Commission Implementing Regulation (EU) 2019/1842Show full title

Commission Implementing Regulation (EU) 2019/1842

of 31 October 2019

laying down rules for the application of Directive 2003/87/EC of the European Parliament and of the Council as regards further arrangements for the adjustments to free allocation of emission allowances due to activity level changes

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas emission allowance trading within the Union and amending Council Directive 96/61/EC(1), and in particular Article 10a(21) thereof,

Whereas:

(1) Directive 2003/87/EC establishes a system for greenhouse gas emission allowance trading within the Union in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner. In its Article 10a, it provides for the transitional free allocation of allowances.

(2) Commission Delegated Regulation (EU) 2019/331(2) lays down the transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC for the fourth trading period from 2021 until 2030.

(3) In accordance with Article 10a(20) of Directive 2003/87/EC, the allocation of emission allowances free of charge to installations whose operations have increased or decreased, as assessed on the basis of a rolling average of two years, by more than 15 % compared to the historical activity levels is to be adjusted in a symmetrical manner. To implement the adjustments of allocation of emission allowances due to changes in activity, since the installations are divided in sub-installations in accordance with Article 10 of Delegated Regulation (EU) 2019/331, it is appropriate to compare these changes against the historical activity levels at sub-installation level.

(4) The collection of high quality and independently verified data is necessary for adjustments to free allocation. Consistency in the accuracy and quality of the data monitored and reported to determine free allocation should be ensured. For that purpose, specific rules for reporting of activity levels at sub-installation level should be provided, taking into account the relevant provisions of Delegated Regulation (EU) 2019/331. Data collected from operators in accordance with these rules should reflect the actual operations of sub-installations.

(5) Operators should report the requested data annually. Data should be monitored in accordance with the requirements on monitoring pursuant to Article 8 of Delegated Regulation (EU) 2019/331.

(6) To ensure consistency between verification of annual emissions reports pursuant to Article 15 of Directive 2003/87/EC and activity level data, as well as to make use of synergies, it is appropriate to use the legal framework set by measures in accordance with Commission Implementing Regulation (EU) 2018/2067(3).

(7) In order to prevent manipulation or abuse of the system for adjustments of allocations, avoid undue administrative burden and ensure that changes to the allocations are carried out in an effective, non-discriminatory and uniform manner, further arrangements for the adjustments of free allocation of sub-installations should apply when activity level have increased or decreased by more than 15 % compared to the historical activity level. The average activity level should be defined as the arithmetic mean of the two annual activity levels of two full calendar years of operation. The first year of calculation of the average activity level should be the first year of each allocation period. If the comparison of the historical activity level and the average activity level presents a difference of more than 15 %, then the free allocation should be adjusted by the exact percentage of the activity level change. If a subsequent change of activity level occurs within the same 5 % interval, beyond 15 %, then the allocation should remain the same. If a subsequent change exceeds the 5 % interval within which the previous adjustment fell (e.g. 20-25 %, 25-30 % and so on), the adjustment in that case should also be as the exact percentage change in the average activity level.

(8) To avoid undue administrative burden, adjustments should be considered whenever changes in the level of activity of a sub-installation would lead to an annual adjustment in the level of free allocation of the sub-installation of 100 allowances or more.

(9) In order to prevent manipulation or abuse of the system and to ensure that the changes to the allocations are carried out in an effective, non-discriminatory and uniform manner, the new entrants and the new sub-installations should be treated in the same manner.

(10) Article 10a(1) of Directive 2003/87/EC requires transitional harmonised measures for free allocation of emission allowances to take place in a manner that provides incentives for reductions in greenhouse gas emissions and energy efficient techniques. In order to maintain incentives to reduce emissions when defining further arrangements for the adjustment of free allocations to sub-installations whose operations have increased or decreased by more than 15 % compared to the historical activity levels, changes in the operation of sub-installations other than changes in activity levels should also be considered. This should cover improvements of energy efficiency, changes in heat supply, the exchangeability of fuel and electricity, production of high value chemicals, changes in the production of vinyl chloride monomer as well as the energy recovery of waste gases. In order to maximise such incentives to reduce emissions, it is appropriate to consider such changes at sub-installation level.

