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The Greenhouse Gas Emissions Trading Scheme Order 2020

Type Statutory-Instrument

Publication 2020-11-11

Last updated 2026-03-11

State In force

Department King's Printer of Acts of Parliament

Source legislation.gov.uk

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Made: 11th November 2020

Coming into force in accordance with article 2

At the Court at Windsor Castle, the 11th day of November 2020

Present,

The Queen's Most Excellent Majesty in Council

This Order is made in exercise of the powers conferred by sections 44, 46(3), 54 and 90(3) of, and Schedule 2 and paragraph 9 of Schedule 3 to, the Climate Change Act 2008 .

In accordance with paragraph 10 of Schedule 3 to that Act, before the recommendation to Her Majesty in Council to make this Order was made—the advice of the Committee on Climate Change, including on the amount of the limit referred to in section 48(2) of that Act, was obtained and taken into account; andsuch persons likely to be affected by the Order as the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs considered appropriate were consulted.

In accordance with paragraph 10 of Schedule 3 to that Act, before the recommendation to Her Majesty in Council to make this Order was made—

the advice of the Committee on Climate Change, including on the amount of the limit referred to in section 48(2) of that Act, was obtained and taken into account; and

such persons likely to be affected by the Order as the Secretary of State, the Scottish Ministers, the Welsh Ministers and the Department of Agriculture, Environment and Rural Affairs considered appropriate were consulted.

In accordance with paragraph 11 of that Schedule, a draft of the instrument containing this Order was laid before Parliament, the Northern Ireland Assembly, the Scottish Parliament and Senedd Cymru and approved by resolution of each House of Parliament, the Northern Ireland Assembly, the Scottish Parliament and Senedd Cymru.

Accordingly, Her Majesty, by and with the advice of Her Privy Council, makes the following Order:

PART 1 — Preliminary

Citation

1

This Order may be cited as the Greenhouse Gas Emissions Trading Scheme Order 2020.

Commencement

2

(1) Except as provided by paragraph (2), this Order comes into force on the day after the day on which it is made.

(2) Article 25, Schedule 5 and paragraph 4 of Schedule 8 come into force—

(a) on the day after the day on which this Order is made; or

(b) immediately after IP completion day,

whichever is later.

Extent

3

This Order extends to the whole of the United Kingdom.

Interpretation

4

(1) In this Order—

“2021-2025 allocation period” means the 2021, 2022, 2023, 2024 and 2025 scheme years;

“2026-2030 period” means the period beginning with 1st January 2026 and ending with 31st December 2030;

“2026 allocation period” means the 2026 scheme year;

“2027-2030 allocation period” means the 2027, 2028, 2029 and 2030 scheme years;

“account” means account in the registry;

“Activity Level Changes Regulation” means Commission Implementing Regulation (EU) 2019/1842 of 31 October 2019, as it forms part of domestic law;

“aerodrome” means a defined area (including any buildings, installations and equipment) on land or water or on a fixed, fixed offshore or floating structure to be used either wholly or in part for the arrival, departure and surface movement of aircraft;

“aircraft operator” has the meaning given in article 6;

“aircraft operator holding account” means an aircraft operator holding account opened under paragraph 13(3) of Schedule 5A;

“allocation period” means the 2021-2025 allocation period, the 2026 allocation period or the 2027-2030 allocation period;

“allocation table” means an allocation table for the 2021-2025 allocation period, the 2026 allocation period or the 2027-2030 allocation period referred to in article 34A or 34AA;

“allowance” means an allowance created under this Order (see article 18);

“aviation activity” means an activity set out in paragraph 1 of Schedule 1;

“aviation allocation table” means the aviation allocation table for the 2021-2025 allocation period referred to in article 34N;

“aviation emissions” means emissions of carbon dioxide arising from an aviation activity;

“carbon price”, in relation to a scheme year, has the meaning given in article 46;

“CCA 2008” means the Climate Change Act 2008;

“central account” has the meaning given in paragraph 9(2) of Schedule 5A;

“the Chicago Convention” means the Convention on International Civil Aviation which was, on 7th December 1944, signed on behalf of the Government of the United Kingdom at the International Civil Aviation Conference held at Chicago ;

“chief inspector” means the chief inspector constituted under regulation 8(3) of the Pollution Prevention and Control (Industrial Emissions) Regulations (Northern Ireland) 2013 ;

“commercial air transport operator” means a person that, for remuneration, provides scheduled or non-scheduled air transport services to the public for the carriage of passengers, freight or mail and holds an air operator certificate (AOC) or equivalent document as required by Part I of Annex 6 to the Chicago Convention;

“Directive” means Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a system for greenhouse gas emission allowance trading within the Union and amending Council Directive 96/61/EC ;

“emission factor” has the same meaning as in the Monitoring and Reporting Regulation 2018;

“emissions monitoring plan” has the meaning given in article 28(1);

“EU ETS” means the system for greenhouse gas emission allowance trading established by the Directive;

“Eurocontrol” has the meaning given in section 24 of the Civil Aviation Act 1982 ;

“excluded flights” means flights set out in paragraph 2 of Schedule 1;

“FA installation", “FA installation for the 2021-2025 allocation period” and “FA installation for the 2026 and 2027-2030 allocation periods” must be construed in accordance with article 4A;

“flight” means one flight sector that is a flight or one of a series of flights which commences at a parking place of the aircraft and terminates at a parking place of the aircraft;

“free allocation” means the allocation of allowances free of charge under Part 4A;

“free allocation conditions” means the conditions referred to in paragraph 4(6) of Schedule 6;

“Free Allocation Regulation” means Commission Delegated Regulation (EU) 2019/331 of 19 December 2018, as it forms part of domestic law;

“full-scope flights” means flights departing from, or arriving in, an aerodrome situated in the United Kingdom, Gibraltar , Switzerland or an EEA state, other than excluded flights;

“GGETSR 2012” means the Greenhouse Gas Emissions Trading Scheme Regulations 2012 ;

“GGETSR emissions plan” means an emissions plan as defined in regulation 20 of the GGETSR 2012;

