These Regulations make certain new provisions under the UK Emissions Trading Scheme (ETS) and introduce mechanisms to support market stability in this new scheme. The UK ETS was established by the Greenhouse Gas Emissions Trading Scheme Order 2020 (GGETS Order) as a UK-wide greenhouse gas emissions trading scheme to encourage cost- effective emissions reductions which will contribute to the UK’s emissions reduction targets and net zero goal. It is estimated that the provisions of these Regulations, as well as that under the UK ETS as a whole, will impact those businesses who work in the power, aviation and industry sectors.
The GGETS Order was implemented through amending provisions made under the Climate Change Act 2008 in November 2020. The Order set up a UK ETS to be operational from the start of 2021, and takes the place of the now-defunct EU Emissions Trading System. In summary, the GGETS Order regulates the overall greenhouse gas emissions in the UK, and permits the creation of allowances to emit one tonne of carbon dioxide equivalent.
The Order also sets a limiting cap on the number of allowances which may be created in any scheme year. The GGETS Auctioning Regulations 2021 provide for the auctioning of allowances created under the GGETS Order, making equivalent provision in relation to these allowances to that made by Commission Regulation (EU) No 1031/2010 on the timing, administration and other aspects of auctioning of greenhouse gas allowances pursuant to Directive 2003/87/EC, the EU legislation which established the EU Emission Trading Scheme, in relation to EU emission allowances.
As a result, these Regulations run parallel with the Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021, which creates an oversight role for the Financial Conduct Authority (FCA) in the UK ETS and emission allowance market.
