The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2021

Schedule 7 amended (hospitals and small emitters)

25.—(1) Schedule 7 is amended as follows.

Paragraph 9 substituted

(2) For paragraph 9 substitute—

“Hospital or small emitter permits: issue of permit

9.   A hospital or small emitter permit for an installation may be issued only if—

(a) the application is made for a permit to come into force in a scheme year for which the installation is a hospital or small emitter;

(b) a monitoring plan has been approved in relation to the installation under the Monitoring and Reporting Regulation 2018; and

(c) the regulator considers that from the date on which the permit comes into force the operator of the installation will be capable of monitoring and reporting the installation’s reportable emissions in accordance with the monitoring and reporting conditions of the permit.”.

Paragraph 11 amended (hospital or small emitter permits: content of permit)

(3) In paragraph 11(1)(g) omit “Articles 11 to 13 of” in each place.

Paragraph 13 amended (hospital and small emitters: modifications to Monitoring and Reporting Regulation 2018)

(4) After paragraph 13(5)(a) insert—

“(aa) in paragraph 3—

(i) for “an improvement report” there were substituted “a report”;

(ii) after “in response to” there were inserted “outstanding non-conformities or”;”.

Paragraphs 19A to 19G inserted

(5) After paragraph 19 insert—

“Capacity increases: application to increase emissions targets

19A.— (1) Where a capacity increase is put into operation at an installation after the reference date, the operator of the installation may apply to the regulator to increase the installation’s emissions targets for scheme years after the capacity increase is put into operation (including, if the capacity increase is put into operation on or after 1st January 2021, for the scheme year in which the capacity increase is put into operation).

(2) An application may be made to increase emissions targets for scheme years in the 2021-2025 allocation period or the 2026-2030 allocation period (or both).

(3) But an application may not be made to increase an emissions target—

(a) for the 2021 or 2022 scheme year if the emissions target for that year was calculated under paragraph 16(4)(a) or (5)(a) or (b);

(b) for the 2026 or 2027 scheme year if the emissions target for that year was calculated under paragraph 17(4)(a) or (5)(a) or (b).

(4) Nor may an application be made to increase an emissions target—

(a) for the 2021 scheme year unless the application is made on or before 31st March 2022;

(b) for any other scheme year unless the application is made on or before the later of—

(i) the end of the scheme year; and

(ii) where the capacity increase is put into operation in the scheme year, 3 months after the date on which the capacity increase is put into operation.

(5) Subject to sub-paragraph (4), an application to increase emissions targets may be made at any time.

Capacity increases: content of application

19B.— (1) For the purpose of an application to increase an installation’s emissions targets, the operator must divide the installation into sub-installations in accordance with Article 10 of the Free Allocation Regulation.

(2) The application must contain the following—

(a) evidence of the capacity increase and the sub-installation to which it relates, including evidence that it has been put into operation and is not temporary;

(b) evidence of any capacity decrease at the installation since the reference date and the sub-installation to which it relates, including, where relevant, evidence that it is temporary;

(c) evidence to enable the combined capacity utilisation factor to be calculated (see paragraph 19F);

(d) where the capacity increase or any capacity decrease relates to a district heating sub-installation or a heat benchmark sub-installation of an installation that consumes or exports measurable heat produced outside the installation, evidence of whether or not the capacity increase or capacity decrease is solely associated with measurable heat produced at the installation.

Capacity increases: grant of application

19C.— (1) An application to increase an installation’s emissions targets may be granted only if the regulator considers that—

(a) a capacity increase has been put into operation at the installation;

(b) the capacity increase is not temporary; and

(c) the net change in installed capacity at the installation since the reference date (see paragraph 19D) is greater than zero.

(2) Where the application is granted, the regulator must—

(a) calculate new emissions targets for each scheme year for which the application is made by increasing the existing emissions target for the scheme year by the increase in the emissions target for the scheme year (see paragraph 19E); and

(b) vary the installation’s hospital or small emitter permit under paragraph 6 of Schedule 6 by substituting the new emissions targets for the existing targets.

(3) Except where the installation is a hospital-qualifying installation, if increasing the emissions target for a scheme year would result in an emissions target that exceeds the maximum amount, the emissions target must be increased by such amount as results in an emissions target of the maximum amount.

(4) Where, after calculating new emissions targets and varying the permit under sub-paragraph (2), the regulator considers that, as a result of incorrect or incomplete evidence in the application, either the application would not have been granted or the installation’s emissions targets would not have been increased to the same extent—

(a) the regulator may, for the current and future scheme years, determine that the emissions targets should not have been increased or, as the case may be, recalculate the new emissions targets under sub-paragraph (2)(a); and

(b) if the regulator does either of the things referred to in paragraph (a), the regulator must vary the permit under paragraph 6 of Schedule 6 accordingly.

Capacity increases: net change in installed capacity at installation since reference date

19D.— (1) The net change in installed capacity at the installation since the reference date must be calculated as follows.