“greenhouse gas emissions permit” means a greenhouse gas emissions permit—issued under paragraph 3 or 9 of Schedule 6; orconverted under paragraph 24 or 26 of Schedule 7 or paragraph 1(4) of Schedule 11;

“hospital and small emitter list for 2021-2025” has the meaning given in paragraph 3(2) of Schedule 7;

“hospital and small emitter list for 2026-2030” has the meaning given in paragraph 5(4)(b) of Schedule 7;

“hospital or small emitter” must be construed in accordance with paragraphs 3 and 4 of Schedule 7;

“hospital or small emitter permit” means a hospital or small emitter permit—issued under paragraph 9 of Schedule 7; orconverted under paragraph 10 of Schedule 7 or paragraph 1(3) of Schedule 11;

“installation” must be construed in accordance with Schedule 2;

“monitoring and reporting conditions” means—in relation to a greenhouse gas emissions permit, the conditions referred to in paragraph 4(2) of Schedule 6;in relation to a hospital or small emitter permit, the conditions referred to in paragraph 11(2) of Schedule 7;

“Monitoring and Reporting Regulation 2012” means Commission Regulation (EU) No. 601/2012 of 21 June 2012 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council ;

“Monitoring and Reporting Regulation 2018” means Commission Implementing Regulation (EU) 2018/2066 of 19 December 2018 on the monitoring and reporting of greenhouse gas emissions pursuant to Directive 2003/87/EC of the European Parliament and of the Council (disregarding any amendments adopted after 11th November 2020) and, except in article 24 and Schedule 4, it means that Regulation as given effect subject to modifications by article 24;

“non-commercial air transport operator” means a person who operates flights and is not a commercial air transport operator;

“NRW” means the Natural Resources Body for Wales ;

“operator”, in relation to an installation, has the meaning given in article 5;

“operator holding account” means an operator holding account for an installation opened under paragraph 11(4) or 12(3) of Schedule 5A;

“outermost region” means—the Canary Islands;French Guiana;Guadeloupe;Mayotte;Martinique;Réunion;Saint-Martin;the Azores; orMadeira;

“permit” means—a greenhouse gas emissions permit; ora hospital or small emitter permit,and a reference to a permit includes the monitoring plan (see paragraph 4(1)(f) of Schedule 6 and paragraph 11(1)(g) of Schedule 7) and, in the case of a greenhouse gas emissions permit, any monitoring methodology plan (see paragraph 4(1)(hb) and (7) of Schedule 6);

“registry” hashas the meaning given in paragraph 5(1) of Schedule 5A;

“registry administrator” has the meaning given in article 8A;

“regulated activity” has the meaning given in paragraph 3(1) of Schedule 2;

“regulator” must be construed in accordance with articles 9 to 13;

“relevant Northern Ireland electricity generator” means an installation within the meaning of GGETSR 2012 to which those Regulations continue to apply to regulate the carrying out of regulated activities at the installation on or after 1st January 2021;

“reportable emissions”, in relation to an installation, means the total specified emissions (in tonnes of carbon dioxide equivalent ) from the regulated activities carried out at the installation;

“scheme year” means the calendar year beginning on 1st January 2021 or any of the 9 subsequent calendar years; and a reference to a scheme year described by a calendar year (for example, the “2021 scheme year”) is a reference to the scheme year beginning on 1st January of that year;

“SEPA” means the Scottish Environment Protection Agency ;

“specified emissions” has the meaning given in paragraph 3(7) of Schedule 2;

“surrender”, in relation to an allowance, means use the allowance to account for reportable emissions or aviation emissions in a particular scheme year in accordance with article 27 or 34 or any other obligation referred to in paragraph (6) of this article;

“surrender condition” has the meaning given in paragraph 4(3) of Schedule 6;

“trading period” means the period beginning on 1st January 2021 and ending on 31st December 2030;

“UK coastal waters” has the meaning given in section 89(2) of CCA 2008;

“UK ETS” has the meaning given in article 16(1);

“UK ETS authority” has the meaning given in article 14;

“UK sector of the continental shelf” has the meaning given in section 89(2) of CCA 2008;

“ultra-small emitter” must be construed in accordance with paragraph 2 of Schedule 8;

“ultra-small emitter list for 2021-2025” has the meaning given in paragraph 2(2) of Schedule 8;

“ultra-small emitter list for 2026-2030” has the meaning given in paragraph 3(5) of Schedule 8;

“Verification Regulation 2012” means Commission Regulation (EU) No 600/2012 of 21 June 2012 on the verification of greenhouse gas emission reports and tonne-kilometre reports and the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council ;

“Verification Regulation 2018” means Commission Implementing Regulation (EU) 2018/2067 of 19 December 2018 on the verification of data and on the accreditation of verifiers pursuant to Directive 2003/87/EC of the European Parliament and of the Council (disregarding any amendments adopted after 11th November 2020) and, except in article 25 and Schedule 5, it means that Regulation as given effect subject to modifications by article 25 .

“verification report” has the same meaning as in the Verification Regulation 2018.

(2) For the purposes of this Order, the amount of an installation's reportable emissions (including reportable emissions within the meaning of GGETSR 2012) from biomass must be treated as zero where the emission factor of the biomass under the Monitoring and Reporting Regulation 2012 or the Monitoring and Reporting Regulation 2018 is zero.

(2A) For the purposes of this Order, the amount of an aircraft operator’s aviation emissions from biofuel must be treated as zero where the emission factor of the biofuel under the Monitoring and Reporting Regulation 2018 is zero.

(3) For the purposes of this Order, an installation has ceased operation if all regulated activities have permanently ceased to be carried out at the installation (see paragraph 10A of Schedule 6 (installation to be treated as ceasing operation: regulator’s notice) for circumstances in which an installation must be treated as having ceased operation).

(4) For the purposes of this Order, the question of whether any waters are adjacent to Northern Ireland, Scotland or Wales must be determined in accordance with—

(a) any Order in Council made under section 98(8) of the Northern Ireland Act 1998 ;

(b) any Order in Council made under section 126(2) of the Scotland Act 1998 ;

(c) any Order in Council made under sections 58 and 158(4), or order made under section 158(3), of the Government of Wales Act 2006 .

