UK ETS Consultation: Participants receiving free allocation

Swan Energy has produced a guidance document to summarise the Developing the UK Emissions Trading Scheme – UK ETS consultation document under  a number of headlines – one being for UK ETS participants who receive free allocation. Here we highlight the key points.

In summary:

1 – The Authority proposes to reset the industry cap to 37% of the overall allowance cap.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 4 – 6 in the response survey.

  • Should the industry cap be reset?
  • Do you agree with the industry cap being reset to a percentage (37%) instead of a fixed figure?

 

2 – The Authority proposes to target free allocations at those at greatest risk of carbon leakage and those who have limited ability/opportunity to decarbonise.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 7 – 11 in the response survey.

  • Do you agree with the three principles set out above?
  • Are there any other aspects (i.e., eligibility, calculation, etc.) of the free allocation policy that need reviewing?

 

3 – The Authority proposes to implement a Carbon Border Adjustment Mechanisms and mandatory product standards to reduce carbon leakage.

The Authority wishes to hear your thoughts on the following. This section relates to Question 12 in the response survey.

  • Are there other carbon leakage mitigation policies that the UK Government, Scottish Government, Welsh Government, and DAERA, have not considered, that you wish to flag up?

 

4 – The Authority proposes to omit the 2020 COVID year from the calculation of change in activity level in 2022.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 13 – 17 in the response survey.

  • Do you agree with the proposal?
  • What data would you be able to provide to prove that the COVID-19 pandemic caused significant discrepancies between reductions in output and emissions?
  • How should “significant discrepancies” be defined?
  • Should the Authority implement an inclusion criterion for those eligible for 2020 COVID year omission?
  • If 2020 is omitted, which years should be considered in the calculation of Activity Level Changes in 2022?

 

5 – There will be no changes to the ALC Regulation to consider the turn-off of activity.

The Authority wishes to hear your thoughts on the following. This section relates to Question 18 in the response survey.

  • Do you agree with the proposal?

 

6 – The Authority proposes to update the allocations of existing sub-installations based on current year should they invest in increasing their production capabilities.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 19 – 20 in the response survey.

  • Do you agree with the proposal?
  • What data would you be able to provide to prove that the increase in output is due specifically to investments to increase production capabilities?

 

7 – The Authority proposes that the time of year a permit transfer occurs will determine whether the free allocation of allowances should be merged, issued, and adjusted.

The Authority wishes to hear your thoughts on the following. This section relates to Question 21 in the response survey.

  • Do you agree with the proposal?

 

8 – The Authority proposes to that the new UK ETS benchmark values should be incorporated directly into UK law.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 179 – 184 in the response survey.

  • Do you agree with the proposed approaches?
  • Are there alternative approaches that have not been considered?

 

9 – The Authority proposes that an operator will be penalised should they fail to surrender allowances

The Authority wishes to hear your thoughts on the following. This section relates to Questions 191 – 193 in the response survey.

  • Do you agree with the proposal?

 

10 – The Authority proposes to that in the instance that an operator fails to surrender allowances by the deadline in a surrender or revocation notice, regulators may have the power to issue a further penalty and deadline notice.

The Authority wishes to hear your thoughts on the following. This section relates to Questions 194 – 196 in the response survey.

  • Do you agree with the proposals?
  • Do you agree that the regulators should be empowered?
  • Do you agree that operators with surrendered or revoked permits should be pursued if historic errors are discovered in emissions reporting?

 

More detailed that is relevant to all UK ETS participants who receive free allocation is included in our summary document. If anyone would like to receive the full guide, please call us on 01484 843867 or email info@swanenergy.co.uk and we’ll be in touch.

Swan Energy has been involved with the UK ETS (formerly EU ETS) since its conception and delivers 100% compliance for our clients. Click here to find out more about our service.

Rebecca Scarratt

Carbon Consultant

Rebecca Scarratt

Carbon Consultant

Rebecca has joined the Swan Energy team in 2021. She graduated from the University of Hull with a BSc in Geology with Physical Geography in 2020 and went on to do a MSc in Renewable Energy. Her Masters’ thesis focused on how future climate change may impact the Humber region’s wind energy sector and how adaptation strategies could be used to reduce vulnerability.

In her role at Swan Energy, Rebecca supports the consultancy work the team does with clients across the UK.