CHAPTER IIIU.K.Allocation rules

[F1Article 25U.K.Mergers and splits

1.This Article applies where an application for the transfer of a greenhouse gas emissions permit of an installation that is an FA installation at the transfer date is granted under paragraph 9 of Schedule 6 to the UK ETS Order.

2.But this Article does not apply if the application contains a statement by the new operator (as defined in paragraph 7 of that Schedule) that the new operator renounces free allocation in respect of the transferred units (as defined in that paragraph).

3.The operators of installations (“new installations”) resulting from a merger or split must submit the following to the regulator:

(a)the relevant report or reports (see paragraphs 4 and 5);

(b)a report on [F2the activity level (if any) of each sub-installation of each new installation in the first relevant calendar year] containing the information referred to in Article 3(2) of the Activity Level Changes Regulation, as if the merger or split had taken place at the beginning of that year;

(c)a verification report on the reports referred to in points (a) and (b) in accordance with the Verification Regulation 2018.

4.In the case of a merger, the relevant report is:

(a)if at least one of the installations before the merger was an incumbent installation whose start of normal operation occurred before the end of the baseline period, a report verified in accordance with the Verification Regulation 2018 containing the data referred to in Article 4(2)(a) covering the baseline period for the new installation and its sub-installations, as if the merger had taken place at the beginning of the baseline period;

(b)in any other case, a report verified in accordance with the Verification Regulation 2018 on the activity level of the first calendar year after the start of normal operation of the following installations before the merger and their sub-installations:

(i)the installation with the earliest start of normal operation; and

(ii)any other installation whose start of normal operation occurred in the same year as the installation with the earliest start of normal operation.

5.In the case of a split, the relevant reports are:

(a)if the installation before the split was an incumbent installation whose start of normal operation occurred before the end of the baseline period, a report verified in accordance with the Verification Regulation 2018 containing the data referred to in Article 4(2)(a) covering the baseline period for each new installation and its sub-installations, as if the split had taken place at the beginning of the baseline period;

(b)in any other case, a report verified in accordance with the Verification Regulation 2018 on the activity level of the installation in the first calendar year after the start of normal operation for each new installation and its sub-installations, as if the split had taken place at the beginning of that year.

6.After assessing the reports referred to in paragraph 3, the regulator must:

(a)determine the historical activity level of each sub-installation of each new installation:

(i)where paragraph 4(a) or 5(a) applies, in accordance with Article 15;

(ii)where paragraph 4(b) or 5(b) applies in accordance with Article 17;

(b)based on the historical activity levels, calculate the preliminary and final annual number of allowances to be allocated in respect of each new installation and of each sub-installation of each new installation for each scheme year in the relevant allocation period beginning with the [F3first recalculated scheme year]:

(i)where paragraph 4(a) or 5(a) applies, in accordance with Articles 16 and 16b;

(ii)where paragraph 4(b) or 5(b) applies, in accordance with Article 18 and 18a;

(c)send the information contained in the relevant report or reports referred to in paragraph 3(a), the determination referred to in point (a) and the calculation referred to in point (b) to the UK ETS authority.

7.For the purposes of paragraph 6:

(a)where a sub-installation of an installation before a split is split into 2 or more sub-installations, the historical activity level and allocation in respect of the sub-installation of the new installation must be based on the historical activity level of the respective stationary technical units of the installation before the split;

(b)the final annual number of allowances to be allocated in respect of the new installation or installations for a scheme year must correspond to the final annual number of allowances to be allocated in respect of the installation or installations before the merger or split for the scheme year.

8.The UK ETS authority must:

(a)approve the final annual number of allowances to be allocated in respect of each new installation for each scheme year in the relevant allocation period beginning with the [F4first recalculated scheme year], making any corrections that the UK ETS authority considers appropriate; and

(b)inform the regulator accordingly.

9.The regulator must give notice to the operator of each new installation:

(a)of the final annual number of allowances approved; and

[F5(b)where the final annual number of allowances to be allocated in respect of a new installation:

(i)for each scheme year in the 2021-2025 allocation period beginning with the first recalculated scheme year is zero, that the installation is not an FA installation for the 2021-2025 allocation period;

(ii)for the 2026 scheme year is zero, or for each scheme year in the 2027-2030 allocation period beginning with the first recalculated scheme year is zero, that the installation is not an FA installation for the 2026 and 2027-2030 allocation periods.]

[F69a.Paragraph 9(b) does not apply to a new installation:

(a)in the case of a split, if the installation before the split was an electricity generator;

(b)in the case of a merger, if any installation before the merger was an electricity generator.]

10.In this Article:

(a)“relevant allocation period” means:

(i)where any installation before the split or merger is an FA installation for the 2021-2025 allocation period, the 2021-2025 allocation period;

[F7(ii)where any installation before the split or merger is an FA installation for the 2026 and 2027-2030 allocation periods:

(aa)with an entry in the allocation table for the 2026 allocation period, the 2026 allocation period;

(bb)with an entry in the allocation table for the 2027-2030 allocation period, the 2027-2030 allocation period;]

(b)“transfer date”, in relation to the transfer referred to in paragraph 1, has the meaning given in paragraph 9 of Schedule 6 to the UK ETS Order.]

[F8(c)“first relevant calendar year” means—

(i)where the transfer date is before 31 March in a scheme year, the calendar year beginning 2 years before the scheme year in which the transfer date occurs;

(ii)where the transfer date is on or after 31 March in a scheme year, the calendar year before the scheme year in which the transfer date occurs;

(d)“first recalculated scheme year” means—

(i)where the transfer date is before 31 March in a scheme year, the scheme year in which the transfer date occurs;

(ii)where the transfer date is on or after 31 March in a scheme year, the scheme year after the scheme year in which the transfer date occurs.]

[F9(e)“incumbent installation” means:

(i)if the transfer date is before 31 March 2026, an installation in respect of which a deemed application for free allocation in the 2021-2025 allocation period is made;

(ii)if the transfer date is on or after 31 March 2026, an installation in respect of which an application under Article 4 for free allocation in the 2027-2030 allocation period is made.]

[F1011.This paragraph applies, in the case of a merger, where:

(a)the transfer date is after the date on which the allocation table for the 2026 allocation period is published but before 31 March 2026; and

(b)the installations before the merger include a type 1 2026 incumbent (as defined in Part 2 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025) and a type 2 2026 incumbent (as defined in that Part).

12.Where paragraph 11 applies:

(a)this Article applies as if:

(i)a reference to the first relevant calendar year were a reference to 2024;

(ii)a reference to the first recalculated scheme year were a reference to the 2027 scheme year;

(b)the operator of the new installation must comply with the obligation in Article 3 of the Activity Level Changes Regulation to report on activity levels in 2025 as if the merger had not taken place;

(c)paragraph 12 of Schedule 5A to the UK ETS Order applies as if in sub-paragraph (8) “and the transfer date (as defined in paragraph 9(6) of Schedule 6 to this Order) is on or after 31st March in a scheme year” were omitted.]

Textual Amendments

F6Art. 25(9a) 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), 19(2) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))