(11) For better alignment of production changes to free allocation, emission allowances should not be issued for sub-installations reporting a cessation of operations as of the year following the cessation.

(12) The measures provided for in this Regulation are in accordance with the opinion of the Climate Change Committee,

HAS ADOPTED THIS REGULATION:

Modifications etc. (not altering text)

C1 Regulation modified (7.2.2022) by S.I. 2020/1265, Sch. 8A para. 5 (as inserted by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2021 (S.I. 2021/1455), arts. 2, 27)

Article 1 U.K. Scope

This Regulation applies to the free allocation of allowances [F1 to installations under the UK ETS].

Textual Amendments

F1 Words in Art. 1 substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 2(2)

Article 2 U.K. Definitions

[F2 1.] For the purposes of this Regulation, the following definitions shall apply:

(1)

‘average activity level’ means, for each sub-installation, the arithmetic mean of the related annual activity levels for the two calendar years preceding the submission of a report referred to in Article 3(1);

(2)

‘incumbent installation’ means incumbent installation as defined in Article 2(1) of Delegated Regulation (EU) 2019/331;

(3)

‘heat benchmark sub-installation’ means heat benchmark sub-installation as defined in Article 2(3) of Delegated Regulation (EU) 2019/331;

(4)

‘fuel benchmark sub-installation’ means fuel benchmark sub-installation as defined in Article 2(6) of Delegated Regulation (EU) 2019/331;

(5)

F3 ...

(6)

F4 ...

(7)

[F5 ‘Delegated Regulation (EU) 2019/331’ means the Free Allocation Regulation (as defined in the UK ETS Order);

(8)

‘emission allowance’ means an allowance (as defined in the UK ETS Order);

(9)

‘Implementing Regulation (EU) 2018/2067’ means the Verification Regulation 2018 (as defined in the UK ETS Order);

(10)

‘UK ETS Order’ means the Greenhouse Gas Emissions Trading Scheme Order 2020.]

[F6 2. Expressions used in this Regulation that are defined for the purposes of the UK ETS Order or the Free Allocation Regulation have the meaning given in that Order or Regulation.

3. For the purposes of this Regulation, a sub-installation has ceased operation if:

(a) the sub-installation is no longer operating; and

(b) it is technically impossible to resume operation.

4. For the purpose of this Regulation, the number of allowances to be allocated in respect of sub-installations and installations must be expressed as the nearest integer, taking 0.5 as nearest to the previous integer.]

Textual Amendments

F2 Art. 2 renumbered as Art. 2(1) (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 3(2)

F3 Art. 2(1)(5) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 3(3)(a)

F4 Art. 2(1)(6) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 3(3)(a)

F5 Arts. 2(1)(7)-(10) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 3(3)(b)

F6 Art. 2(2)-(4) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 3(4)

Article 3 U.K. Reporting requirements

1. Starting in 2021, the operators of installations [F7 that are FA installations] shall report annually on the activity level of each sub-installation in the preceding calendar year. In 2021, this report shall include data for the two years preceding its submission. [F8 In 2026 this report must include data for the 2 years preceding its submission if the operator is not required under this Article to submit in 2025 a report including data for 2024.]

F9 ...

2. The activity level report must [F10 be verified as satisfactory in accordance with the Verification Regulation 2018 and] contain information on the activity level of each sub-installation and on each of the parameters listed in sections 1, except 1.3 (c) [F11 and 1.4(e)], and 2.3 to 2.7 of Annex IV to Delegated Regulation (EU) 2019/331. The activity level report shall also contain information F12 ... on whether any sub-installation has ceased [F13 operation].

F14 ...

3. The activity level report shall be submitted [F15 to the regulator on or before 30 June in the 2021 scheme year and on or before 31 March in each subsequent scheme year]. It shall be submitted together with a verification report on the activity level report issued pursuant to Implementing Regulation (EU) 2018/2067.

F16 ...

F16 ...

F16 ...

F16 ...

