Synopsis
This order will amend legislation implementing the UK Emissions Trading Scheme (UK ETS): the Greenhouse Gas Emissions Trading Scheme Order 2020, assimilated Free Allocation Regulation (EU) 2019/331 and Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021.
Carbon dioxide venting from the upstream oil and gas sector and flights from Northern Ireland to Switzerland will be brought into the scheme. Rules on free allocations will be updated, including to reflect net-zero commitments.
Summary
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024 will amend the Greenhouse Gas Emissions Trading Scheme Order 2020, assimilated Free Allocation Regulation (EU) 2019/331 and Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021. The amending order is expected to come into force on 1 January 2025.
This legislation will apply across the UK.
What will change?
Revised free allocations of allowances
Amendments will reduce free allocations of UK ETS allowances to mirror net zero greenhouse gas emissions reduction commitments under the Climate Change Act 2008.
The assimilated Free Allocation Regulation (EU) 2019/331 will also be amended to provide a ‘flexible reserve’ of allowances, which may be freely allocated to installations between 2026 and 2030. This reserve is intended to ensure scheme stability.
Inclusion of carbon dioxide venting from the upstream oil and gas sector
Schedule 2, which defines installations obligated under the UK ETS, will be amended on 1 April 2025 to add the venting of carbon dioxide emissions from upstream oil and gas installations. This includes where a combustion process is not operated.
Installations undertaking this activity will be required to obtain a greenhouse gas emissions permit. These installations will not receive free allocations of allowances.
Changes to civil sanctions
New ‘deficit notices’ may be used to require the surrender of further allowances when a shortfall arises. Financial penalties may also be applied.
Financial penalties may also be applied when an installation operator fails to make the required applications for the 2026-2030 allocation period. The amount of penalties charged for a range of offences will also be updated.
Further flights brought into scope
The UK ETS will now cover flights from Northern Ireland that arrive in Switzerland. This will affect aviation operators.
New obligations in Northern Ireland
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 will be applied under the UK ETS in Northern Ireland. This will reflect existing obligations in Great Britain. The changes adjusted free allocation rules for electricity generators and carbon capture, transport and storage. Rules will also apply on the return of excess allowances issued to aircraft operators.
Background
The Greenhouse Gas Emissions Trading Scheme Order 2020 applies the UK ETS, which began operation on 1 January 2021. The UK ETS replaced the former EU ETS and covers a range of installations and aviation operators in the UK.
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