The Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021

[F1 Cost containment mechanism U.K.

12.— (1) Where paragraph (3) applies, the Treasury may authorise one or more of the following measures—

(a) changing the distribution of allowances to be auctioned at auctions within a calendar year;

(b) increasing the volume of allowances to be auctioned in a calendar year—

(i) by bringing forward part of the volume of allowances to be auctioned in a subsequent calendar year;

(ii) by the release for auction of up to 25% of the allowances held in the new entrants’ reserve provided for in article 34G of the Trading Scheme Order;

(iii) by the release for auction of allowances from the market stability mechanism account held by the UK ETS authority.

[F2 (iv) [F3 if, for a scheme year referred to in column 1 of the table in regulation 9(10), the number of allowances set out in the corresponding entry in column 3] exceeds the actual allocation for the scheme year (determined in accordance with paragraph (1A)), by the release for auction of allowances not exceeding the difference;

(v) by the release for auction of up to [F4 28,081,237 allowances].]

[F5 (1A) The actual allocation for a scheme year is A–B, where—

(a) A is the final annual number of allowances to be allocated for the scheme year in respect of all installations approved under Article 16b of the Free Allocation Regulation (final allocation at installation level for incumbent installations);

(b) B is the total of any of that number that, although approved as mentioned in sub-paragraph (a), were not in fact so allocated (or, if allocated, were subsequently returned) by reason of a reduction in the allocation for the scheme year in consequence of any approval of the UK ETS authority under a provision referred to in article 34C(1)(b), (c), (e) [F6 and (f)] [F6 , (f) and (j)] of the Trading Scheme Order (activity level changes, renunciation, cessation [F7 and errors] [F7 , errors and electricity generators that state they will not produce electricity for sale for consumption outside the installation but subsequently do so]).

(1B) In paragraph (1A), a reference to the final annual number of allowances approved under Article 16b of the Free Allocation Regulation to be allocated in respect of all installations includes the number that would have been so approved but for any error in an application for free allocation made under that Regulation or of the regulator or the UK ETS authority in the exercise of functions under that Regulation in consequence of which the UK ETS authority approves, under article 34H(6) of the Trading Scheme Order, an increase to the final annual number of allowances originally approved under Article 16b.

(1C) In paragraphs (1A) and (1B), “installation” does not include an installation referred to—

(a) if the scheme year is in the 2021-2025 allocation period, in article 34A(4)(b) and (c) of the Trading Scheme Order (installations that ceased operation, or whose permit was revoked, on or before 31st December 2020);

(b) if the scheme year is in the 2026-2030 allocation period, in article 34A(7)(b) and (c) of the Trading Scheme Order (installations that ceased operation, or whose permit was revoked, on or before 31st December 2025).]

[F8 (1D) For the purposes of paragraph (1)(b)(iv)—

(a) the references in paragraphs (1A) and (1B) to the final annual number of allowances approved under Article 16b of the Free Allocation Regulation must be read as including, in relation to allowances to be allocated for the 2024 and 2025 scheme years, a reference to any increase added to the amount included in column A of the allocation table under article 34B(3A) of the Trading Scheme Order (free allocation for 2024 and 2025 scheme years: lime and malt extract);

(b) the reference in paragraph (1B) to an error in an application for free allocation under the Free Allocation Regulation must be read as including a reference to an error in any information provided under article 20(4) of the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023;

(c) the reference in paragraph (1B) to the exercise of functions under the Free Allocation Regulation must be read as including a reference to the exercise of functions under article 20 of the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023.]

(2) Where the Treasury authorises increasing the volume of allowances to be auctioned in a calendar year under paragraph (1)(b), the UK ETS authority may create additional allowances for auction in that year.

(3) This paragraph applies where the monthly average carbon price is more than—

(a) 2 x the 2-year average carbon price for 3 consecutive months, if the last consecutive month is in 2021;

(b) 2.5 x the 2-year average carbon price for 3 consecutive months, if the last consecutive month is in 2022; or

(c) 3 x the 2-year average carbon price for 6 consecutive months, if the last consecutive month is in 2023 or any subsequent year.