4. The [F17 regulator] shall assess the activity level report referred to in paragraphs 1 to 3 of this Article in accordance with the requirements of Articles 7 to 12 of Delegated Regulation (EU) 2019/331. The [F17 regulator] may make a conservative estimate of the value of any parameter in any of the following situations:

(a) no F18 ... activity level report has been submitted by the operator by the time limit referred to in paragraph 3 F19 ...;

(b) the verified value submitted is not in compliance with this Regulation or Delegated Regulation (EU) 2019/331;

(c) the activity level report of an operator has not been verified [F20 as satisfactory] in accordance with Implementing Regulation (EU) 2018/2067.

F21 ...

Where a verifier has stated, in the verification report pursuant to Implementing Regulation (EU) 2018/2067, the existence of non-material misstatements which have not been corrected by the operator before issuing the verification report, the [F17 regulator] shall assess those misstatements, and make a conservative estimate of the value of a parameter, where possible. The [F17 regulator] shall inform the operator whether and which corrections are required to the activity level report. The operator shall make that information available to the verifier.

[F22 5. Where the regulator makes an estimate of the value of a parameter under paragraph 4, the regulator must give notice of the value to the operator

6. Subject to paragraph 8, where notice of an estimate of the value of a parameter is given, for the purposes of this Regulation, the operator must be treated as having submitted an activity level report including the estimated value.

7. Where, after making an estimate of a parameter (including a rectified estimate, or a further rectified estimate, made under this paragraph), the regulator considers that there is an error in the estimate, the regulator must:

(a) withdraw any notice of the estimate given under paragraph 5;

(b) make a rectified estimate; and

(c) give notice of the rectified estimate in accordance paragraph 5,

and paragraph 6 applies to a notice of the rectified estimate as it does to the notice of the previous estimate.

8. Where no activity level report has been submitted by the operator of an installation by the time limit referred to in paragraph 3 and the regulator makes an estimate of the value of a parameter under paragraph 4(a):

(a) Article 3a does not apply;

(b) the regulator must not send to the UK ETS authority under Article 6a(2) any adjustment to free allocation calculated on the basis of such an estimate, or any recalculation of the preliminary or final annual number of allowances to be allocated in respect of the installation calculated on the basis of such an estimate, if the effect of the adjustment is to increase the final annual number of allowances to be allocated.]

Textual Amendments

F7 Words in Art. 3(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(2)(a)(i)

F8 Words in Art. 3(1) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(2)(a)(ii)

F9 Words in Art. 3(1) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(2)(b)

F10 Words in Art. 3(2) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(3)(a)(i)

F11 Words in Art. 3(2) inserted (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), 22(2)

F12 Words in Art. 3(2) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(3)(a)(ii)

F13 Word in Art. 3(2) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(3)(a)(iii)

F14 Words in Art. 3(2) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(3)(b)

F15 Words in Art. 3(3) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(4)(a)

F16 Words in Art. 3(3) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(4)(b)

F17 Word in Art. 3(4) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(5)(a)

F18 Word in Art. 3(4)(a) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(5)(b)(i)(aa)

F19 Words in Art. 3(4)(a) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(5)(b)(i)(bb)

F20 Words in Art. 3(4)(c) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(5)(b)(ii)

F21 Words in Art. 3(4) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(5)(c)

F22 Art. 3(5)-(8) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 4(6)

Modifications etc. (not altering text)

C2 Art. 3(4)-(8) applied (with modifications) (1.1.2024) by S.I. 2020/1265, Sch. 8A para. 3(3) (as inserted by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023 (S.I. 2023/850), arts. 2, 10(3)(c))

[F23 Article 3a U.K. Sub-installations for which no historical activity level determined

1. This Article applies where the historical activity level of a sub-installation referred to in an activity level report has not been determined under Article 15 or 17 of the Free Allocation Regulation (see Articles 15(7) and 17(2) of that Regulation) or under this Article.