(5) Where an allowance is surrendered in circumstances in which the allowance may be treated as surrendered to comply with more than one obligation referred to in paragraph (6), or with one of those obligations but in respect of more than one scheme year, the regulator may treat the allowance as surrendered to comply with any one of those obligations, or in respect of any one of those scheme years; and consequently any provision of Part 7 under which a deficit notice may be given, or a civil penalty may or must be imposed, in respect of a failure to surrender allowances must be read accordingly.

(6) The obligations are obligations to surrender allowances under any of the following—

(a) article 27;

(b) article 34;

(d) a notice under paragraph 10 of Schedule 6;

(e) a surrender notice under paragraph 11 of that Schedule;

(f) a revocation notice under paragraph 12 of that Schedule.

Meaning of operator

5

(1) In this Order, the “operator” of an installation is the person who has control over its operation.

(2) But where—

(a) a regulated activity has not begun to be carried out at an installation, the operator of the installation is the person who will have control over its operation when a regulated activity is carried out at the installation;

(b) a regulated activity is no longer carried out at an installation, the operator of the installation is the person who holds the permit for the installation or, if no permit authorises a regulated activity to be carried out at the installation, the person who had control over its operation immediately before regulated activities ceased to be carried out at the installation;

(c) the holder of a permit for an installation ceases to have control over its operation, the operator of the installation is the permit holder.

Meaning of aircraft operator

6

(1) In this Order, a person is an aircraft operator in relation to a scheme year, where in respect of that year that person—

(a) performs an aviation activity; and

(b) is not exempt under article 7 or 8.

(2) For the purposes of paragraph (1)(a), an aviation activity is performed by the person who operates the aircraft at the time of the flight, or where that person is not known, the owner of that aircraft is deemed to be the person that performed the aviation activity.

Exempt commercial air transport operators

7

(1) A commercial air transport operator is not an aircraft operator for the purposes of this Order in relation to a scheme year, where in respect of that year it operates—

(a) less than 243 full-scope flights per period for 3 consecutive 4-month periods; or

(b) full-scope flights with total annual emissions of less than 10,000 tonnes of carbon dioxide.

(2) In this article, “4-month period” means any of the following periods—

(a) January to April;

(b) May to August;

(3) For the purposes of this article, a full-scope flight is taken to have occurred in the 4-month period that included its local time of departure.

Exempt non-commercial air transport operators

8

A non-commercial air transport operator is not an aircraft operator for the purposes of this Order in relation to a scheme year, where in respect of that year it operates full-scope flights with total annual emissions of less than 1,000 tonnes of carbon dioxide.

Meaning of regulator

9

(1) Each of the following is a “regulator” for the purposes of this Order—

(a) the chief inspector;

(b) the Environment Agency ;

(d) the Secretary of State;

(e) SEPA.

(2) In this Order, “regulator” means—

(a) in relation to an installation, the regulator determined in accordance with article 10;

(b) in relation to an aircraft operator, the regulator determined in accordance with articles 11 to 13.

(2A) Articles 11 to 13 apply for the purpose of determining the regulator of a person other than an aircraft operator in relation to—

(a) monitoring and reporting of the person's aviation emissions;

(b) free allocation to the person under Chapter 2 of Part 4A (aviation free allocation);

as if references to “aircraft operator” were to the person.

(3) Each regulator is an administrator of the UK ETS for the purposes of paragraph 21 of Schedule 2 to CCA 2008.

Meaning of regulator: installations

10

(1) This article applies for the purposes of article 9.

(2) The regulator, in relation to an installation set out in column 1 of table A, is the regulator set out in the corresponding entry in column 2.

Column 1	Column 2
Installation	Regulator
Installation in—aEngland;bthe territorial sea adjacent to England, except where the installation is used for a purpose referred to in paragraph (3)	Environment Agency
Installation in—aNorthern Ireland;bcontrolled waters adjacent to Northern Ireland;cthe territorial sea (other than controlled waters) adjacent to Northern Ireland, except where the installation is used for a purpose referred to in paragraph (3)(a)	Chief inspector
Installation in—aScotland;bcontrolled waters adjacent to Scotland;cthe territorial sea (other than controlled waters) adjacent to Scotland, except where the installation is used for a purpose referred to in paragraph (3)(a)	SEPA
Installation in—aWales;bthe territorial sea adjacent to Wales	NRW
Installation in—athe territorial sea adjacent to England, where the installation is used for a purpose referred to in paragraph (3);bthe territorial sea (other than controlled waters) adjacent to Northern Ireland and Scotland, where the installation is used for a purpose referred to in paragraph (3)(a);cthe UK sector of the continental shelf	Secretary of State

(3) The purposes are—

(a) a purpose connected with the exploration for, or exploitation of, petroleum (within the meaning of section 1 of the Petroleum Act 1998 );

(b) a purpose connected with an activity referred to in section 2(3) of the Energy Act 2008 (unloading and storage of combustible gas);

(4) In this article—

“controlled waters” means the part of the territorial sea that is between the landward limit of the territorial sea and the line that is 3 nautical miles seaward of the landward limit of the territorial sea;

“territorial sea” means the territorial sea of the United Kingdom;

“territorial sea adjacent to England” means the part of the territorial sea that is not adjacent to Northern Ireland, Scotland or Wales.

(5) In this article, a reference to England, Northern Ireland, Scotland or Wales includes a reference to waters adjacent to England or, as the case may be, Northern Ireland, Scotland or Wales that are landward of the landward limit of the territorial sea.

Meaning of regulator: aircraft operators

11

(1) This article applies for the purposes of article 9.

(2) Subject to articles 12 and 13 the regulator of an aircraft operator is—

(a) the Environment Agency, where the aircraft operator —

(i) has its registered office or place of residence in England; or

(ii) does not have a registered office or a place of residence in the United Kingdom;

(b) NRW, where the aircraft operator has its registered office or place of residence in Wales;

(d) the chief inspector, where the aircraft operator has its registered office or place of residence in Northern Ireland.

