The UK ETS Authority is seeking opinions about the possibility of delaying the beginning of the next period.
On Thursday the 26th of September, the UK ETS Authority called for a view on postponing the start of the second UK ETS allocation period. This follows on from a wider consultation reviewing free allocation policy as a whole, which highlighted free allocation as being the only existing carbon leakage mitigation tool. Many respondents to this consultation called for this policy to be aligned with other incoming measures to reduce carbon leakage risk – with the vast majority specifically mentioning an alignment with the new Carbon Border Adjustment Mechanism (CBAM) due to come into effect in 2027.
Due to this the Authority has proposed to delay the next allocation period (currently 2026 – 2030) to begin in 2027 instead. In this proposal, the 2026 UK ETS would be treated as an extension of the current allocation period which was due to end after scheme year 2025. However, the baseline data reporting exercise will continue to take place from 1 April to 30 June 2025 as planned. Any applications for free allocation would normally take place with the baseline reporting but are proposed to move back a year to 2026.
The Authority has stated the delay will allow better alignment of overall policy and a more effective approach to tackling carbon leakage risk. However, the additional year before the start of the next allocation period will also allow for more consideration of stakeholder views in further changes to the free allocation rules themselves.
If you would like to respond to this consultation, you can do so before the closing date of the 11th of October via email to ukets.consultationresponses@energysecurity.gov.uk.
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