2. If the activity level report contains data for the first calendar year after the start of normal operation of the sub-installation, the regulator must:

(a) determine the historical activity level of the sub-installation in accordance with Article 17(1) of the Free Allocation Regulation (whether the sub-installation is a sub-installation of an incumbent installation or a new entrant);

(b) calculate in accordance with Article 18(1) of that Regulation the preliminary annual number of allowances to be allocated in respect of the sub-installation for each scheme year in the relevant allocation period beginning with the first scheme year after the start of normal operation; and

(c) calculate the final annual number of allowances to be allocated in respect of the sub-installation for each scheme year referred to in point (b):

(i) in the case of a sub-installation of an incumbent installation, in accordance with Article 16b(2) of that Regulation, but using the preliminary annual number of allowances calculated under point (b) instead of the preliminary annual number of allowances referred to in the words before point (a) of paragraph 2 of Article 16b;

(ii) in the case of a sub-installation of a new entrant, in accordance with Article 18a(3) of that Regulation.

3. If the year in which the start of normal operation of the sub-installation occurs is a scheme year in the relevant allocation period, the regulator must:

(a) determine the activity level of the sub-installation in the scheme year;

(b) calculate in accordance with Article 18(2) of the Free Allocation Regulation the preliminary annual number of allowances to be allocated in respect of the sub-installation for the scheme year;

(c) calculate the final annual number of allowances to be allocated in respect of the sub-installation for the scheme year:

(i) in the case of a sub-installation of an incumbent installation, in accordance with Article 16b(2) of that Regulation, but using the preliminary annual number of allowances calculated under point (b) instead of the preliminary annual number of allowances referred to in the words before point (a) of paragraph 2 of Article 16b;

(ii) in the case of a sub-installation of a new entrant, in accordance with Article 18a(3) of that Regulation.

4. In this Article, “relevant allocation period” means:

(a) in the case of a sub-installation of an incumbent installation in respect of which a deemed application for free allocation in the 2021-2025 allocation period was made or a new entrant in respect of which an application for free allocation is made under Article 5(1)(a) of the Free Allocation Regulation, the 2021-2025 allocation period;

(b) in the case of a sub-installation of an incumbent installation in respect of which an application for free allocation in the 2026-2030 allocation period is made under Article 4 of that Regulation or a new entrant in respect of which an application for free allocation is made under Article 5(1)(b) of that Regulation, the 2026-2030 allocation period.]

Textual Amendments

F23 Art. 3a inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 5

Article 4 U.K. Average activity levels

1. The [F24 regulator] shall determine the average activity level of each sub-installation annually based on the activity level reports for the relevant two-year period.

2. The average activity level of new sub-installations and new entrants shall not be calculated for the first three calendar years of operation.

Textual Amendments

F24 Word in Art. 4(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 6(2)

Article 5 U.K. Adjustments to free allocation due to activity level changes

1. Every year the [F25 regulator] shall compare the average activity level of each sub-installation, determined in accordance with Article 4, with the historical activity level initially used to determine the free allocation. When the absolute value of the difference between the average activity level and the historical activity level of that sub-installation is more than 15 %, the free allocation of allowances [F26 in respect of the sub-installation] shall be adjusted. That adjustment shall apply as of the year following the two calendars years used for determining the average activity level, and provided that the adjustment of the annual preliminary amount of emission allowances allocated for free to the sub-installation is at least 100 emission allowances. [F27 The regulator must calculate that adjustment] by increasing or decreasing the free allocation for the relevant sub-installation by the exact percentage change in the average activity level compared to the historical activity level initially used to determine the free allocation.

2. When an adjustment according to paragraph 1 [F28 has been approved by the UK ETS authority under Article 6a], during an allocation period, further adjustments can only take place if the absolute value of the difference between the average activity level and the historical activity level of that sub-installation, exceeds the nearest 5 % interval, beyond the 15 % change, which caused the previous adjustment of free allocation [F29 in respect of the sub-installation], by increasing or decreasing the free allocation for the relevant sub-installation by the exact percentage change in the average activity level compared to the historical activity level initially used to determine the free allocation and provided that the adjustment of the annual preliminary amount of emission allowances allocated for free to the sub-installation is at least 100 emission allowances.

3. If the increase or decrease of the average activity level of a sub-installation no longer exceeds 15 % compared to the historical activity level initially used to determine the free allocation, the free allocation of allowances [F30 in respect of the sub-installation] shall be equal to the initial allocation [F31 approved under Article 16b or 18a of the Free Allocation Regulation or under Article 6a of this Regulation], as of the year following the two calendar years used for determining the average activity level. [F32 The regulator must calculate an adjustment to the free allocation of the sub-installation accordingly.]

