The Decree-Law No. 101/2024, publish on December 4th, brings important updates as it partially transposes Directive (EU) 2023/959 of May 10, 2023, into Portuguese law. This legislative amendment revises Decree-Law No. 12/2020 of April 6 (“DL12/2020”), which regulates the EU Emissions Trading System (ETS).
The EU Emissions Trading System (ETS) remains one of the European Union’s cornerstone mechanisms for mitigating greenhouse gas (GHG) emissions. It operates under the Cap and Trade principle, which imposes an EU-wide cap on the total number of emission allowances, requiring GHG-emitting entities to acquire the necessary allowances.
Directive (EU) 2023/959 reflects the commitments reached under the Fit for 55 Package, establishing a new 2030 emissions reduction target of -62% compared to 2005 levels for sectors covered by the ETS. This represents a 19% increase from the previously established 43% reduction target. To accommodate the new emissions reduction trajectory, the EU-wide cap on allowances will be reduced more sharply through two absolute reductions in 2024 and 2026, alongside an increase in the linear reduction factor, which will be set at 4.3% from 2024 to 2027 and at 4.4% from 2028 onwards.
Among the most significant amendments to DL 12/2020 is the revision of the scope of application of the ETS, which now applies directly to the activities themselves, rather than being limited to the emissions generated by those activities.
More specifically, the following changes are also noteworthy:
(i) The definition of "emissions" has been revised to include not only the release of GHGs directly "into the atmosphere" but also emissions that do not involve direct atmospheric release (Article 3).
(ii) The scope of eight activities conducted by stationary installations has been revised. Notably, hydrogen and synthesis gas production will no longer be restricted to processes of reforming or partial oxidation, now encompassing all manufacturing methods, including the production of "green hydrogen" (Annex II).
(iii) The allocation of free emission allowances is now contingent on the preparation of a climate neutrality plan for the installation (Articles 12-B and 12-C). Non-compliance with this requirement may result in a 20% reduction in the free allocation of emission allowances in specific cases
(iv) Lastly, also noteworthy is the alignment of the free allocation of emission allowances with the Carbon Border Adjustment Mechanism (CBAM). Under this mechanism, the production of goods in sectors covered by the CBAM will no longer qualify for free allocation of allowances. This measure will be implemented gradually through the application of the so-called "CBAM factor" (For more information about this mechanism, you can consult our CMS Insight "Carbon Border Adjustment Mechanism (CBAM)".
Operators of installations engaging in any of the newly introduced activities must submit an application for a greenhouse gas emissions permit within 30 days of the publication of the Decree-Law. The Decree-Law also includes specific provisions regarding its entry into effect, as outlined in Article 9.
For further information, please consult the full text of Decree-Law No. 101/2024 (only available in Portuguese).
