CHAPTER I

General provisions

Eligibility for free allocation
Article 2a
1. An application for free allocation of allowances may not be made under this Regulation in respect of:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
  2. an electricity generator, except in relation to measurable heat:
    1. produced by an electricity generator that produced measurable heat by means of high-efficiency cogeneration (as defined in Article 2(34) of Directive 2012/27/EU of the European Parliament and of the Council of 25 October 2012)
...; or
    2. exported for the purposes of district heating.
2. For the purposes of
this Article
:
  1. the “relevant period” is:
    1. in the case of a deemed application for free allocation in the 2021-2025 allocation period or an application for free allocation in the
2027-2030
allocation period under Article 4, the baseline period;
    2. in the case of an application for free allocation under Article 5
made after the end of the first full calendar year after the start of normal operation of a heat benchmark sub-installation
, the period from the start of normal operation until the end of the year before the year in which the application is made;
  2. Directive 2012/27/EU has effect as if in Annex 2 in point (a) in the first indent after “heat and electricity” there were inserted
“ ; and for the purposes of this indent, cogeneration production from cogeneration units certified under the standard applying from time to time for the purposes of the Combined Heat and Power Quality Assurance Programme that provides primary energy savings during the period of certification must be treated as providing primary energy savings of at least 10% during that period ”
.
3. An application for free allocation may be made in respect of an electricity generator in relation to measurable heat
, or the first stage of such an application under Article 4 may be completed,
whether or not at the date of the application
, or of the completion of the first stage,
the electricity generator has produced measurable heat by means of high-efficiency cogeneration or has exported measurable heat for the purposes of district heating.
4. Paragraphs 5 and 6 apply where an application for free allocation is made in respect of an electricity generator in relation to measurable heat
or where the first stage of such an application under Article 4 is completed
.
5. For the purposes of Chapter 3 of this Regulation
, Articles 3a to 6a of the Activity Level Changes Regulation and Part 2 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025
(which relate to the calculation of free allocation), the installation must be treated as not including any heat benchmark sub-installation unless the heat benchmark sub-installation:
  1. in a case where the installation includes the heat benchmark sub-installation at the date of the application and the application is made under Article 4 or under Article 5 after the end of the first full calendar year after the start of normal operation of the sub-installation
, or in a case where the installation includes the heat benchmark sub-installation at the date of completion of the first stage of an application under Article 4
, produced measurable heat by means of high-efficiency cogeneration in the relevant period, calculated over the relevant period as a whole; or
  2. in any other case, produces measurable heat by means of high-efficiency cogeneration in any subsequent qualifying period, calculated over the subsequent qualifying period as a whole.
6. Where paragraph 5(b) applies, Article 3a of the Activity Level Changes Regulation applies to the heat benchmark sub-installation as if its start of normal operation, if before the beginning of the subsequent qualifying period, were at the beginning of the subsequent qualifying period.
7. In paragraphs 5 and 6, “
subsequent qualifying period
” means, in relation to a heat benchmark sub-installation, any period including at least one full calendar year of operation of the heat benchmark sub-installation that:
  1. ends with 31 December:
    1. in the case of an application under Article 4, in any scheme year (“year 2”) beginning with the second scheme year after the baseline period;
    2. in the case of an application under Article 5, in any scheme year (“year 2”) beginning with the first scheme year for which a report on the activity level of the sub-installation in that year is required under Article 3 of the Activity Level Changes Regulation; and
  2. begins with 1 January in the scheme year preceding year 2 or, if the start of normal operation of the heat benchmark sub-installation is later, the start of normal operation of the sub-installation.
8. The following regulated activities are not eligible for free allocation:
  1. the capture of greenhouse gases from a regulated activity for the purpose of transport and geological storage in a storage site;
  2. the transport of greenhouse gases by pipelines for geological storage in a storage site;
  3. the geological storage of greenhouse gases in a storage site.
Art. 2a inserted (31.12.2020) by The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020 (S.I. 2020/1557), art. 2(2), Sch. 1 para. 5
Art. 2a(3)-(8) 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), 13(4) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))
Art. 2a(1)(a) omitted (E.W.S.) (1.1.2024 immediately after S.I. 2023/850 comes into force) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 (S.I. 2023/1387), arts. 2(1), 13(2)(a) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))
Words in Art. 2a(1)(b)(i) omitted (E.W.S.) (1.1.2024 immediately after S.I. 2023/850 comes into force) by virtue of The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 (S.I. 2023/1387), arts. 2(1), 13(2)(b) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))
Words in Art. 2a(2) substituted (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), 13(3)(a) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))
Words in Art. 2a(2)(a)(ii) 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), 13(3)(b) (which amendment was extended to N.I. (1.1.2025) by virtue of S.I. 2024/1366, arts. 2(2)(a), 45(2))
Word in Art. 2a(2)(a)(i) substituted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(2)
Words in Art. 2a(3) inserted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(3)(a)
Words in Art. 2a(3) inserted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(3)(b)
Words in Art. 2a(4) inserted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(4)
Words in Art. 2a(5) substituted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(5)(a)
Words in Art. 2a(5)(a) inserted (31.3.2025) by The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (S.I. 2025/124), arts. 2, 35(5)(b)