Aircraft operator: change in regulator

12

(1) This paragraph applies where—

(a) an aircraft operator (“A”) does not have a registered office or a place of residence in the United Kingdom;

(b) “B” is the regulator of A; and

(c) a different regulator (“C”) is satisfied that the highest percentage of aviation emissions of A in the 2023 and 2024 scheme years is attributable to flights departing from aerodromes situated in the area of C.

(2) Where paragraph (1) applies, on or before 30th June 2025, C must give notice to—

(a) A;

(b) B; and

that C is the regulator of A from 1st January 2026.

(3) A notice under paragraph (2) must be accompanied by evidence demonstrating that the highest percentage of aviation emissions of A in the 2023 and 2024 scheme years is attributable to flights departing from aerodromes situated in the area of C.

(4) In this article, “area” in relation to a regulator, means—

(a) in respect of the Environment Agency, England;

(b) in respect of the NRW, Wales;

(d) in respect of the chief inspector, Northern Ireland.

Aircraft operator: change in registered office

13

(1) Where—

(a) an aircraft operator (“A”) with a registered office or a place of residence in the area of a regulator, in the course of the 2021-2025 allocation period, changes the address of its registered office or place of residence to the area of a different regulator (“R”); and

(b) A's registered office or place of residence is in the area of R at the end of the 2021-2025 allocation period,

R is the regulator of A from 1st January 2026.

(2) Where—

(a) an aircraft operator (“B”) which did not have a registered office or a place of residence in the United Kingdom at the beginning of the 2021-2025 allocation period acquires a registered office or a place of residence in the United Kingdom in the course of that period; and

(b) at the end of the 2021-2025 allocation period that registered office or place of residence is in the area of a regulator (“S”) who is not the regulator of B in that allocation period,

S is the regulator of B from 1st January 2026.

(3) In this article “area” has the same meaning as in article 12.

Meaning of UK ETS authority, etc.

14

(1) A reference in this Order to the “UK ETS authority” is a reference to all of the national authorities .

(2) Functions conferred or imposed by this Order on the “UK ETS authority” may be exercised—

(a) by all of the national authorities jointly; or

(b) by one of the national authorities (or by more than one of the national authorities jointly) on behalf of the other national authorities with their agreement.

(3) Where this Order provides for a person to do anything in relation to the “UK ETS authority” (for example, to give a notice to the UK ETS authority), it is sufficient for the person to do it in relation to any of the national authorities.

(4) Each national authority is an administrator of the UK ETS for the purposes of paragraph 21 of Schedule 2 to CCA 2008.

(5) In this article, a reference to this Order includes a reference to the Monitoring and Reporting Regulation 2018, the Verification Regulation 2018, the Free Allocation Regulation and the Activity Level Changes Regulation.

Applications, notices, etc.

15

(1) Part 1 of Schedule 3 (which makes provision in relation to applications, notices and reports submitted to a regulator) has effect.

(2) Part 2 of Schedule 3 (which makes provision in relation to notices given by a regulator, a national authority or the UK ETS authority) has effect.

PART 2 — Basic elements of the UK ETS

CHAPTER 1 — Establishment of the UK ETS and requirement for review

UK Emissions Trading Scheme

16

(1) This Order establishes a trading scheme, known as the “UK Emissions Trading Scheme” or “UK ETS”.

(2) The purpose of the UK ETS is to limit, or encourage the limitation of, the emission of greenhouse gases in the trading period from the carrying out of—

(a) regulated activities by operators of installations; and

(b) aviation activities by aircraft operators.

Review of UK ETS

17

(1) The UK ETS authority must before each review date—

(a) carry out a review of the operation of the UK ETS;

(b) publish a report setting out the conclusions of the review.

(2) The review dates are 31st December 2023 and 31st December 2028.

(3) The report must in each case—

(a) review the operation of the UK ETS (including assessing the extent to which the purpose of the UK ETS is being achieved);

(b) make any recommendations that the UK ETS authority considers appropriate as to the future operation and purpose of the UK ETS.

CHAPTER 2 — Allowances and caps

Allowances

18

(1) The UK ETS authority may create allowances in the registry for the purposes of the UK ETS.

(2) An allowance is an allowance to emit 1 tonne of carbon dioxide equivalent.

(3) Allowances may be held only in accounts in the registry.

Cap for trading period

19

The number of allowances created in the trading period may not exceed the sum of—

(a) 633,116,297 multiplied by the 2021-2025 hospital and small emitter reduction factor; and

(b) 302,924,924 multiplied by the 2026-2030 hospital and small emitter reduction factor.

Cap for scheme years

20

(1) The number of allowances created in a scheme year may not exceed ...—

(a) the base for the scheme year multiplied by—

(i) if the scheme year is in the 2021-2025 allocation period, the 2021-2025 hospital and small emitter reduction factor;

(ii) if the scheme year is in the 2026-2030 ... period, the 2026-2030 hospital and small emitter reduction factor; ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) But the restriction in paragraph (1) does not apply to the creation of allowances—

(a) for the flexible reserve (see article 23A);

(b) for the new entrants’ reserve (see article 34G);

(c) for allocation under the Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021 or any other regulations made under section 96 of the Finance Act 2020.

(3) Nothing in this article overrides article 19.

Cap: hospital and small emitter reduction factors

21

(1) This article applies for the purposes of articles 19 and 20.

(2) The 2021-2025 hospital and small emitter reduction factor is (RE₁ – SI₁)/RE₁, where—

RE₁ is the total reportable emissions (within the meaning of GGETSR 2012) in 2016, 2017 and 2018 of all installations (within the meaning of GGETSR 2012) and all UK aircraft operators (within the meaning of GGETSR 2012);

SI₁ is the total reportable emissions (within the meaning of GGETSR 2012) in 2016, 2017 and 2018 of all installations included in the hospital and small emitter list for 2021-2025.

