UK Department for Energy Security and Net Zero Publishes Update on Extension of UK Emissions Trading Scheme First Free Allocation Period to 2026

The U.K. Department for Energy Security and Net Zero published an update in relation to an extension of the U.K. Emissions Trading Scheme's first free allocation period. The U.K. ETS Authority is consulting operators in the scheme on a proposal to move the start of the second allocation period from 2026 to 2027, extending the current allocation period to include 2026. Operators will receive the consultation from their scheme regulator and have until October 11, 2024 to submit responses. The change aims to align changes to free allocation with the introduction of the U.K. Carbon Border Adjustment Mechanism in 2027. The Authority received a significant number of responses to the Free Allocation Review consultation indicating a preference for this alignment to ensure a consistent approach to carbon leakage mitigation. The Authority will ensure that any changes made to free allocation rules under the Free Allocation Review will be published by the end of 2025, with implementation in 2027.

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