The 2026 UK ETS baseline window (running from 1 April to 30 June 2026) is the second and final submission required ahead of the next allocation period beginning in 2027. This window is key because it determines how much free allocation full‑participant installations will receive for 2027–2030, and therefore how exposed operators may be to carbon costs for the remainder of the decade.
The Government’s decision to delay the next allocation period from 2026 to 2027 split the baselining process into two stages:
1 – 2025 UK ETS Baseline Window (Completed)
Operators eligible for free allocation submitted a verified Baseline Data Report (BDR) covering activity levels for 2019–2023.
Installations seeking to join the Hospital/Small Emitter (HSE) opt‑out scheme also submitted evidence to support their transition from 2026.
2 – 2026 UK ETS Baseline Window (Current)
This year’s submission finalises the data that will drive free allocation for 2027-2030. It is the second and final submission ahead of the next allocation period beginning in 2027.
Installations must confirm their intention to apply for free allocation during this window. Sites that applied for both free allocation and HSE opt‑out status last year must now confirm their final choice for 2027 onwards.
There are some key changes for the 2026 submissions:
1 – COVID‑Year Exclusions
To account for pandemic‑related disruption, operators may exclude 2020 only, or 2020 and 2021 from their Historical Activity Level (HAL) submitted in 2025.
This adjustment is particularly valuable for installations that experienced abnormally low production during the pandemic, as it may increase their free allocation entitlement.
2 – Carbon Border Adjustment Mechanism (CBAM) Declaration
For the first time, operators must declare whether they produce goods covered by the incoming UK CBAM, which applies from 1 January 2027. CBAM‑regulated sectors include Aluminium, Cement, Fertilisers, Hydrogen and Iron & Steel.
Installations producing CBAM‑covered goods must split energy use between CBAM and non‑CBAM production. Because this split was not included in the 2025 BDR, operators will need third‑party verification during the 2027 window. This introduces a new layer of complexity and verification requirements.
This 2026 UK ETS baseline window is the last opportunity to influence free allocation levels for 2027–2030. It is important that installations get this right as it will affect them for the next four years. 2026 is a critical year for or assurance and compliance.
Swan Energy has been involved with the UK ETS since its inception and delivers 100% compliance for clients. We are a safe pair of hands so please click here to find out more about how we can support you through the 2026 UK ETS Baseline process.