(3) The 2026-2030 hospital and small emitter reduction factor is (RE₂ - SI₂)/RE₂, where—

RE₂ is the total reportable emissions and the total aviation emissions, expressed in tonnes, in the 2021, 2022 and 2023 scheme years of all installations and all aircraft operators;

SI₂ is the total reportable emissions in the 2021, 2022 and 2023 scheme years of all installations included in the hospital and small emitter list for 2026-2030.

(4) In this article, a reference to reportable emissions or aviation emissions is a reference to reportable emissions or aviation emissions—

(a) verified as satisfactory in accordance with the Verification Regulation 2012 or the Verification Regulation 2018;

(aa) determined under regulation 44 of GGETSR 2012 or article 45 of this Order;

(b) where relevant, set out in an emissions report accompanied by the notice or declaration referred to in paragraph 3(8)(b)(ii) of Schedule 5 to GGETSR 2012 or paragraph 11(2)(b)(ii) of Schedule 7 to this Order; or

Cap: base for scheme years

22

For the purposes of article 20, the base for a scheme year set out in column 1 of table B is the value set out in the corresponding entry in column 2.

Trading in allowances

23

Allowances may be traded, except where prohibited by other legislation.

CHAPTER 3 — Monitoring, reporting and verification

Monitoring and reporting of emissions

24

The Monitoring and Reporting Regulation 2018 has effect for the purpose of the UK ETS, subject to the modifications in Schedule 4 and to Part 4 (see also paragraph 13 of Schedule 7 which makes further modifications in relation to hospitals and small emitters and paragraph 5 of Schedule 8 which makes further modifications in relation to ultra-small emitters).

Verification of data and accreditation of verifiers

25

The Verification Regulation 2018 has effect for the purpose of the UK ETS, subject to the modifications in Schedule 5 (see also paragraph 4 of Schedule 8 which makes further modifications in relation to ultra-small emitters).

PART 3 — Installations

Installations: requirement for permit to carry out regulated activity

26

(1) No person may carry out a regulated activity at an installation in a scheme year unless the operator of the installation holds a greenhouse gas emissions permit or a hospital or small emitter permit for the installation that authorises the regulated activity to be carried out.

(2) Paragraph (1) does not apply to a regulated activity carried out at an installation in a scheme year for which the installation is an ultra-small emitter.

(3) Schedule 6 (which provides for applications for greenhouse gas emissions permits and generally for permits) has effect.

(4) Schedule 7 (which provides for hospitals and small emitters) has effect.

(5) Schedule 8 (which provides for ultra-small emitters) has effect.

Installations: requirement to surrender allowances

27

Where the operator of an installation holds a greenhouse gas emissions permit, the operator must surrender allowances in accordance with the surrender condition of the permit for each scheme year (or part of a scheme year) that the permit is in force.

PART 4 — Aviation

Application for emissions monitoring plans

28

(1) An aircraft operator must , and any other person may, apply to the regulator for a plan setting out how the applicant’s aviation emissions are to be monitored for the purposes of this Order (“an emissions monitoring plan”).

(2) A person who has previously been issued with an emissions monitoring plan or a GGETSR emissions plan may not make an application under paragraph (1) without the agreement of the regulator (but see article 29(3)).

(3) An application under paragraph (1) is the means by which a monitoring plan is submitted to the regulator for approval under Article 12 of the Monitoring and Reporting Regulation 2018 ; and where such an application is made by a person who is not an aircraft operator, Articles 12 and 13 of, and Annex 1 to, that Regulation have effect as if “aircraft operator” included such an applicant.

(4) An aircraft operator must comply with the requirement in paragraph (1) before the end of the period of 42 days commencing with the day it becomes an aircraft operator.

Issue of emissions monitoring plans

29

(1) If an aircraft operator or other person applies for an emissions monitoring plan in accordance with article 28(1) and (2), the regulator must issue the emissions monitoring plan unless—

(a) the regulator is not satisfied that the application complies with the Monitoring and Reporting Regulation 2018; and

(b) the applicant has not agreed to amendments of the application required to satisfy the regulator that the application does so comply.

(2) An emissions monitoring plan issued under paragraph (1) replaces any emissions monitoring plan previously issued to the applicant.

(3) The regulator may issue an emissions monitoring plan to a person who was a UK administered operator for the purpose of GGETSR 2012 and held a GGETSR emissions plan.

(4) Subject to paragraph (5), an emissions monitoring plan issued under paragraph (3) must be in substantially the same terms as the GGETSR emissions plan.

(5) An emissions monitoring plan must contain any conditions that the regulator considers necessary to give proper effect to the Monitoring and Reporting Regulation 2018 and the Verification Regulation 2018.

Refusal of application for emissions monitoring plans

30

(1) If the regulator refuses an application for an emissions monitoring plan the regulator must give notice to the applicant.

(2) A notice under paragraph (1) must state—

(a) the reasons for the decision; and

(b) if amendments of the application are required in order for an emissions monitoring plan to be issued, the nature of those amendments.

(3) An aircraft operator who is given a notice under paragraph (1) must make a revised application to the regulator before the end of the period of 31 days beginning with the day that the notice was given.

(4) Article 29 and this article apply to a revised application to which paragraph (5) applies as they apply to the original application, but for the purposes of such a revised application, the references to the period of 2 months in paragraph 2 of Schedule 3 are to be read as references to a period of 24 days.

(5) This paragraph applies to—

(a) a revised application under paragraph (3);

(b) where the regulator refuses an application for an emissions monitoring plan by a person who is not an aircraft operator, a revised application made by the person before the end of the period of 31 days beginning with the day on which the notice under paragraph (1) is given.

Variation of emissions monitoring plans

31

(1) An aircraft operator—

(a) may apply to the regulator to vary its emissions monitoring plan;

(b) must apply to the regulator to vary its emissions monitoring plan where required to do so by a condition of the emissions monitoring plan.

(2) A variation applied for under paragraph (1) is given effect by the regulator giving notice to the aircraft operator.

(3) Paragraphs (1) and (2) do not affect the operation of any condition of an emissions monitoring plan that allows an aircraft operator to make a variation without applying to the regulator.