4. If a sub-installation has ceased operation, [F33 the regulator must calculate an adjustment to the free allocation of the sub-installation so that it is] zero as of the year following the cessation of operations.

5. For new sub-installations and for new entrants, for the first three calendar years of operation the free allocation of emission allowances shall not be adjusted. For the first and second calendar years of operation, the free allocation of emission allowances shall be based on the activity level of each year respectively, for the third calendar year of operation the free allocation of emission allowances shall be based on the historical activity level used to determine free allocation.

F34 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F35 7. In this Article, a reference to the historical activity level of a sub-installation includes a reference to the historical activity level approved under Article 6a.]

Textual Amendments

F25 Word in Art. 5(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(2)(a)

F26 Words in Art. 5(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(2)(b)

F27 Words in Art. 5(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(2)(c)

F28 Words in Art. 5(2) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(3)(a)

F29 Words in Art. 5(2) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(3)(b)

F30 Words in Art. 5(3) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(4)(a)

F31 Words in Art. 5(3) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(4)(b)

F32 Words in Art. 5(3) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(4)(c)

F33 Words in Art. 5(4) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(5)

F34 Art. 5(6) omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(6)

F35 Art. 5(7) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 7(7)

[F36 Article 5a U.K. 2022 activity level changes: average activity level based on 2019 and 2021 years

1. The operator of an installation may apply for a determination by the UK ETS authority that a sub-installation of the installation meets the Covid condition referred to in Article 5b if, on submission of the 2022 activity level report under Article 3, Article 5(1), (2) or (3) requires (apart from this Article) an adjustment to decrease free allocation of allowances in respect of the sub-installation for the 2022 and subsequent scheme years.

2. But an application may not be made if the regulator made an estimate of the value of a parameter under Article 3(4)(a) because the operator did not submit the 2021 activity level report or the 2022 activity level report on or before the date referred to in Article 3(3).

3. An application must be made to the regulator on or before 31 January 2023 or such later date as the regulator may specify if, in a case where the operator requests an extension of time on or before 31 January 2023, the regulator considers that the reason for the request is reasonable.

4. An application must be accompanied by:

(a) either:

(i) a report identifying the quantity of emissions attributable to the sub-installation in 2019 and in 2020, determined in accordance with the methodology in the monitoring methodology plan and verified as satisfactory in accordance with the Verification Regulation 2018 as if the data in the report formed part of a baseline data report; or

(ii) where the data referred to in subpoint (i) are included in the 2021 activity level report, a statement by the verifier that the verification of the report included the verification of those data; and

(b) evidence that the sub-installation meets point (c) of the Covid condition set out in Article 5b(2), including an explanation why, when comparing 2020 to 2019 levels, the emissions attributable to the sub-installation did not fall by at least the same proportion as its activity level.

5. After receiving an application, the regulator must, as soon as reasonably practicable:

(a) assess whether or not the sub-installation meets the Covid condition; and

(b) send the assessment and the reasons for it to the UK ETS authority.

6. After receiving the assessment, the UK ETS authority must determine whether or not the sub-installation meets the Covid condition.

7. If the UK ETS authority determines that the sub-installation meets the Covid condition:

(a) this Regulation applies as if the regulator were required to determine the 2022 average activity level (that is to say, the average activity level of the sub-installation to be determined under Article 4 on submission of the 2022 activity level report) based on the activity levels of the sub-installation in 2019 and 2021 (and not on those in 2020 and 2021); or

(b) if, before the UK ETS authority determines that the sub-installation meets the Covid condition, the 2022 average activity level based on the activity levels of the sub-installation in 2020 and 2021 is determined by the regulator under Article 4, and an adjustment to free allocation in respect of the sub-installation is approved by the UK ETS authority based on the 2022 average activity level so determined:

(i) the regulator must re-determine the 2022 average activity level based on the activity levels of the sub-installation in 2019 and 2021; and

(ii) this Regulation applies on the basis of that re-determination (ignoring the first determination of the 2022 average activity level and subsequent approval).

8. If the UK ETS authority determines that the sub-installation does not meet the Covid condition:

(a) the UK ETS authority must inform the regulator; and

(b) the regulator must inform the operator.

