The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024

Article 23A inserted

9.  After article 23 insert—

“Flexible reserve

23A.— (1) The flexible reserve is a reserve of allowances for the trading period from which allowances may be allocated until the reserve is exhausted.

(2) The flexible reserve consists of the following—

(a) allowances equal to the sum of the amounts set out in paragraphs (i) and (ii), if the sum is greater than zero—

(i) 28,081,237;

(ii) the sum of A and C minus 53,294,847, where—

(aa) A is 240,342,255 (industry cap for 2021-2025 allocation period) minus B;

(bb) B is the final annual number of allowances approved by the UK ETS authority(1) under Article 16b of the Free Allocation Regulation(2) (final allocation at installation level for incumbent installations) to be allocated in respect of all installations for all scheme years in the 2021-2025 allocation period;

(cc) C is equal to the number of B that are not allocated or, if allocated, subsequently returned;

(b) allowances equal to the sum of D and F, where—

(i) D is—

(aa) 121,169,970 (industry cap for 2026-2030 allocation period) minus E; or

(bb) if E is greater than 121,169,970, zero;

(ii) E is the final annual number of allowances approved by the UK ETS authority under Article 16b of the Free Allocation Regulation to be allocated in respect of all installations for all scheme years in the 2026-2030 allocation period;

(iii) F is equal to the number of E that are not allocated or, if allocated, subsequently returned;

(c) allowances equal to the number of allowances representing aviation free allocation entitlement (within the meaning of Chapter 2 of Part 4A) approved by the UK ETS authority but not allocated or, if allocated, subsequently returned.

(3) For the purposes of paragraph (2)—

(a) any increase approved by the UK ETS authority under article 20(5) of the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2023(3) (free allocation for 2024 and 2025 scheme years: lime and malt extract) that in accordance with article 34B(3A) of this Order was required to be added to the amount included in column A of the allocation table for the 2021-2025 allocation period must be treated as if approved under Article 16b of the Free Allocation Regulation;

(b) a reference to allowances that are returned is a reference to allowances transferred or returned in accordance with a notice under article 34U or 34V or, in the case of other allowances to which a person is not entitled (as set out in article 34S(3) or 34T(3)), returned voluntarily without the need for such a notice to be given.

(4) Allowances from the flexible reserve may be used—

(a) for free allocation in respect of incumbent installations (within the meaning of the Free Allocation Regulation(4));

(b) for allocation under the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 or any other regulations made under section 96 of the Finance Act 2020.”.

(1)

See article 14 of S.I. 2020/1265 for “UK ETS authority”.

(2)

EUR 2019/331, amended by S.I. 2020/1557, 2021/1455, 2022/1173, 2023/850, 2023/1387, 2024/192 and this Order. See article 4(1) of S.I. 2020/1265 for the definition of “Free Allocation Regulation”.

(3)

S.I. 2023/850.

(4)

See Article 2(1)(1) of EUR 2019/331 for the definition of “incumbent installation”.