# The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024, Note: Explanatory note


(This note is not part of the Order)
The United Kingdom Emissions Trading Scheme (the “UK ETS”) was established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (the “UK ETS Order”). The UK ETS runs for a “trading period” consisting of 10 “scheme years” beginning with 2021, split into two 5-year “allocation periods”. Operators of certain industrial installations and certain aircraft operators are required to monitor, report on, and surrender “allowances” equivalent to, their greenhouse gas emissions in each scheme year. Allowances (which are tradable) are held in accounts in the UK ETS registry, and there is a cap on the number of allowances that may be created. Allowances are sold at auction, but some participants receive an allocation of allowances free of charge.
This Order amends inter alia the UK ETS Order and Commission Delegated Regulation (EU) 2019/331 (the “Free Allocation Regulation”). Articles 24 and 25 of the UK ETS Order provide that Commission Implementing Regulation (EU) 2018/2066 (the “Monitoring and Reporting Regulation 2018”) and Commission Implementing Regulation (EU) 2018/2067 (the “Verification Regulation 2018”) have effect for the purposes of the UK ETS, with modifications set out in Schedules 4 and 5 to the UK ETS Order, and this Order makes further modifications.
The main changes made by this Order are as follows.
The number of allowances that may be created, and the number available for free allocation for installations, is reduced (see amendments to articles 19, 20, 22 and 34G of the UK ETS Order and to Article 16a of the Free Allocation Regulation).
A “flexible reserve” of allowances is created, which may be used to top up free allocation for “incumbent” installations in the 2026-2030 allocation period before the application of a cross-sectoral correction factor or for auction (see new article 23A of the UK ETS Order and amendments to Article 16a of the Free Allocation Regulation). Consequential amendments are made to the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021.
The UK ETS is expanded to include (a) flights from Northern Ireland to Switzerland (see amendments to article 4 of, and Schedule 1 to, the UK ETS Order) and (b) the venting of carbon dioxide emissions released without a combustion process from installations in the “upstream” oil and gas sector that are required to participate in the UK ETS in any event by reason of combustion activities (see amendments to Schedule 2 to the UK ETS Order and further modifications to the Monitoring and Reporting Regulation 2018 and the Verification Regulation 2018). There is no free allocation for vented emissions (see amendments to the Free Allocation Regulation (other than to Article 16a)).
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023 is extended to Northern Ireland (see article 45 of this Order). That Order provides for aircraft operators whose free allocation exceeds their emissions to be required to return any excess allowances and makes provision in relation to carbon capture, transport and storage and free allocation for “electricity generators”.
There is an additional means of enforcing the obligation to surrender allowances – a “deficit notice” – and an associated civil penalty (see new articles 44A and 65A of the UK ETS Order).
There is a new civil penalty to enforce the requirement in article 27A of the UK ETS Order to provide information (see new article 60A of the UK ETS Order), and changes are made to the amount of the civil penalty that may be imposed under articles 52, 53, 56, 57 and 60 of the UK ETS Order.
This Order also makes a number of corrections and clarifications.
An impact assessment covering some of the policy given effect to by this Order is available from the Industrial Decarbonisation and Emissions Trading Directorate, Department for Energy Security and Net Zero, 3-8 Whitehall Place, London SW1A 2JP and is available alongside this Order on www.legislation.gov.uk.

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Source: https://www.legislation.gov.uk/uksi/2024/1366/note (the official version)
Page: https://openlegislation.uk/greenhouse-gas-emissions-trading-scheme-amendment-no-2-order-2024/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.