9. In this Article:

(a) “2021 activity level report” means the activity level report (on activity levels in 2019 and 2020) due on or before 30 June 2021;

(b) “2022 activity level report” means the activity level report (on activity levels in 2021) due on or before 31 March 2022.]

Textual Amendments

F36 Arts. 5a, 5b inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 26

[F36 Article 5b U.K. [F37 2021 and 2022] activity level changes: Covid condition

1. This Article has effect for the purposes of [F38 Articles 5a and 5c].

2. A sub-installation of an installation meets the Covid condition if:

(a) AL 2020 is less than AL 2019;

(b) (AL 2019-AL 2020)/AL 2019 – (E 2019-E 2020)/E 2019 is greater than or equal to 0.15; and

(c) the reason for the matters referred to in points (a) and (b) is wholly or mainly due to the effects of the coronavirus Covid-19 pandemic.

3. In paragraph 2:

(a) AL 2019 is the activity level of the sub-installation in 2019;

(b) AL 2020 is the activity level of the sub-installation in 2020;

(c) E 2019 is the emissions attributable to the sub-installation in 2019;

(d) E 2020 is the emissions attributable to the sub-installation in 2020.]

Textual Amendments

F36 Arts. 5a, 5b inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 26

F37 Words in Art. 5b heading substituted (1.1.2024) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023 (S.I. 2023/850), arts. 2, 17(2)

F38 Words in Art. 5b(1) substituted (1.1.2024) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023 (S.I. 2023/850), arts. 2, 17(3)

[F39 Article 5c U.K. Activity level changes: average activity level omitting 2020 data

1. The operator of an installation may apply for a determination by the UK ETS authority that a sub-installation of the installation meets the Covid condition referred to in Article 5b if, on submission of the 2021 activity level report under Article 3, Article 5(1) required an adjustment to decrease free allocation of allowances in respect of the sub-installation for the 2021 and subsequent scheme years.

2. But an application may not be made if the regulator made an estimate of the value of a parameter under Article 3(4)(a) because the operator did not submit the 2021 activity level report or the 2022 activity level report on or before the date referred to in Article 3(3).

3. An application must be made to the regulator on or before 31 January 2024 or such later date as the regulator may specify if, in a case where the operator requests an extension of time on or before 31 January 2024, the regulator considers that the reason for the request is reasonable.

4. An application must be accompanied by:

(a) either:

(i) a report identifying the quantity of emissions attributable to the sub-installation in 2019 and in 2020, determined in accordance with the methodology in the monitoring methodology plan and verified as satisfactory in accordance with the Verification Regulation 2018 as if the data in the report formed part of a baseline data report; or

(ii) where the data referred to in subpoint (i) are included in the 2021 activity level report, a statement by the verifier that the verification of the report included the verification of those data; and

(b) evidence that the sub-installation meets point (c) of the Covid condition set out in Article 5b(2), including an explanation why, when comparing 2020 to 2019 levels, the emissions attributable to the sub-installation did not fall by at least the same proportion as its activity level.

5. After receiving an application, the regulator must, as soon as reasonably practicable:

(a) assess whether or not the sub-installation meets the Covid condition; and

(b) send the assessment and the reasons for it to the UK ETS authority.

6. After receiving the assessment, the UK ETS authority must determine whether or not the sub-installation meets the Covid condition.

7. If the UK ETS authority determines that the sub-installation meets the Covid condition:

(a) the regulator must calculate the final annual number of allowances to be allocated in respect of the sub-installation for each scheme year in the 2021-2025 allocation period that would have been set out in the allocation table on compliance by the regulator and the UK ETS authority with the requirements of this Regulation and the UK ETS Order following submission of the 2021, 2022 and 2023 activity level reports if:

(i) the average activity level of the sub-installation required to be determined under Article 4 on submission of the 2021 activity level report had been based on the activity levels of the sub-installation in 2018 and 2019 (and not on those in 2019 and 2020); and

(ii) the average activity level of the sub-installation required to be determined under Article 4 on submission of the 2022 activity level report had been based on the activity levels of the sub-installation in 2019 and 2021 (and not on those in 2020 and 2021);

