By Nina Chestney and Susanna Twidale
LONDON (Reuters) - Taxpayers will lend British Steel around 120 million pounds to enable Britain's second largest steelmaker to comply with the European Union's Emissions Trading System (ETS) and avert a fine.
British Steel told the government earlier this year it would not be able to meet an April 30 deadline due to the absence of 2019 free permits, which have not been issued yet due to Brexit negotiations.
"If it had failed to do so by last night's deadline, it would have attracted an immediate and unremovable fine of half a billion pounds, on top of the continuing liability of around 120 million pounds, putting the company under significant financial strain," British energy secretary Greg Clark said on Wednesday.
The ETS requires power plants and heavy industry to obtain and surrender allowances equal to their level of carbon emissions on an annual basis, although some industrial companies are allocated a proportion of free carbon permits every year.
They can bank these to use at a later date to comply with their obligations for the previous year under the ETS, which Britain will have to leave after Brexit.
Clark said the government had provided a short-term bridging loan of around 120 million pounds to British Steel, which in return will give the state its 2019 permits when they are released and these will be sold to return money to the taxpayer.
The British government said it has been advised that the loan is compliant with EU state aid rules.
A spokesman for Tata Steel, Britain's largest steelmaker, said it had fulfilled its compliance obligations for 2018.