(4) The regulator may, by giving notice to an aircraft operator, make any variation of the aircraft operator's emissions monitoring plan that the regulator considers necessary in consequence of a report made by the aircraft operator under Article 69(4) of the Monitoring and Reporting Regulation 2018.

(5) The regulator may, by giving notice to an aircraft operator, vary the aircraft operator's emissions monitoring plan where the aircraft operator has failed to comply with a requirement in the emissions monitoring plan to make or apply for such a variation.

(6) The regulator may, by giving notice to an aircraft operator, vary the aircraft operator's emissions monitoring plan by modifying, adding or removing a condition if the regulator considers it necessary to do so to give proper effect to the Monitoring and Reporting Regulation 2018 or the Verification Regulation 2018.

(7) In this article references to an aircraft operator include any person who has been issued with an emissions monitoring plan.

Monitoring emissions and emissions monitoring plan conditions

32

(1) Each aircraft operator must monitor its aviation emissions in accordance with—

(a) the Monitoring and Reporting Regulation 2018; and

(b) its emissions monitoring plan, including any written procedures required by Article 12 of the Monitoring and Reporting Regulation 2018.

(2) Each aircraft operator must comply with any condition included in its emissions monitoring plan under article 29(5) or 31(6).

Reporting aviation emissions

33

(1) A person who is an aircraft operator in relation to a scheme year must prepare a report of its aviation emissions for that scheme year in accordance with the Monitoring and Reporting Regulation 2018; the report must be verified as satisfactory in accordance with the Verification Regulation 2018.

(2) The obligation for the report to be verified as satisfactory in accordance with the Verification Regulation 2018 does not apply, and the aviation emissions stated in the report are considered to be verified, where the person required to prepare the report in relation to a scheme year—

(a) had emissions of carbon dioxide for that scheme year amounting to either—

(i) less than 25,000 tonnes from full-scope flights; or

(ii) less than 3,000 tonnes from aviation activity; and

(b) determined its emissions using the small emitters tool approved under Commission Regulation (EU) No 606/2010, the tool having been populated with data by Eurocontrol.

(3) The report prepared under paragraph (1) (and the verification report) must be submitted to the regulator on or before 31st March in the year following the scheme year to which it relates.

Surrender of allowances by aircraft operators

34

(1) A person who is an aircraft operator in relation to a scheme year must surrender, on or before 30th April in the following year, an amount of allowances equal to its aviation emissions in that scheme year (expressed in tonnes).

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART 5 — Charging

Charges

35

(1) The regulator or the registry administrator may charge an applicant, operator, aircraft operator or any other person an amount as a means of recovering costs incurred by the regulator or the registry administrator in performing activities in accordance with or by virtue of this Order.

(2) The activities referred to in paragraph (1) include—

(a) giving advice in relation to an application under or by virtue of this Order or any other advice in relation to the operation of the UK ETS;

(b) considering an application under or by virtue of this Order;

(d) issuing or varying an emissions monitoring plan;

(e) giving any notice or other document provided for by or under this Order;

(f) receiving any notice or other document provided for by or under this Order;

(g) monitoring compliance with this Order;

(h) making a determination of emissions or aviation emissions under article 45.

(i) estimating the value of a parameter under article 34H(4) of this Order or Article 3(4) of the Activity Level Changes Regulation;

(j) administering an account in the registry.

(3) A charge under paragraph (1) may include an annual or other periodic charge to an operator or aircraft operator that does not relate to any specific activity.

(4) The regulator or the registry administrator may apply different charges for different categories of person in relation to the same activity.

(5) Payment of a charge is not received until the regulator or, as the case may be, the registry administrator has cleared funds for the full amount due and a charge, if unpaid, may be recovered by the regulator or, as the case may be, the registry administrator as a civil debt.

(6) The regulator or the registry administrator may require a charge to be paid before it carries out the activity to which the charge relates.

(7) If the regulator or the registry administrator does not require a charge to be paid in accordance with paragraph (6), it is payable on demand.

(8) Neither the regulator nor the registry administrator is required to reimburse a charge where—

(a) an activity is not completed; or

(b) the person liable to pay the charge does not remain within the scheme for all of the period in relation to which the charge is payable or has been calculated.

(9) In this article, a reference to this Order includes a reference to the Monitoring and Reporting Regulation 2018, the Verification Regulation 2018, the Free Allocation Regulation and the Activity Level Changes Regulation.

Approval, publication and revision of charges

36

(1) The regulator must publish a document (a “charging scheme”) setting out the charges payable in accordance with article 35(1) or how they will be calculated.

(2) Before publishing a charging scheme, the regulator must—

(a) bring the proposals to the attention of persons likely to be affected by them;

(b) specify the period within which representations or objections to the proposals may be made.

(3) A charging scheme may not be published unless it has been approved by the appropriate national authority.

(4) Where a proposed charging scheme is submitted for approval under paragraph (3), the appropriate national authority—

(a) must consider any representations or objections made under paragraph (2)(b);

(b) may make such modifications to the proposals as the appropriate national authority considers appropriate.

(5) If the regulator proposes to revise a charging scheme in a material way, paragraphs (2) to (4) apply to the revised charging scheme.

(6) Paragraphs (2) to (5) do not apply in relation to a charging scheme published by the Secretary of State.

(7) In this article, “appropriate national authority” means—

(a) where the regulator is the Environment Agency, the Secretary of State;

(b) where the regulator is the chief inspector, the Department of Agriculture, Environment and Rural Affairs.

(d) where the regulator is NRW, the Welsh Ministers.

Remittance of charges

37

(1) The regulator must pay any charge received in accordance with a charging scheme under article 36 to the appropriate national authority (as defined in paragraph (7) of that article).

(2) Paragraph (1) does not apply to a charge received by the Secretary of State.

(3) The registry administrator must pay any charge received in accordance with a charging scheme under article 36A to the UK ETS authority.

PART 6 — Monitoring compliance

Authorised persons

38

(1) The regulator may authorise a person to exercise, on behalf of the regulator and in accordance with the terms of the authorisation, the regulator's powers set out in this Part.