(b) the regulator must send to the UK ETS authority:

(i) the calculation referred to in point (a); and

(ii) the regulator’s recalculation of the final annual number of allowances to be allocated in respect of the installation for each scheme year in the 2021-2025 allocation period, taking account of the calculation referred to in point (a);

(c) the UK ETS authority must:

(i) approve the final annual number of allowances to be allocated in respect of the installation for each scheme year in the 2021-2025 allocation period, making any corrections to the final annual number of allowances that the UK ETS authority considers appropriate; and

(ii) inform the regulator accordingly;

(d) the regulator must inform the operator of the installation of the final annual number of allowances approved.

8. For the purposes of Article 5, the reference in paragraph 2 of that Article to an adjustment approved under Article 6a must be read as including a reference to an adjustment approved under paragraph 7(c) of this Article.

9. If the UK ETS authority determines that the sub-installation does not meet the Covid condition:

(a) the UK ETS authority must inform the regulator; and

(b) the regulator must inform the operator.

10. In this Article:

(a) “2021 activity level report” means the activity level report (on activity levels in 2019 and 2020) due on or before 30 June 2021;

(b) “2022 activity level report” means the activity level report (on activity levels in 2021) due on or before 31 March 2022;

(c) “2023 activity level report” means the activity level report (on activity levels in 2022) due on or before 31 March 2023.]

Textual Amendments

F39 Art. 5c inserted (1.1.2024) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023 (S.I. 2023/850), arts. 2, 18

Article 6 U.K. Other changes in the operation of the installation

1. Where an operator demonstrates, based on the data submitted in the activity level report and any additional data requested by the [F40 regulator], that the decrease of the activity level of a sub-installation for which the amount of free allocation has been determined based on a heat or fuel benchmark is not related to a change of production levels of the sub-installation, but due to the increased energy efficiency of that sub-installation in accordance with paragraph 3 of this Article, compared to the one based on the baseline data or the new entrant data report, by more than 15 %, no adjustment of free allocation shall be made.

2. Where an operator fails to demonstrate, upon request of the [F41 regulator], based on the data submitted in the activity level report and any additional data requested by the [F41 regulator], that the increase of the activity level of a sub-installation for which the amount of free allocation has been determined based on a heat or fuel benchmark is related to a change of production levels of the sub-installation and not due to the decrease of the energy efficiency of that sub-installation in accordance with paragraph 3 of this Article, compared to the one based on the baseline data or the new entrant data report, by more than 15 %, the [F41 regulator] may reject adjustment of free allocation.

3. For heat benchmark sub-installations and fuel benchmark sub-installations, the energy efficiency change shall be determined by comparing the quotients of the amount of heat or fuel used for the production of each product and the amounts of their respective production according to the baseline data report [F42 or the new entrant data report] and after the change in the operation of the sub-installation has taken place. Such determination of energy efficiency shall be carried out for the production of each product covered by each PRODCOM code of the sub-installation under the list referred to in Article 2(2) of Council Regulation (EEC) No 3924/91(4) [F43 or, where there is no PRODCOM code, by the code referred to in Section B or C of Annex 1 (NACE rev. 2) to Regulation (EC) No. 1893/2006 of the European Parliament and of the Council of 20 December 2006 as it has effect in EU law].

In accordance with the first subparagraph of this paragraph, the amounts of heat and fuel used for the production of each product shall be determined in line with the methodologies laid down in the monitoring methodology plan as approved in accordance with [F44 Article 8] of Delegated Regulation (EU) 2019/331.

4. Where the activity level report submitted pursuant to Article 3 indicates that the rolling average of two years of a parameter listed in Article 16(5), Article 19, 20, 21 or 22 of Delegated Regulation (EU) 2019/331, other than activity levels, has changed by more than 15 % for a sub-installation, compared with the values used to determine the initial level of free allocation, the free allocation of allowances [F45 in respect of the sub-installation] shall be adjusted, as of the year following the two years used for determining the change of parameters, provided that the adjustment of the annual preliminary amount of emission allowances allocated for free to the sub-installation is at least 100 emission [F46 allowances. The regulator must calculate that adjustment by increasing] or decreasing the free allocation for the relevant sub-installation using the new exact value of the parameter.