Step 1

Calculate the following for each relevant sub-installation—

the net change in installed capacity at the relevant sub-installation since the reference date x the benchmark for the sub-installation.

Step 2

Add up all calculations done under Step 1.

The net change in installed capacity at the installation since the reference date is the result of Step 2.

(2) For the purposes of sub-paragraph (1)—

(a) the net change in installed capacity at a relevant sub-installation must be determined by taking into account only capacity increases and capacity decreases (other than capacity decreases that are temporary) that relate to the sub-installation since the reference date;

(b) where capacity decreases exceed capacity increases at a sub-installation, the net change in installed capacity must be a negative value;

(c) in calculating the net change in installed capacity at a district heating sub-installation or a heat benchmark sub-installation of an installation that consumes or exports measurable heat produced outside the installation, any capacity increase or capacity decrease that relates to the sub-installation must not be taken into account unless it is solely associated with measurable heat produced at the installation.

(3) In this paragraph, “relevant sub-installation” means—

(a) the sub-installation to which the capacity increase relates;

(b) any other sub-installation to which a capacity decrease at the installation since the reference date relates.

Capacity increases: increase in emissions targets for scheme years

19E.— (1) The increase in an installation’s emissions target for each scheme year for which the application is made is NC x CCUF x RF x FYF, where—

NC is the net change in installed capacity at the installation since the reference date (see paragraph 19D);

CCUF is the combined capacity utilisation factor (see paragraph 19F);

RF is the reduction factor for the scheme year;

FYF is the first year factor.

(2) The reduction factor—

(a) for a scheme year set out in column 1 of table D in paragraph 16 is the value set out in the corresponding entry in column 2;

(b) for a scheme year set out in column 1 of table E in paragraph 17 is the value set out in the corresponding entry in column 2.

(3) The first year factor is—

(a) for the scheme year in which the capacity increase is put into operation, (Y-D)/Y;

(b) for any other scheme year, 1.

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

(a) Y is the number of days in the scheme year;

(b) D is the number of days in the scheme year before the date on which the capacity increase is put into operation.

(5) Where an application is made in respect of two or more capacity increases, for the purpose of calculating the first year factor, the capacity increases must be treated as being put into operation on the date on which the last capacity increase is put into operation.

Capacity increases: combined capacity utilisation factor

19F.— (1) The combined capacity utilisation factor must be calculated as follows.

Step 1

Calculate the following for each sub-installation to which the capacity increase relates—

the capacity increase x the benchmark for the sub-installation x the capacity utilisation factor.

Step 2

Add up all calculations done under Step 1.

Step 3

Calculate the following for each sub-installation to which the capacity increase relates—

the capacity increase x the benchmark for the sub-installation.

Step 4

Add up all calculations done under Step 3.

Step 5

Divide the result of Step 2 by the result of Step 4.

The combined capacity utilisation factor is the result of Step 5.

(2) In calculating the combined capacity utilisation factor, a capacity increase that relates to a district heating sub-installation or a heat benchmark sub-installation of an installation that consumes or exports measurable heat produced outside the installation must not be taken into account unless it is solely associated with measurable heat produced at the installation.

(3) Where an application is made in respect of two or more capacity increases that relate to the same sub-installation, for the purpose of calculating the combined capacity utilisation factor, the calculations under Steps 1 and 3 must be done separately for each such capacity increase as if the capacity increases related to separate sub-installations.

(4) In this paragraph, “capacity utilisation factor”, in relation to a capacity increase, means the expected level of production or consumption, expressed as a proportion of the increase in installed capacity.

Capacity increases: interpretation

19G.— (1) In this paragraph and paragraphs 19A to 19F—

“benchmark” means—

(a)

in relation to a sub-installation other than a process emissions sub-installation, the benchmark referred to in Article 16(2) of the Free Allocation Regulation used to determine the preliminary annual number of allowances allocated free of charge in respect of the sub-installation—

(i)

where an application is made to increase an installation’s emissions targets for scheme years in the 2021-2025 allocation period, for scheme years in that allocation period;

(ii)

where an application is made to increase an installation’s emissions targets for scheme years in the 2026-2030 allocation period, for scheme years in that allocation period;

(b)

in relation to a process emissions sub-installation, 0.97;

“capacity decrease”, in relation to an installation or a sub-installation, means a decrease in installed capacity as a result of one or more physical changes relating to its technical configuration and functioning;

“capacity increase”, in relation to an installation or a sub-installation, means an increase in installed capacity as a result of one or more physical changes relating to its technical configuration and functioning;

“district heating sub-installation” has the meaning given in point (5) of Article 2(1) of the Free Allocation Regulation;

“fuel benchmark sub-installation” has the meaning given in point (6) of Article 2(1) of the Free Allocation Regulation;

“heat benchmark sub-installation” has the meaning given in point (3) of Article 2(1) of the Free Allocation Regulation;

“installed capacity” means the maximum capacity—

(a)

in the case of a product benchmark sub-installation, for producing a product;