(2) In this Part, “authorised person” means a person authorised under—

(a) paragraph (1); or

(b) section 108(1) of the Environment Act 1995 .

Inspections

39

(1) The regulator or an authorised person may, at a reasonable time, inspect any premises and any thing in or on those premises in order to monitor compliance with this Order , the Monitoring and Reporting Regulation 2018, the Verification Regulation 2018, the Free Allocation Regulation or the Activity Level Changes Regulation.

(2) Reasonable prior notice must be given before exercising the powers in this article.

(3) A person in control of the premises to which the regulator or authorised person reasonably requires access must allow the regulator or authorised person to have such access.

(4) The regulator or authorised person may, when inspecting premises—

(a) make any such examination and investigation as may be necessary;

(b) install or maintain monitoring equipment or other apparatus;

(d) take measurements, photographs, recordings or copies of any thing;

(e) take samples of any articles or substances found in, or on, the premises and of the air, water or land in, on, or in the vicinity of, those premises;

(f) request any person at the premises to provide facilities or assistance to the extent that is within that person's control.

(5) Except to the extent agreed by the person in control of a place or premises, the power referred to in paragraph (1) does not apply to—

(a) a prohibited place within the meaning of Part 1 of the National Security Act 2023; or

(b) any other premises to which the Crown restricts access on the ground of national security.

Powers of entry, etc.

40

(1) The regulator or an authorised person may—

(a) enter any premises with a warrant issued in accordance with article 41, together with any equipment or material as may be required;

(b) when entering premises by virtue of sub-paragraph (a)—

(i) be accompanied by an authorised person and, if considered appropriate, a constable;

(ii) direct that any part of the premises be left undisturbed for so long as may be necessary;

(i) to attend at a place and time specified by the regulator or authorised person;

(ii) to answer questions (in the absence of any person other than those whom the regulator or authorised person allows to be present and a person nominated by the person being asked questions);

(iii) to sign a declaration of truth of the answers given by that person;

(d) require the production of—

(i) records required to be kept under this Order , the Monitoring and Reporting Regulation 2018, the Verification Regulation 2018, the Free Allocation Regulation or the Activity Level Changes Regulation;

(ii) other records which the regulator or authorised person considers it necessary to see for the purpose of an examination or investigation;

(iii) entries in a record referred to in this sub-paragraph;

(e) inspect and take copies of the records and entries referred to in sub-paragraph (d).

(2) The powers in paragraph (1) may only be exercised where the regulator or an authorised person reasonably believes there has been a failure to comply with the requirements of this Order , the Monitoring and Reporting Regulation 2018, the Verification Regulation 2018, the Free Allocation Regulation or the Activity Level Changes Regulation.

(3) Except to the extent agreed by the person in control of a place or premises, the powers referred to in paragraph (1) do not apply in relation to—

(a) a prohibited place within the meaning of Part 1 of the National Security Act 2023; or

(b) any other premises to which the Crown restricts access on the ground of national security.

(4) It is an offence for a person—

(a) to fail to comply with a requirement imposed pursuant to this article; ...

(b) to prevent any other person from—

(i) appearing before the regulator or an authorised person; or

(ii) answering a question to which the regulator or authorised person requires an answer; or

(c) intentionally to obstruct the regulator, or an authorised person, in the exercise of a power referred to in paragraph (1).

(5) A person guilty of an offence under paragraph (4) is liable—

(a) on summary conviction in England and Wales, to a fine;

(b) on summary conviction in Scotland or in Northern Ireland, to a fine not exceeding the statutory maximum;

Warrants

41

(1) A judge may issue a warrant in relation to any premises for the purpose of article 40(1)(a) where satisfied that—

(a) there are reasonable grounds for the exercise of the power in that sub-paragraph; and

(b) one or more of the conditions in paragraph (2) are fulfilled in relation to the premises.

(2) The conditions referred to in paragraph (1)(b) are that—

(a) the exercise of the power by consent in relation to the premises has been refused;

(b) a refusal of consent to the exercise of the power is reasonably expected;

(d) the occupier is temporarily absent from the premises and the case is one of urgency; or

(e) a request for admission to the premises would defeat the purpose of the entry.

(3) A warrant in accordance with this article continues to have effect until the purpose for which it was issued has been fulfilled.

(4) In paragraph (1), “judge” means—

(a) in England or Wales, a justice of the peace;

(b) in Northern Ireland, a lay magistrate;

Admissible evidence

42

(1) An answer given by a person in compliance with article 40(1)(c)(ii) is admissible in evidence—

(a) in England, Wales and Northern Ireland, against that person in any proceedings;

(b) in Scotland, against that person in criminal proceedings.

(2) In criminal proceedings in which the person referred to in paragraph (1) is charged with an offence, no evidence relating to the person's answer may be adduced and no question relating to it may be asked by, or on behalf of, the prosecution unless evidence relating to it has been adduced by, or on behalf of, the person.

(3) Paragraph (2) does not apply to an offence under—

(a) section 5 of the Perjury Act 1911 ;

(b) section 44(2) of the Criminal Law (Consolidation) (Scotland) Act 1995 ; or

Legal professional privilege

43

Nothing in this Part requires any person to produce a document which that person would be entitled to withhold the production of on grounds of legal professional privilege.

PART 7 — Enforcement

CHAPTER 1 — Enforcement notices , deficit notices and determination of emissions by regulator

Enforcement notices

44

(1) Where the regulator considers that a person has contravened, is contravening or is likely to contravene a relevant requirement, the regulator may give notice (an “enforcement notice”) to the person.

(2) In paragraph (1), “relevant requirement” means—

(a) a requirement imposed on the person by or under—

(i) this Order , except for Schedule 5A;

(ii) the Monitoring and Reporting Regulation 2018;

(iii) the Verification Regulation 2018;

(iv) the Free Allocation Regulation;

(v) the Activity Level Changes Regulation.

(b) a condition of a permit;

(2A) Where the registry administrator considers that a person has contravened, is contravening or is likely to contravene a requirement imposed on the person by or under Schedule 5A, the registry administrator may give notice (an “enforcement notice”) to the person.

