The second and final stage of the UK ETS free allocation application process is now open, and operators have until the 30th of June. This submission finalises your free allocation application for 2027–2030 and is the last opportunity to influence those figures before the next allocation period begins.
What do most operators need to submit?
Full participant operators will need to confirm their UK ETS free allocation application using the updated Baseline Data Report (BDR) template, which is now available to download from the operator details page on the METS portal. As mentioned in previous blogs, sites will also have to declare any CBAM obligations and can exclude covid affected years from the historic activity level (HAL).
The Covid exclusion decision
To account for pandemic related disruption, operators may exclude 2020 only, or both 2020 and 2021 from their HAL. This adjustment can be valuable for installations that experienced unusually low production during these years and could increase their initial free allocation.
However, this isn’t automatically the right call for all operators. Your HAL is the level against which your ongoing activity, over a two year average, is measured each year. If activity level data shows an increase or decrease of 15% or more from historical activity levels, free allocation will be recalculated proportionately.
If excluding the Covid years pushes your baseline above your actual operating level in 2027–2030, you could find yourself triggering a downward activity level change and losing allocation where you otherwise may not. Inversely, a high baseline could hinder an installation receiving additional allocation where the two year average increases but not enough to breach the 15% threshold.
While a high initial free allocation may seem like the obvious choice, it may not be the case for all operators.
If you would like to discuss the baselining submission or free allocations, please get in touch with Swan Energy.
