Paragraph 20 Articles 16a and 16b insertedI1

After Article 16 insert—

“Article 16a

Cross-sectoral correction factors

1

This Article applies where, for a scheme year (the “relevant scheme year”) in an allocation period:

(a)

the sum (“PFA”) of the preliminary annual number of allowances to be allocated in respect of all installations in the relevant scheme year calculated under Article 16 (including any corrections required under Article 16(11)) is greater than the industry cap (“IC”) for the relevant scheme year; and

(b)

the amount by which PFA exceeds IC is greater than the previous unallocated amount.

2

The previous unallocated amount is TIC + FS - TFA, where:

(a)

TIC is the sum of the industry cap for each scheme year in the trading period preceding the relevant scheme year;

(b)

FS is 40,984,970 allowances (the flexible share);

(c)

TFA is the sum of the final allocation for each scheme year in the trading period preceding the relevant scheme year.

3

The final allocation for a scheme year is the sum of—

(a)

the total preliminary annual number of allowances calculated under Article 16 to be allocated in the scheme year in respect of all installations other than electricity generators multiplied by the cross-sectoral correction factor (if any) for the scheme year determined under this Article; and

(b)

the total preliminary annual number of allowances calculated under Article 16 to be allocated in the scheme year in respect of all electricity generators multiplied by the cross-sectoral correction factor (if any) for the scheme year determined under this Article or, if there is no cross-sectoral correction factor for the scheme year, the reduction factor for the scheme year.

4

The UK ETS authority must determine the cross-sectoral correction factor for the relevant scheme year, that is to say the factor that reduces PFA by such amount that TIC + IC + FS = TFA + the final allocation for the relevant scheme year.

5

The UK ETS authority must, as soon as reasonably practicable, publish for each allocation period:

(a)

the cross-sectoral correction factors for scheme years in the allocation period determined under paragraph 4; or

(b)

if there is no cross-sectoral correction factor for any scheme year in the allocation period, a statement to that effect.

6

For the purposes of this Article:

(a)

the industry cap for a scheme year set out in column 1 of table A is the number of allowances set out in the corresponding entry in column 2;

(b)

the reduction factor for a scheme year set out in column 1 of table A is the value set out in the corresponding entry in column 3.

Table A

Column 1 Scheme year	Column 2 Industry cap	Column 3 Reduction factor
2021	57,856,572	0.8562
2022	56,273,432	0.8342
2023	54,690,292	0.8122
2024	53,107,152	0.7902
2025	51,524,012	0.7682
2026	49,940,872	0.7462
2027	48,357,732	0.7242
2028	46,774,592	0.7022
2029	45,191,452	0.6802
2030	43,608,312	0.6582

7

In this Article and Article 16b, “installation” does not include an installation if:

(a)

a deemed application for free allocation in the 2021-2025 allocation period was made in respect of the installation and the installation is included in the hospital and small emitter list for 2021-2025 or the ultra-small emitter list for 2021-2025; or

(b)

an application for free allocation in the 2026-2030 allocation period is made in respect of the installation under Article 4 and the installation is included in the hospital and small emitter list for 2026-2030 or the ultra-small emitter list for 2026-2030.

8

Accordingly, the matters referred to in paragraph 5 must not, in relation to the 2026-2030 allocation period, be published before the publication of the hospital and small emitter list for 2026-2030 and the ultra-small emitter list for 2026-2030 under the UK ETS Order (see paragraph 5(5) of Schedule 7, and paragraph 3(6) of Schedule 8, to that Order)

Article 16b

Final allocation at installation level for incumbent installations

1

Where the preliminary annual number of allowances to be allocated in respect of an installation has been calculated under Article 16, the regulator must, as soon as reasonably practicable after the publication of the matters referred to in Article 16a(5):

(a)

calculate the final annual number of allowances to be allocated in respect of each installation and each sub-installation of each installation:

(i)

in the case of a deemed application for free allocation in the 2021-2025 allocation period, for each scheme year in the 2021-2025 allocation period;

(ii)

in the case of an application for free allocation in the 2026-2030 allocation period under Article 4, for each scheme year in the 2026-2030 allocation period; and

(b)

send the calculation to the UK ETS authority.

2

The final annual number of allowances to be allocated for a scheme year in respect of a sub-installation is the preliminary annual number of allowances calculated under Article 16 (including any corrections required under Article 16(11)) multiplied by:

(a)

in the case of sub-installation of an installation other than an electricity generator, the cross-sectoral correction factor for the scheme year (if any) determined under Article 16a;

(b)

in the case of a sub-installation of an electricity generator, the cross-sectoral correction factor for the scheme year determined under Article 16a or, if there is no cross-sectoral correction factor for the scheme year, the reduction factor for the scheme year (see Article 16a(6)).

3

The final annual number of allowances to be allocated in respect of an installation for a scheme year is the sum of the final annual number of allowances to be allocated in respect of all sub-installations of the installation.

4

The UK ETS authority must:

(a)

approve the final annual number allowances, making any corrections to the calculation that the UK ETS authority considers appropriate;

(b)

inform the regulator accordingly.

5

For the purpose of the calculation referred to in paragraphs 2 and 3, the number of allowances for sub-installations and installations must be expressed as the nearest integer, taking 0.5 as nearest to the previous integer.”.