UK Emissions Trading Scheme: Business and Regulations Impact Assessment (BRIA)

Annex A: Description of technical changes not covered by this BRIA

The Authority decisions covered in this annex are not included in this BRIA as:

• these were calls for evidence and any final proposals are subject to further consultation;
• the proposed change is minor and the impact on operators has been estimated not to be significant; or
• it is a temporary solution in response to an unequal treatment of some UK ETS participants identified by the Authority or raised by operators.

A description of each technical changed covered in the Government Response to the UK ETS consultation, and the chapter in which they appear, are provided below. Please refer to the Government Response for further information on the rationale of the decisions.

Chapter 2: Free Allocation Review – Technical Changes

No amendment to the Activity Level Changes (ALCs) for turn-off of activity due to maintenance/planned downtime

• Currently, operators could see a reduction in their free allocations if they turned off their activity for maintenance or improvement work. As this is part of normal operation, no changes will be made to the distribution of free allocations to consider the turn-off of activity. Operators can plan for the turn-off of activity and should be encouraged to do so as efficiently as possible.

Putting current benchmark values into UK law

• Bringing the current benchmark values into UK law, by direct inclusion in UK ETS legislation.

Not changing the treatment of existing vs new sub-installations

• Changes will be made to the electricity generator definition to consider electricity exports in the baseline period, rather than electricity exports since 2005 (this proposal would not apply for the 2021-2025 free allocation period, as the definition is already determined for these years in the current legislation).

Amending the electricity generator definition to only consider electricity exports in the baseline period

• The Authority proposed to amend the electricity generator definition to consider electricity exports in the baseline period, rather than electricity exports since 2005 (this proposal would not apply for the 2021-2025 free allocation allocation period, as the definition is already determined for these years in current legislation).

Amending the combined Heat and Power (CHP) plants and electricity generator definition

• The Authority will amend the electricity generator classification to exclude installations that have produced electricity for sale to third parties, if that electricity was produced by means of a Combined Heat and Power Quality Assurance (CHPQA) certified plant, operating as part of an operator’s industrial activity.

Amending electricity generators

• Changes will be made to allow electricity generators who have not exported measurable heat produced by means of high-efficiency cogeneration in the “relevant period” but start to do so in the following scheme years, to be eligible for free allowances once they can demonstrate they meet the eligibility criteria.

Amending the Covid 2021 ALCs

• The Authority will amend the ALCs Regulation to provide for the optional recalculation of the 2021 free allocations omitting the 2020 COVID year, for those operators who can demonstrate significant discrepancies between reductions in activity and emissions.

Amending benchmarks and the carbon leakage list category

• Effecting temporary changes to the lime benchmark and the carbon leakage classification of malt extract production for the 2024 and 2025 scheme years. This decision is based on substantive and evidenced claims from these sectors.

Chapter 4: Aviation

Effecting a cap to aviation free allocations

• The Authority has decided to cap the total amount of aviation free allocation that operators are eligible to receive. This change aims to ensure that aviation operators do not get more free allocations than their verified emissions.

Aviation calls for evidence

• Sustainable aviation fuels (SAF): The Authority signals the intention to continue developing proposals on how SAF is treated in the UK ETS.
• Non-CO2 climate impacts: The Authority will consider how to bring non-CO2 emissions into the scope of the scheme
• International cooperation: The Authority will consider how international cooperation on aviation emissions could be increased

Chapter 5: Expanding UK ETS Coverage within Covered Sectors

Inclusion of upstream CO2 venting

• The Authority will include process emissions from carbon dioxide venting from the upstream oil and gas sector in the UK ETS.

Carbon capture and storage (CCS) transportation

• To expand the transportation of CO2 through other forms of non-pipeline transport (i.e., shipping, rail, and road) by including them as a regulated activity under the UK ETS by the mid-2020s, in addition to the existing transport via pipeline.

Expanding UK ETS coverage within covered sectors calls for evidence

• Methane emissions: The Authority will further review the possible expansion of the UK ETS to cover methane emissions from upstream oil and gas and other traded sectors. Any changes will be consulted in due course.
• Safety venting and flaring: There is no intention to include safety and flaring in the UK ETS at this stage. The Authority will review this policy in the coming months and reconsult in due course.
• Remaining upstream oil and gas emissions: The Authority is not proposing any changes at this point, but we will review this policy in the coming months and reconsult in due course.
• 20MWth threshold and 3MW aggregation: The Authority will review the thresholds and to consult further if changes are considered.

Chapter 7: Calls for evidence on greenhouse gas removals and agriculture and land use emissions

Agriculture and Land Use

• Continued exploration of the monitoring, reporting and verification (MRV) of emissions from agriculture. The consultation called for evidence to better understand the MRV in land use and agriculture sector. There is no plan to include this sector within the scope of the UK ETS.

Chapter 8: Operational Amendments to the UK ETS

Appeal routes

• Not implementing appeal routes to UK ETS decisions at this stage.

Penalties

• The Authority will introduce a new penalty and enforcement notice to those operators that fail to submit information requested by Regulators.