The UK Emissions Trading Registry and Free Allocation of Allowances
The UK Emissions Trading Registry
The UK Emissions Trading Registry operates in a similar way to an online bank account. The Registry is a secure web-based application that serves as both the UK Emissions Trading Scheme Registry (UK ETS Registry) holding allowances, and the UK Kyoto Protocol Registry holding international units.
UK ETS Registry records include:
- allowances held in Operator Holding Accounts (OHA), Aircraft Operator Holding Accounts (AOHA), Trading Accounts and Government Accounts
- the movement of allowances between accounts and details of verified emissions and allowances surrendered by operators
- matters relating to the free allocation of allowances to Operator Holding Accounts and Aircraft Operator Holding Accounts
UK Kyoto Protocol Registry records include:
- holdings of international units in accounts
- international unit transfers
Operator Holding Account (OHA) and Aircraft Operator Holding Account
Installation operators must have an Operator Holding Account (OHA) in the Registry to acquire and surrender allowances in line with their UK ETS obligations. Aircraft operators must have an Aircraft Operator Holding Account (AOHA).
OHAs and AOHAs can also be used to trade allowances (UKAs) in the UK ETS markets.
Once your permit or emissions monitoring plan has been issued by your regulator, they will instruct the Registry Administrator to open an OHA, or AOHA for you. You will be contacted by the Registry Administrator and asked to provide details of a primary contact (who is authorised to give instructions to the Registry Administrator on your behalf), and also to nominate authorised representatives to operate your OHA, or AOHA for you.
UK ETS trading accounts are available for the holding and trading of UK allowances as an activity unrelated to UK ETS compliance. Trading accounts cannot be used for UK ETS compliance, but operators are able to use their OHAs and AOHAs to trade.
To open a trading account, you must first register to use the service, and then request a trading account. The Registry Administrator will then get in touch with you to guide you through the remainder of the process.
Trading accounts require at least 2 registered authorised representatives to operate the account.
Person Holding Accounts
The Registry is also used to host the UK Kyoto Protocol Registry, and Person Holding Accounts are available to be requested if you need to hold or trade international units.
Opening a UK Registry Account
The opening of a UK Registry account and the validation of individuals involves the same level of scrutiny as when opening a bank account. This will include requesting any further information to satisfy the Registry Administrator that you are a fit and proper person to hold an account or to act as an authorised representative in relation to an account. As such, this process can take up to 2 months (and longer in some cases).
Free Allocation of Allowances
The free allocation of allowances to eligible installation operators and aircraft operators will continue, to reduce the risk of carbon leakage for UK businesses.
The initial approach to free allocation in the UK ETS is similar to the EU’s approach for Phase IV of the EU ETS. This ensures continuity for businesses in this area of the scheme. The benchmarks used to calculate free allocation entitlement are the same as Phase IV of the EU ETS.
Legislation covering free allocation is in The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020, which came into force on 31 December 2020.
Free Allocation for installation operators
Free allocations will be made available for operators of eligible installations who applied for a free allocation of allowances for the 2021 to 2025 allocation period and for new entrants to the UK ETS. The free allocation application validity will be determined by the UK ETS Authority.
Each installation’s free allocation is published in an Allocation Table once it has been calculated by the regulators and approved by the UK ETS authority.
Find the UK ETS Allocation Table for operators of installations containing a list of each installation’s free allocation for the 2021 to 2025 allocation period. It is updated periodically.
Find industry benchmarks used to calculate free allocations published by the European Commission on 12 March 2021.
Activity Level Reports and changes in allocation
If you are included in the Allocation Table, you must submit a verified Activity Level Report (ALR) to your UK ETS regulator. From 2022 onwards the deadline to submit these reports is 31 March of each calendar year.
If the data in your Activity Level Report shows an increase or decrease in activity of more than 15% from historic activity levels (calculated from the previous 2 years’ activity levels), your free allocation of allowances will be recalculated.
Your regulator recalculates the free allocation of allowances in line with the Activity Level Change Regulation. The UK ETS Authority approves the final allocation.
When approved, you will be notified by your regulator of changes to your final free allocation of allowances.
Any changes to the free allocation of allowances based on Activity Level Reports will then be published in the updated Allocation Table.
Some instances of free allocation amendments may be processed at a later point. They will not be reflected in the published Allocation Table until approved by the Authority. You will be contacted if this is the case. Some allowances may be withheld in which case your regulator will notify you.
Any increase in allocation will be allocated to Operator Holding Accounts in the Registry in line with the updated allocation table, and any reductions in entitlement will mean that you must return any over-allocations from your Operator Holding Account. Your regulator will confirm if you are required to return any allowances.
You will be able to access your updated Activity Level Report from ETSWAP following your regulator’s review. This ALR will contain updated benchmarks and any other changes agreed with your regulator and should be used in future years.
You must use the verification report template for the verification of your activity levels data. You must submit the completed verification report template to your regulator with your Activity Level Report.
Free allocation from 2022
In 2022 and every scheme year thereafter, free allocation will be allocated on or before 28 February of each calendar year. The deadline for submitting verified Activity Level Reports is 31 March of each calendar year.
Cross-sectional correction factor
The UK ETS Authority has determined that no cross-sectoral correction factor (CSCF) will be applied for the 2021-2025 allocation period.
Free allocation for aircraft operators
Free allocation has been made available to all eligible aircraft operators who applied for a free allocation of allowances under the UK ETS during 2021.
The UK ETS Aviation Allocation Table contains a list of each aircraft operator’s free allocation entitlement for the 2021 to 2025 allocation period. This table is subject to change and the years 2023-2025 should be treated as indicative, pending the outcome of the ongoing free allocation review. Allowances for the relevant scheme year will be allocated to eligible aircraft operators on or before 28 February.
UK ETS auctions and market operation
Auctioning will continue to be the primary means of introducing allowances into the market. Participants will also be able to trade allowances on a secondary market.
See UK Emissions Trading Scheme markets for background information on the functioning of the UK ETS markets.