Updates

UK ETS – Application window moved to 2025

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The next application window for free allocations, as well as for Hospital Small Emitter and Ultra Small Emitter schemes, has been moved to 1st April 2025 – 30th June 2025. Operators not applying for free allocations must also provide information to the UK ETS Authority during this window.

Background

The UK Emissions Trading Scheme (UK ETS) was introduced by The Greenhouse Gas Emissions Trading Scheme Order 2020, following the United Kingdom’s exit from the European Union. The scheme was designed to maintain continuity with the EU ETS and began on 1st January 2021.

How does it work

A cap on the total amount of certain greenhouse gases (GHG) that can be emitted by sectors covered by the scheme is set by the UK ETS Authority. The cap is reduced over time, so that total emissions must fall.

Within this cap, free allowances are issued to eligible participants while other emission allowances can be purchased at auction or on the secondary market and traded with other participants as needed. Each year, the participants covered by the scheme must surrender allowances to cover their reportable emissions.

Who the UK ETS applies to

The UK ETS covers greenhouse gas emissions (GHG) from:

  • power and heat generation;
  • energy intensive industries; and
  • aviation.

Simplified requirements apply for:

  • hospitals, and small emitters (with emissions lower than 25000 tonnes of CO2 per year); and
  • ultra-small emitters (with emissions lower than 2500 tonnes per year).

Allocation periods

Phase I of the UK ETS runs from 2021 to 2030 and is split into 2 allocation periods:

  • 2021-2025 allocation period; and
  • 2026-2030 allocation period.

Before each allocation period, participants must apply for the relevant scheme, during the specified application window. The application window for the 2026 – 2030 period, was previously set as 1st April 2024 – 30th June 2024.

What is changing?

The next application window for free allocations, as well as for Hospital Small Emitter and Ultra Small Emitter schemes, has been moved to 1st April 2025 – 30th June 2025. Operators not applying for free allocations must also provide information to the UK ETS Authority during this window.

Why is it changing?

The application window is moved due to an on-going consultation on changes to free allocation policy, opened by the UK ETS Authority. A final decision in response to this consultation is expected by the end of 2024.

Moving the application windows to 1 April 2025 – 30 June 2025 will enable the UK ETS Authority to finalise the policy for the 2026-2030 allocation period.

This will allow operators to determine:

  • their eligibility;
  • what free allocations they are applying for;
  • which data to submit; and
  • whether they should apply under the HSE or USE schemes.

The change to application windows aims to provide certainty to UK ETS operators about what the free allocation rules will be during the allocation period 2026-2030 before they apply.

Detailed guidance on participating in the UK ETS can be accessed here.