Jurisdiction: United Kingdom
Commencement: 31st January 2025
Amends: The Greenhouse Gas Emissions Trading Scheme Order 2020
Mini Summary
Following the UK’s exit from the EU, the Greenhouse Gas Emissions Trading Scheme Order 2020 establishes a UK Emissions Trading Scheme (UK ETS) covering greenhouse gas emissions from power and heat generation, energy intensive industries and aviation.
Duties
Various duties apply and are available to view on the Legislation Update Service.
Amendment
Free allocation period
In order to align with the Carbon Border Adjustment Mechanism (CBAM), the start of the second allocation period for stationary installations has been moved from 2026 to 2027, making 2026 a standalone scheme year. The 2026 scheme year is to be treated as an extension of the first allocation period of 2021–2025.
The application period will be split into two periods with the first being April-June 2025 for data collection and the second being April-June 2026.
Hospitals, Small and Ultra-Small Emitters
Hospitals and small emitters (HSE) and ultra-small emitters (USEs)* may request to voluntarily exit the HSE or USE scheme and re-enter the main UK ETS for the 2027-2030 allocation period, and to apply to receive free allocation in that period if they are eligible.
Installations with low levels of emissions which started operations between 2nd January 2021 and 1st January 2024 inclusive can apply to be classed as ultra-small emitters (USEs) during the 2027-2030 period.
*Ultra-small emitters are installations that emit less than 2,500 tonnes of carbon dioxide equivalent per year.
In order to align with the Carbon Border Adjustment Mechanism (CBAM), the start of the second allocation period for stationary installations has been moved from 2026 to 2027, making 2026 a standalone scheme year. The 2026 scheme year is to be treated as an extension of the first allocation period of 2021–2025.
The application period will be split into two periods with the first being April-June 2025 for data collection and the second being April-June 2026.
Hospitals, Small and Ultra-Small Emitters
Hospitals and small emitters (HSE) and ultra-small emitters (USEs)* may request to voluntarily exit the HSE or USE scheme and re-enter the main UK ETS for the 2027-2030 allocation period, and to apply to receive free allocation in that period if they are eligible.
Installations with low levels of emissions which started operations between 2nd January 2021 and 1st January 2024 inclusive can apply to be classed as ultra-small emitters (USEs) during the 2027-2030 period.
*Ultra-small emitters are installations that emit less than 2,500 tonnes of carbon dioxide equivalent per year.
Further detail can be viewed on the Legislation Update Service or below.