[F47 5. In this Article, where an application under Article 5 of the Free Allocation Regulation is made in respect of a new entrant that has not been operating for a full calendar year after the start of normal operation, a reference to the new entrant data report includes a reference to the activity level report submitted after the end of the first full calendar year of operation.]

Textual Amendments

F40 Word in Art. 6(1) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(2)

F41 Word in Art. 6(2) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(3)

F42 Words in Art. 6(3) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(4)(a)

F43 Words in Art. 6(3) inserted (1.1.2024) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023 (S.I. 2023/850), arts. 2, 19(2)

F44 Words in Art. 6(3) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(4)(b)

F45 Words in Art. 6(4) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(5)(a)

F46 Words in Art. 6(4) substituted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(5)(b)

F47 Art. 6(5) inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 8(6)

[F48 Article 6a U.K. Approval of changes by UK ETS authority

1. This Article applies where the regulator:

(a) determines the activity level or historical activity level of a sub-installation or calculates the preliminary or final annual number of allowances to be allocated in respect of a sub-installation for a scheme year under Article 3a; F49 ...

(b) calculates an adjustment to free allocation in respect of a sub-installation for a scheme year under [F50 Article 5 or 6; or]

[F51 (c) does not calculate an adjustment to free allocation in respect of a heat or fuel benchmark sub-installation for a scheme year by virtue of paragraph 1 or 2 of Article 6.]

2. Subject to Article 3(8), the regulator must as soon as reasonably practicable send to the UK ETS authority:

(a) the determination or calculation referred to in paragraph 1 [F52 (if any)];

(b) the regulator's recalculation of the final annual number of allowances to be allocated in respect of the installation of which the sub-installation is part for the scheme year, taking account of the determination, calculation or adjustment referred to paragraph 1 [F53 (if any)];

[F54 (c) where, in the case of a heat or fuel benchmark sub-installation, after consideration of the matters referred to in paragraph 1 or 2 of Article 6, the regulator either calculates an adjustment to free allocation in respect of the sub-installation or does not calculate an adjustment, the regulator’s assessment of those matters for consideration by the UK ETS authority under paragraph 3.]

3. The UK ETS authority must:

(a) approve the final annual number of allowances to be allocated in respect of the installation for the scheme year, making any corrections to the activity level, historical activity level, preliminary annual number of allowances and final annual number of allowances [F55 , and any calculations in respect of a sub-installation referred to in paragraph 1(c),] that the UK ETS authority considers appropriate; and

(b) inform the regulator accordingly.

4. The regulator must inform the operator of the installation of the final annual number of allowances approved.]

Textual Amendments

F48 Art. 6a inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 9

F49 Word in Art. 6a(1)(a) omitted (1.1.2023) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(2)(a)

F50 Words in Art. 6a(1)(b) substituted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(2)(b)

F51 Art. 6a(1)(c) inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(2)(c)

F52 Words in Art. 6a(2)(a) inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(3)(a)

F53 Words in Art. 6a(2)(b) inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(3)(b)

F54 Art. 6a(2)(c) inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(3)(c)

F55 Words in Art. 6a(3)(a) inserted (1.1.2023) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2022 (S.I. 2022/1173), arts. 2, 27(4)

Article 7 U.K. Entry into force and application

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

F56 ...

Done at Brussels, 31 October 2019.

For the Commission

The President

Jean-Claude Juncker

Textual Amendments

F56 Words in Signature omitted (31.12.2020) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 2 para. 10

(1)

OJ L 275, 25.10.2003, p. 32.

(2)

Commission Delegated Regulation (EU) 2019/331 of 19 December 2018 determining transitional Union-wide rules for harmonised free allocation of emission allowances pursuant to Article 10a of Directive 2003/87/EC of the European Parliament and of the Council (OJ L 59, 27.2.2019, p. 8).

(3)

Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018 on the verification of data and on the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council (OJ L 334, 31.12.2018, p. 94).

(4)

Council Regulation (EEC) No 3924/91 of 19 December 1991 on the establishment of a Community survey of industrial production (OJ L 374, 31.12.1991, p. 1).