The UK ETS – what you need to know
Have your UK installations previously been subject to the EU Emissions Trading System (EU ETS)?
If so, while you’ll still need to relinquish EU Allowances (EUAs) by 30 April 2021 (covering your emissions over 2020), from 1 January 2021 your UK-based omissions will be subject to the UK Emissions Trading Scheme (UK ETS).
However, the system isn’t yet fully established and auctions have only recently been scheduled, with the first one to be held in May 2021 – so read on to see what you can do to make sure you have a route to market when it opens.
What’s changing?
Since the UK left the EU on 1 January 2021, UK organisations will no longer have a requirement to procure and relinquish EUAs to cover your UK-based emissions. Instead the UK government have announced that a similar scheme (called the UK ETS) is being set up, which we understand will follow broadly similar criteria with a few important differences.
As part of your participation in the UK ETS, you will need UK Allowances (UKAs) on an annual basis.
At the moment, organisations don’t have the information to know exactly how many allowances they’ll be given and how many they’ll need to purchase, but we want to keep you up to speed with the latest information and ensure you’re prepared for the new scheme.
The first auction will be held on 19 May 2021, but until then there remains price uncertainty. What we do know is that there will be controls in place to stop the price per tonne from spiking for prolonged periods in the future under a Cost Containment Mechanism (CCM), but with this being a new market we could see some early volatility until it stabilises. Initially there will also be a price floor (the Auction Reserve Price) of £22/tonne.
What do I need to do?
Ultimately you will need to:
- work out if / how many allowances you will need once your free allowance is announced
- and if you decide you need to procure any allowances beyond your free allocation, find a route to market.
Our expert Trading Team are active in wholesale carbon markets and provide companies who have decided to purchase or sell their allowance requirements with a route to doing so, on a spot and forward basis. If you’d like to talk to our market experts about their capabilities and how best they can work with your organisation, please contact them at: green-energy@edftrading.com
