Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025

The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2025 (SI 2025/124) has been published, alongside an explanatory memorandum. It was made on 5 February and comes into force on 31 March.

The instrument makes amendments to the legislation which gives effect to the UK Emissions Trading Scheme (UK ETS). The UK ETS incentivises decarbonisation by requiring operators to purchase allowances based on carbon emissions. Some operators are given free allocation of allowances to mitigate the risk of carbon leakage. The scheme has two allocation periods, 2021‒2025 and 2026‒2030, in which free allocation is calculated and provided to eligible operators. The SI moves the start of the second allocation period for stationary installations from 2026 to 2027, making 2026 a standalone year, and provides for the calculation of free allocation in the 2026 standalone scheme year. The instrument also makes three changes to other aspects of the scheme. Specifically, these will:

• require the publication of full details of transactions between accounts in the scheme's Registry after a three-year delay;
• add limited exceptions to the prohibition on disclosure of Scheme data in order to support the development and implementation of related policies, and support the statutory functions of the Climate Change Committee (CCC); and
• extend qualification criteria so that installations with low levels of emissions which started operations between 2 January 2021 and 1 January 2024 inclusive can apply to be classed as Ultra-Small Emitters (USEs) during the 2026‒2030 period, thereby benefitting from a reduced administrative burden.

The GHG Amendment (No. 2) Order 2025 was made on the same day as the Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2025 (SI 2025/100), which prevents participants receiving excessive allowances in the final year of trading on permanent cessation and provides additional powers for scheme regulators.

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