your data centre’s combustion units have a total net thermal input capacity equal or exceeding 20 MW_th, then the GHG permit will apply to you.

In addition to back up emergency supplies, data centres may also have combustion engines to power pumps that form part of the fire suppression systems on site. These wouldn’t usually be large enough to include in the total when determining if the threshold is exceeded, but where a permit is needed these smaller units would be covered under a GHG permit.

What is the process of the GHG application?

Applying for a GHG permit is done online via the Emissions Trading Scheme Workflow Automation Project (ETSWAP), which is UK-wide. The Government is currently working to develop a new system to replace ETSWAP. But until then, the existing system will continue.

Once the payment has been made, the EA typically has two months to determine the permit application. However, if a number of changes are required, or further delays are involved, the EA can extend this time period. Current timescales on average are up to four months.

Permit compliance and next steps

Once issued, operators should read and understand their permit to make sure they comply with the monitoring and reporting requirements. The equipment and systems in place at the permitted installation need to match the information that was submitted to the regulator.

Verification is undertaken by accredited third-party verifiers, which must be booked well in advance of the reporting deadline (typically six to nine months). And an operator holding account must also be opened in the UK Registry within 20 days of the permit issue, in order to trade allowances.

The option to opt out for small emitters

In the UK ETS, there are simplified requirements for installations, which refer to the activities covered by the GHG permit. These primarily provide services to a hospital, or those with emissions lower than 25,000 tCO₂e per annum (and a net-rated thermal capacity below 35 MW_th). This may apply to some data centres.

These installations can opt out of the UK ETS, and will be subject to emissions targets instead of trading allowances. Separate simplified conditions are available to installations with emissions lower than 2,500 tCO₂e per annum (ultra-small emitters). But even if this is the case, small emitters still have to comply with annual monitoring and reporting requirements in line with the UK GHG ETS Order 2020.

Ultra-small emitters do not need any type of UK ETS permit during the period in which the installation is an ultra-small emitter, and therefore the same monitoring and reporting requirements do not apply. However, as with other installations within the UK ETS, emissions must still be monitored in line with the approved monitoring plan to ensure they are below the ultra-small emitter threshold.

Prioritising your permit

Securing a GHG permit may seem only a small part of the overall process. But by being prepared and acting early you can streamline the application process, allowing you to focus on speed to market.

As trusted data centre advisors with years of experience helping clients to comply with GHG permitting regulations, we can advise on the most cost and time effective route for your development.

To discuss the GHG permitting requirements for your data centre, get in touch using the form below.