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The Greenhouse Gas Emissions Trading Scheme Order 2020

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CHAPTER 2U.K.Allowances and caps

AllowancesU.K.

18.—(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.]

Textual Amendments

Commencement Information

I1Art. 18 in force at 12.11.2020, see art. 2(1)

Cap for trading periodU.K.

19.  The number of allowances created in the trading period may not exceed the sum of—

(a)[F3633,116,297] multiplied by the 2021-2025 hospital and small emitter reduction factor; and

(b)[F4302,924,924] multiplied by the 2026-2030 hospital and small emitter reduction factor.

Textual Amendments

Commencement Information

I2Art. 19 in force at 12.11.2020, see art. 2(1)

Cap for scheme yearsU.K.

20.—[F5(1) The number of allowances created in a scheme year may not exceed F6...—

(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 F7... period, the 2026-2030 hospital and small emitter reduction factor; F8...

F9(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F10(2) But the restriction in paragraph (1) does not apply to the creation of allowances—

(a)for the flexible reserve (see article 23A);

(b)for the new entrants’ reserve (see article 34G);

(c)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.]

(3) [F11Nothing in this article overrides] article 19.

Textual Amendments

Commencement Information

I3Art. 20 in force at 12.11.2020, see art. 2(1)

Cap: hospital and small emitter reduction factorsU.K.

21.—(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 [F12as satisfactory] in accordance with the Verification Regulation 2012 or the Verification Regulation 2018;

[F13(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.

Textual Amendments

Commencement Information

I4Art. 21 in force at 12.11.2020, see art. 2(1)

Cap: base for scheme yearsU.K.

22.  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.

Table B
Column 1Column 2
Scheme yearBase
2021155,671,581
2022151,437,134
2023147,202,686
2024[F1492,062,882]
2025[F1586,742,014]
2026[F1679,059,690]
2027[F1770,127,996]
2028[F1853,498,502]
2029[F1950,918,572]
2030[F2049,320,164]

Textual Amendments

Commencement Information

I5Art. 22 in force at 12.11.2020, see art. 2(1)

Trading in allowancesU.K.

23.  Allowances may be traded, except where prohibited by other legislation.

Commencement Information

I6Art. 23 in force at 12.11.2020, see art. 2(1)

[F21Flexible reserveU.K.

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 under Article 16b of the Free Allocation Regulation (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 F22...) 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 [F23or Part 2 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025] to be allocated in respect of all installations for all scheme years in the [F242026 allocation period and the 2027-2030 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 (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) [F25or in accordance with article 8 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025];

(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.]

Textual Amendments

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