(b)

in the case of a district heating sub-installation or a heat benchmark sub-installation, for producing measurable heat;

(c)

in the case of a fuel benchmark sub-installation, for consuming fuel;

(d)

in the case of a process emissions sub-installation, for producing the emissions referred to in point (10) of Article 2(1) of the Free Allocation Regulation;

“measurable heat” has the meaning given in point (7) of Article 2(1) of the Free Allocation Regulation;

“process emissions sub-installation” has the meaning given in point (10) of Article 2(1) of the Free Allocation Regulation;

“product benchmark sub-installation” has the meaning given in point (2) of Article 2(1) of the Free Allocation Regulation;

“reference date” must be determined in accordance with sub-paragraphs (2) to (5);

“sub-installation” means a district heating sub-installation, a fuel benchmark sub-installation, a heat benchmark sub-installation, a process emissions sub-installation or a product benchmark sub-installation.

(2) Where an application is to increase an installation’s emissions targets for scheme years in the 2021-2025 allocation period, the reference date is—

(a) where a regulated activity began to be carried out at the installation before 2018, 31st December 2018;

(b) where a regulated activity began to be carried out at the installation in 2018, 31st December 2019;

(c) where a regulated activity began to be carried out at the installation in 2019 or 2020, 31st December 2020.

(3) But if the installation’s emissions targets for scheme years in the 2021-2025 allocation period were increased following an application in respect of a previous capacity increase, the reference date is the date on which the last such capacity increase was put into operation.

(4) Where an application is to increase an installation’s emissions targets for scheme years in the 2026-2030 allocation period, the reference date is—

(a) where a regulated activity begins to be carried out at the installation before 2023, 31st December 2023;

(b) where a regulated activity begins to be carried out at the installation in 2023, 31st December 2024;

(c) where a regulated activity begins to be carried out at the installation in 2024 or 2025, 31st December 2025.

(5) But if the installation’s emissions targets for scheme years in the 2026-2030 allocation period were increased following an application in respect of a previous capacity increase, the reference date is the date on which the last such capacity increase was put into operation.

(6) For the purpose of calculating the net change in installed capacity at an installation since the reference date under paragraph 19D or the combined capacity utilisation factor under paragraph 19F, a capacity increase or a capacity decrease at a sub-installation must be expressed in the following units—

(a) if the capacity increase or capacity decrease relates to a product benchmark sub-installation, tonnes of product produced per year;

(b) if the capacity increase or capacity decrease relates to a district heating sub-installation or a heat benchmark sub-installation, terajoules of measurable heat produced per year;

(c) if the capacity increase or capacity decrease relates to a fuel benchmark sub-installation, terajoules of fuel consumed per year;

(d) if the capacity increase or capacity decrease relates to a process emissions sub-installation, tonnes of carbon dioxide equivalent emitted per year.”.

Paragraph 22 amended (emissions targets: errors)

(6) In paragraph 22(1) for “paragraph 20” substitute “paragraph 19C or 20”,

Paragraph 24 amended (conversion notices)

(7) In paragraph 24—

(a) for sub-paragraph (1)(d) substitute—

“(d) state that, unless the monitoring plan already complies with the Monitoring and Reporting Regulation 2018, the operator must apply to the regulator to vary the monitoring plan so that it does comply with that Regulation.”.

(b) for sub-paragraph (3) substitute—

“(3) Despite sub-paragraph (2)—

(a) where the monitoring plan does not already comply with the Monitoring and Reporting Regulation 2018, the regulator may revoke the permit under paragraph 12 of Schedule 6 instead of converting it if—

(i) the operator fails to apply to the regulator to vary the monitoring plan; or

(ii) the variations applied for are not such that the plan would comply with that Regulation;

(b) the regulator must revoke the permit instead of converting it if the regulator considers that the operator will not be capable of monitoring and reporting the installation’s reportable emissions in accordance with the monitoring and reporting conditions of a greenhouse gas emissions permit.”.

Paragraph 26 amended (end of hospital or small emitter status: end of allocation period)

(8) In paragraph 26—

(a) for sub-paragraph (1)(b) substitute—

“(b) stating that, unless the monitoring plan already complies with the Monitoring and Reporting Regulation 2018, the operator must apply to the regulator on or before 30th September 2025 to vary the monitoring plan so that it does comply with that Regulation.”;

(b) for sub-paragraph (4) substitute—

“(4) Despite sub-paragraph (3)—

(a) where the monitoring plan does not already comply with the Monitoring and Reporting Regulation 2018, the regulator may revoke the permit under paragraph 12 of Schedule 6 instead of converting it if—

(i) the operator fails to apply to the regulator on or before 30th September 2025 to vary the monitoring plan; or

(ii) the variations applied for are not such that the plan would comply with that Regulation;

(b) the regulator must revoke the permit instead of converting it if the regulator considers that the operator will not be capable of monitoring and reporting the installation’s reportable emissions in accordance with the monitoring and reporting conditions of a greenhouse gas emissions permit.”.