(4) For the purposes of paragraph (3)—

(a) the “monthly average carbon price” for any month must be calculated—

(i) by dividing the sum of the end of day settlement prices of the relevant December futures contract as traded on the relevant carbon market exchange for each relevant day in the month by the number of relevant days in the month, or

(ii) if the relevant December futures contract was not traded on the relevant carbon market exchange in the month, by dividing the sum of the end of day settlement prices of the relevant December futures contract as traded on the largest carbon market exchange (as determined by volume of sales of relevant December futures contracts during the month) for each relevant day in the month by the number of relevant days in the month;

(b) the “2-year average carbon price” must be calculated by dividing the sum of the end of day settlement prices of the relevant December futures contract as traded on the relevant carbon market exchange for each relevant day in the 24 months ending with the last month before the first month of the period of 3 or, as the case may be, 6 months referred to in paragraph (3) by the number of relevant days in the 24-month period.

(5) In this regulation—

“end of day settlement price”, in relation to the relevant December futures contract, means the end of day settlement price per tonne of carbon dioxide equivalent published by the carbon market exchange on which the relevant December futures contract is traded expressed in pounds sterling or, where expressed in Euros, converted to pounds sterling by reference to the Bank of England daily spot exchange rate for that day;

“[F9 EU allowance]” means an allowance to emit 1 tonne of carbon dioxide equivalent during a specified period that is valid for the purposes of meeting the requirements of Directive 2003/87/EC of the European Parliament and of the Council of 13th October 2003 establishing a system for greenhouse gas emission allowance trading within the Union and is transferable in accordance with the provisions of that directive;

“relevant carbon market exchange”—

(a)

in relation to the trading of the relevant December futures contract on a day in 2019, 2020 or 2021 means the carbon market exchange operated by ICE Futures Europe (company no. 01528617);

(b)

in relation to the trading of the relevant December futures contract on a day in any subsequent year (the “relevant year”), the largest carbon market exchange as determined by volume of sales of relevant December futures contract during the calendar year preceding the relevant year;

“relevant day” means a day for which an end of day settlement price is published;

“relevant December futures contract”, in relation to a day in the month referred to in paragraph (4)(a) or the 24-month period referred to in paragraph (4)(b), means—

(a)

if the day falls in January to November of 2019 or 2020, a futures contract for EU allowances deliverable in December of the year in which the day falls;

(b)

if the day falls in December of 2019 or 2020, a futures contract for EU allowances deliverable in December of the year after the year in which the day falls;

(c)

if the day falls in January to November of 2021 or a subsequent year, a futures contract for allowances deliverable in December of the year in which the day falls;

(d)

if the day falls in December of 2021 or a subsequent year, a futures contract for allowances deliverable in December of the year after the year in which the day falls.]

Textual Amendments

F1 Reg. 12 substituted (19.5.2021) by The Recognised Auction Platforms and Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2021 (S.I. 2021/513), regs. 1(2), 9

F2 Reg. 12(1)(b)(iv)(v) inserted (25.8.2021) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) (No. 2) Regulations 2021 (S.I. 2021/917), regs. 1(2), 7(2)

F3 Words in reg. 12(1)(b)(iv) substituted (4.10.2023) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2023 (S.I. 2023/994), regs. 1(2), 4(2)(a)

F4 Words in reg. 12(1)(b)(v) substituted (4.10.2023) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2023 (S.I. 2023/994), regs. 1(2), 4(2)(b)

F5 Reg. 12(1A)-(1C) inserted (25.8.2021) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) (No. 2) Regulations 2021 (S.I. 2021/917), regs. 1(2), 7(3)

F6 Words in reg. 12(1A)(b) substituted (E.W.S.) (1.1.2024 immediately after S.I. 2023/850 comes into force) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 (S.I. 2023/1387), arts. 2(1), 23(2)(a)

F7 Words in reg. 12(1A)(b) substituted (E.W.S.) (1.1.2024 immediately after S.I. 2023/850 comes into force) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 (S.I. 2023/1387), arts. 2(1), 23(2)(b)

F8 Reg. 12(1D) inserted (1.1.2024) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) Regulations 2023 (S.I. 2023/994), regs. 1(3), 4(3)

F9 Words in reg. 12(5) substituted (25.8.2021) by The Greenhouse Gas Emissions Trading Scheme Auctioning (Amendment) (No. 2) Regulations 2021 (S.I. 2021/917), regs. 1(2), 7(4)

Commencement Information

I1 Reg. 12 in force at 22.4.2021, see reg. 1(2)