The UK ETS was established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (S.I. 2020/1265). The UK ETS runs for 10 “scheme years”, which is split into two “allocation periods” (the 2021-2025 allocation period and 2027-2030 allocation period) and one standalone scheme year (the 2026 scheme year). Operators of certain industrial installations are required to monitor, submit verified reports on, and surrender “allowances” equivalent to, their greenhouse gas emissions each scheme year. Allowances (which are tradable) are held in accounts in the UK ETS registry, and there is a cap on the number of allowances that may be created. Allowances are sold at auction, but some operators of installations receive an allocation of allowances free of charge (“free allocation”) for each scheme year.
This Order amends Commission Delegated Regulation (EU) 2019/331 (the “Free Allocation Regulation”) to make three main changes to the calculation of free allocation for the 2027-2030 allocation period. To implement these main changes across the UK ETS, amendments to the Greenhouse Gas Emissions Trading Scheme Order 2020 and Commission Implementing Regulation (EU) 2019/1842 (the “Activity Level Changes Regulation”) are also made.
Source: HMSO.