PART 2Basic elements of the UK ETS
CHAPTER 1Establishment of the UK ETS and requirement for review
UK Emissions Trading Scheme16.
(1)
This Order establishes a trading scheme, known as the “UK Emissions Trading Scheme” or “UK ETS”.
(2)
The purpose of the UK ETS is to limit, or encourage the limitation of, the emission of greenhouse gases M1 in the trading period from the carrying out of—
(a)
regulated activities by operators of installations; and
(b)
aviation activities by aircraft operators.
Review of UK ETS17.
(1)
The UK ETS authority must before each review date—
(a)
carry out a review of the operation of the UK ETS;
(b)
publish a report setting out the conclusions of the review.
(2)
The review dates are 31st December 2023 and 31st December 2028.
(3)
The report must in each case—
(a)
review the operation of the UK ETS (including assessing the extent to which the purpose of the UK ETS is being achieved);
(b)
make any recommendations that the UK ETS authority considers appropriate as to the future operation and purpose of the UK ETS.
CHAPTER 2Allowances and caps
Allowances18.
(1)
The UK ETS authority may F1create allowances in the registry for the purposes of the UK ETS.
(2)
An allowance is an allowance to emit 1 tonne of carbon dioxide equivalent.
F2(3)
Allowances may be held only in accounts in the registry.
Cap for trading period19.
The number of allowances created in the trading period may not exceed the sum of—
(a)
736,013,432 multiplied by the 2021-2025 hospital and small emitter reduction factor; and
(b)
630,152,247 multiplied by the 2026-2030 hospital and small emitter reduction factor.
Cap for scheme years20.
F3(1)
The number of allowances created in a scheme year may not exceed the sum of—
(a)
the base for the scheme year multiplied by—
(i)
if the scheme year is in the 2021-2025 allocation period, the 2021-2025 hospital and small emitter reduction factor;
(ii)
if the scheme year is in the 2026-2030 allocation period, the 2026-2030 hospital and small emitter reduction factor; and
(b)
the balance of allowances in the new entrants' reserve on 1st January in the scheme year (see article 34G for the new entrants' reserve).
(2)
Paragraph (1) is subject to any direction given by the UK ETS authority for the creation of allowances for allocation under regulations made by the Treasury under the Finance Act 2020 M2 F4or for the creation of up to 40,984,970 allowances in the trading period for the purpose of free allocation in respect of installations.
(3)
But such a direction may not override article 19.
Cap: hospital and small emitter reduction factors21.
(1)
This article applies for the purposes of articles 19 and 20.
(2)
The 2021-2025 hospital and small emitter reduction factor is (RE1 – SI1)/RE1, where—
RE1 is the total reportable emissions (within the meaning of GGETSR 2012) in 2016, 2017 and 2018 of all installations (within the meaning of GGETSR 2012) and all UK aircraft operators (within the meaning of GGETSR 2012);
SI1 is the total reportable emissions (within the meaning of GGETSR 2012) in 2016, 2017 and 2018 of all installations included in the hospital and small emitter list for 2021-2025.
(3)
The 2026-2030 hospital and small emitter reduction factor is (RE2 - SI2)/RE2, where—
RE2 is the total reportable emissions and the total aviation emissions, expressed in tonnes, in the 2021, 2022 and 2023 scheme years of all installations and all aircraft operators;
SI2 is the total reportable emissions in the 2021, 2022 and 2023 scheme years of all installations included in the hospital and small emitter list for 2026-2030.
(4)
In this article, a reference to reportable emissions or aviation emissions is a reference to reportable emissions or aviation emissions—
(a)
verified F5as satisfactory in accordance with the Verification Regulation 2012 or the Verification Regulation 2018;
F6(aa)
determined under regulation 44 of GGETSR 2012 or article 45 of this Order;
(b)
where relevant, set out in an emissions report accompanied by the notice or declaration referred to in paragraph 3(8)(b)(ii) of Schedule 5 to GGETSR 2012 or paragraph 11(2)(b)(ii) of Schedule 7 to this Order; or
(c)
where relevant, considered to be verified under regulation 35(7) of GGETSR 2012 or article 33(2) of this Order.
Cap: base for scheme years22.
For the purposes of article 20, the base for a scheme year set out in column 1 of table B is the value set out in the corresponding entry in column 2.
Column 1 | Column 2 |
|---|---|
Scheme year | Base |
2021 | 155,671,581 |
2022 | 151,437,134 |
2023 | 147,202,686 |
2024 | 142,968,239 |
2025 | 138,733,792 |
2026 | 134,499,344 |
2027 | 130,264,897 |
2028 | 126,030,449 |
2029 | 121,796,002 |
2030 | 117,561,555 |
Trading in allowances23.
Allowances may be traded, except where prohibited by other legislation.
CHAPTER 3Monitoring, reporting and verification
Monitoring and reporting of emissions24.
F7The Monitoring and Reporting Regulation 2018 has effect for the purpose of the UK ETS, subject to the modifications in Schedule 4 and to Part 4 (see also paragraph 13 of Schedule 7 which makes further modifications in relation to hospitals and small emitters and paragraph 5 of Schedule 8 which makes further modifications in relation to ultra-small emitters).
F8Verification of data and accreditation of verifiers25.
The Verification Regulation 2018 has effect for the purpose of the UK ETS, subject to the modifications in Schedule 5 (see also paragraph 4 of Schedule 8 which makes further modifications in relation to ultra-small emitters).
F9CHAPTER 4Registry
Registry25A.
Schedule 5A (registry) has effect.