The Greenhouse Gas Emissions Trading Scheme Order 2020
25 January 2021
Amends/Commences: New entry
Comes into force: 1st January 2021
Jurisdiction: UK
Following the UK’s exit from the EU, this Order establishes a UK Emissions Trading Scheme (UK ETS) covering greenhouse gas emissions (GHG) from power and heat generation, energy intensive industries and aviation. It replaces the European Union Emissions Trading System (EU ETS) for UK participants.
The UK ETS does not significantly change the requirements for participating UK operators from those brought in by the EU ETS. Elements of the scheme will be familiar to operators. It is designed to maintain continuity with the EU ETS and to facilitate possible linkage in the future, however this is subject to ongoing trade negotiations between the UK and EU and would require further secondary legislation.
The UK ETS continues the principals of emissions trading by allocating and trading GHG emissions allowances. One allowance equals one tonne of carbon dioxide (CO2) equivalent. At the end of each year, installations must have enough allowances to account for their GHG emissions. They have the flexibility to buy additional allowances on top of their allocation, or to sell surplus allowances generated from reducing their emissions below their allocation
Allocation periods
Phase I of the UK ETS will run from 2021-2030 and is split into two allocation periods:
Scope of the scheme
Installations must be part of the UK ETS if they conduct a regulated activity. As there are no changes to this list of regulated activities from the EU ETS, if operators were part of the EU ETS then they remain part of the UK ETS.
Greenhouse gas emissions permits
Greenhouse gas emissions permits can be applied for, varied, transferred, surrendered and revoked. Permits can be transferred by the permit holder to a new operator, by both parties jointly applying to the regulator.
Allowances
Each operator has a number of allowances which must be surrendered to cover their emissions through monitoring and reporting.
Monitoring and reporting
Operators must monitor reportable emissions each year, and in the following year, report them and surrender a number of allowances equal to those emissions. The reporting year runs from 1st January to 31st December each year.
The deadline each year for submitting reports each year to the regulator is on or before 31st March in the following year.
Requirements under the existing EU ETS scheme:
Note that under The Greenhouse Gas Emissions Trading Scheme Regulations 2012 during the transition period from 1st February to 31st December 2020, the UK remained a full participant in the EU ETS. This means that participating UK operators must still meet their 2020 compliance obligations under EU ETS.
The deadlines for UK operators participating in the EU ETS during the transition period are:
Comes into force: 1st January 2021
Jurisdiction: UK
Following the UK’s exit from the EU, this Order establishes a UK Emissions Trading Scheme (UK ETS) covering greenhouse gas emissions (GHG) from power and heat generation, energy intensive industries and aviation. It replaces the European Union Emissions Trading System (EU ETS) for UK participants.
The UK ETS does not significantly change the requirements for participating UK operators from those brought in by the EU ETS. Elements of the scheme will be familiar to operators. It is designed to maintain continuity with the EU ETS and to facilitate possible linkage in the future, however this is subject to ongoing trade negotiations between the UK and EU and would require further secondary legislation.
The UK ETS continues the principals of emissions trading by allocating and trading GHG emissions allowances. One allowance equals one tonne of carbon dioxide (CO2) equivalent. At the end of each year, installations must have enough allowances to account for their GHG emissions. They have the flexibility to buy additional allowances on top of their allocation, or to sell surplus allowances generated from reducing their emissions below their allocation
Allocation periods
Phase I of the UK ETS will run from 2021-2030 and is split into two allocation periods:
- 2021-2025 allocation period; and
- 2026-2030 allocation period.
Scope of the scheme
Installations must be part of the UK ETS if they conduct a regulated activity. As there are no changes to this list of regulated activities from the EU ETS, if operators were part of the EU ETS then they remain part of the UK ETS.
Greenhouse gas emissions permits
Greenhouse gas emissions permits can be applied for, varied, transferred, surrendered and revoked. Permits can be transferred by the permit holder to a new operator, by both parties jointly applying to the regulator.
Allowances
Each operator has a number of allowances which must be surrendered to cover their emissions through monitoring and reporting.
Monitoring and reporting
Operators must monitor reportable emissions each year, and in the following year, report them and surrender a number of allowances equal to those emissions. The reporting year runs from 1st January to 31st December each year.
The deadline each year for submitting reports each year to the regulator is on or before 31st March in the following year.
Requirements under the existing EU ETS scheme:
Note that under The Greenhouse Gas Emissions Trading Scheme Regulations 2012 during the transition period from 1st February to 31st December 2020, the UK remained a full participant in the EU ETS. This means that participating UK operators must still meet their 2020 compliance obligations under EU ETS.
The deadlines for UK operators participating in the EU ETS during the transition period are:
- 31th March 2021 - submit Verified Annual Emissions Report for 2020 emissions; and
- 30th April 2021 - surrender equivalent allowances to 2020 verified emissions.