CHAPTER IIIAllocation rules
F1Article 16aCross-sectoral correction factors
1.
This Article applies where, for a scheme year (the “relevant scheme year”) in an allocation period F2other than the 2026 allocation period:
(a)
the sum (“PFA”) of the preliminary annual number of allowances to be allocated in respect of all installations in the relevant scheme year calculated under Article 16 (including any corrections required under Article 16(11)) is greater than the industry cap (“IC”) for the relevant scheme year; and
(b)
the amount by which PFA exceeds IC is greater than the previous unallocated amount.
2.
The previous unallocated amount is TIC + FS - TFA, where:
(a)
TIC is the sum of the industry cap for each scheme year F3preceding the relevant scheme year in the same allocation period as the relevant scheme year;
(b)
FS is F4such number of allowances from the flexible reserve under article 23A of the UK ETS Order as the UK ETS authority may determine for the allocation period;
(c)
TFA is the sum of the final allocation for each scheme year F5preceding the relevant scheme year in the same allocation period as the relevant scheme year.
3.
The final allocation for a scheme year is the sum of—
(a)
the total preliminary annual number of allowances calculated under Article 16 to be allocated in the scheme year in respect of all installations other than electricity generators multiplied by the cross-sectoral correction factor (if any) for the scheme year determined under this Article; and
(b)
the total preliminary annual number of allowances calculated under Article 16 to be allocated in the scheme year in respect of all electricity generators multiplied by the cross-sectoral correction factor (if any) for the scheme year determined under this Article or, if there is no cross-sectoral correction factor for the scheme year, the reduction factor for the scheme year.
4.
The UK ETS authority must determine the cross-sectoral correction factor for the relevant scheme year, that is to say the factor that reduces PFA by such amount that TIC + IC + FS = TFA + the final allocation for the relevant scheme year.
5.
The UK ETS authority must, as soon as reasonably practicable, publish for each allocation period F6other than the 2026 allocation periodF7the number of allowances determined as FS under paragraph 2(b) and:
(a)
the cross-sectoral correction factors for scheme years in the allocation period determined under paragraph 4; or
(b)
if there is no cross-sectoral correction factor for any scheme year in the allocation period, a statement to that effect.
6.
For the purposes of this Article:
(a)
the industry cap for a scheme year set out in column 1 of table A is the number of allowances set out in the corresponding entry in column 2;
(b)
the reduction factor for a scheme year set out in column 1 of table A is the value set out in the corresponding entry in column 3.
F156a.
But where the industry cap for the 2026 scheme year exceeds the total final annual number of allowances approved under Part 2 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 to be allocated for the 2026 scheme year in respect of all 2026 incumbents (as defined in Part 2 of that Order), the industry cap for the 2027 scheme year must be treated as being increased by the difference.
7.
In this Article and Article 16b, “installation” does not include an installation if:
(a)
a deemed application for free allocation in the 2021-2025 allocation period was made in respect of the installation and the installation is included in the hospital and small emitter list for 2021-2025 or the ultra-small emitter list for 2021-2025; or
F16(b)
an application for free allocation in the 2027-2030 allocation period is made in respect of the installation under Article 4 and the installation is included in the hospital and small emitter list for 2026-2030 or the ultra-small emitter list for 2026-2030 unless, as part of the second stage of the application under Article 4(1a)(b)(i):
(i)
the operator of the installation notifies the regulator on or before 30 June 2026 that the operator wishes the application to proceed because the operator does not wish the installation to be a hospital or small emitter or an ultra-small emitter for the scheme years in the 2027-2030 allocation period; and
(ii)
the UK ETS authority informs the regulator under Article 15a(4) that the application is valid.
8.
Accordingly, the matters referred to in paragraph 5 must not, in relation to the F172027-2030 allocation period, be published before the publication of the hospital and small emitter list for 2026-2030 and the ultra-small emitter list for 2026-2030 under the UK ETS Order (see paragraph 5(5) of Schedule 7, and paragraph 3(6) of Schedule 8, to that Order)