In December 2019, the “Law on Protection from the Negative Impacts of Climate Change” (Climate Law) entered into force in Montenegro. The law mandates the development of a comprehensive set of climate policies including a GHG inventory, a low-carbon development strategy, and a national MRV system. It further provides the legal basis for a national ETS covering emissions from the industry and power sectors.
A bylaw specific to the ETS, the “Decree on Activities for which a GHG Permit is Issued” (ETS Decree), was adopted in February 2020. This regulation determines sectoral coverage and inclusion thresholds, rules governing trading of permits, allocation rules for auctions, benchmarking and grandparenting, and a market stabilization reserve. It further includes provisions for banking allowances, a minimum reserve price of EUR 24 (USD 25.26), and a linear reduction factor for the emissions cap of 1.5% annually in the period 2020-2030. Auction revenues go to the country’s Environmental Protection Fund to finance climate innovation, renewable energy, and environmental protection.
Montenegro has been an EU candidate country since 2010 and is required to bring its environmental and climate change policy in line with the EU as part of accession talks that began in late 2018. The establishment of a national ETS is a requirement to ensure that Montenegro has the climate policy framework in place to take part in the EU ETS should it become an EU member state.
The ETS formally began operations in February 2020 and applies in practice to three installations: the Pljevlja coal plant, the KAP aluminium plant and the Tosčelik steel mill. They received 100% of their allowances for free in 2020 and 2021, which represents 60% of total available allowances.
The scheme covers the following sectors: Industry and Power.
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