(3) An enforcement notice must set out—

(a) the relevant requirement that the regulator , or the requirement imposed by or under Schedule 5A that the registry administrator, considers has been contravened, is being contravened or is likely to be contravened;

(b) details of the contravention or likely contravention;

(d) the period within which the steps must be taken;

(e) information about rights of appeal.

(4) The person to whom the enforcement notice is given must comply with the requirements of the notice within the period set out in the notice.

(5) The regulator or the registry administrator may withdraw an enforcement notice at any time by giving notice of the withdrawal to the person to whom the enforcement notice is given.

Determination of reportable emissions or aviation emissions by regulator

45

(1) The regulator must make a determination of emissions of an installation or an aircraft operator in either of the following circumstances—

(a) if the operator of the installation fails to submit a report of the installation's reportable emissions in accordance with a condition of a permit included under paragraph 4(2)(b) of Schedule 6 or paragraph 11(2)(b) of Schedule 7;

(b) if the aircraft operator fails to submit a report of aviation emissions in accordance with article 33.

(2) Where a verifier states in a verification report under the Verification Regulation 2018 that there are non-material misstatements in the annual emissions report of the operator of an installation or of an aircraft operator that have not been corrected by the operator or the aircraft operator before the verification report is issued—

(a) the regulator must—

(i) assess the misstatements;

(ii) if the regulator considers it appropriate, make a determination of emissions of the installation or the aircraft operator; and

(iii) give notice to the operator or the aircraft operator as to whether or not corrections are required to the annual emissions report and, if corrections are required, set out the corrections in the notice; and

(b) the operator or the aircraft operator must make the information referred to in sub-paragraph (a)(iii) available to the verifier.

(3) The regulator may make a determination of emissions of an installation or of an aircraft operator in any of the following circumstances—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) if the operator of the installation fails to submit a report in accordance with paragraph 11(4)(b) of Schedule 6;

(d) if the regulator considers that the determination of emissions is necessary for the purpose of imposing, or considering whether to impose, a civil penalty under article 47.

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) A regulator who makes a determination of emissions must give notice of the determination to the operator, the aircraft operator or the person on whom the civil penalty may be imposed.

(6) A notice of a determination of emissions determines for the purposes of this Order (including for calculating a civil penalty under article 47) the installation's reportable emissions or the aviation operator's aviation emissions for the period to which the determination relates.

(7) Where, after making a determination of emissions (including a rectified determination of emissions, or a further rectified determination of emissions, made under this paragraph), the regulator considers that there is an error in the determination, the regulator must—

(a) withdraw any notice of the determination given under paragraph (5);

(b) make a rectified determination of the emissions; and

and paragraph (6) applies to a notice of the rectified determination as it does to the notice of the previous determination.

(8) For the purposes of this article, emissions must be determined on the basis of a set of assumptions designed to ensure that no under-estimation occurs.

CHAPTER 2 — Civil penalties

Carbon price

46

(1) This article applies for the purpose of determining the price (the “carbon price”) per tonne of carbon dioxide equivalent for a scheme year.

(2) The carbon price for the 2021 scheme year is the sum of the relevant amount for each auction of allowances held in the period beginning on 1st January 2021 and ending on 11th November 2021 under regulations made by the Treasury under the Finance Act 2020 divided by the sum of the allowances sold at all those auctions.

(3) In paragraph (2), the relevant amount for an auction is the auction clearing price (that is to say, the price per allowance that, in accordance with the auction rules, each successful bidder must pay, irrespective of the original bid) multiplied by the number of allowances sold at the auction.

(4) The carbon price for the 2022 scheme year or any subsequent scheme year (the “relevant scheme year”) is the average end of day settlement price, calculated over the relevant period, of the December futures contract for the relevant scheme year, as traded on the relevant carbon market exchange.

(5) For the purposes of paragraph (4), the “average” end of day settlement price is calculated by dividing the sum of the end of day settlement price for each day in the relevant period for which an end of day settlement price is published by the number of days in the relevant period for which an end of day settlement price is published.

(6) In paragraphs (4) and (5)—

“end of day settlement price”, in relation to a futures contract, means the end of day settlement price per tonne of carbon dioxide equivalent published by the carbon market exchange on which the futures contract is traded;

“futures contract” means a futures contract for allowances;

“relevant carbon market exchange”, in relation to a relevant scheme year, means the largest carbon market exchange as determined by volume of sales in the relevant period of the December futures contract for the relevant scheme year traded on the exchange;

“relevant period” means—in relation to the carbon price for the 2022 scheme year, the period beginning on 1st January 2021 and ending on 11th November 2021;in relation to the carbon price for the 2023 scheme year and any subsequent scheme year, the 12-month period ending on 11th November in the year preceding the relevant scheme year.

(7) The UK ETS authority must publish the carbon price for the 2021 scheme year on or before 30th November 2021.

(8) The UK ETS authority must publish the carbon price for subsequent scheme years on or before 30th November in the year preceding the scheme year.

Penalty notices

47

(1) Where the regulator considers that a person is liable to a civil penalty under any of articles 50 to 68 the regulator may impose a civil penalty on the person.

(2) But where the regulator considers that a person is liable to a civil penalty under any of the following, the regulator must impose a civil penalty on the person–—

(a) article 52 (failure to surrender allowances), but only if the person is liable to the excess emissions penalty referred to in article 52(2);

(b) article 54 (hospitals and small emitters: exceeding emissions target), except where paragraph (3) of that article applies;

(d) article 65A (failure to comply with deficit notice), but the regulator is not required to impose the daily penalty under paragraph (2)(b) of that article.

(3) A civil penalty is imposed on a person by giving a notice (a “penalty notice”) to the person.

(4) Where the civil penalty to which the person is liable consists of a non-escalating penalty only (or where the civil penalty consists of both a non-escalating penalty and a daily penalty, but the regulator decides not to impose a daily penalty), the penalty notice must set out—

(a) the grounds for liability;

(b) the amount of the non-escalating penalty (and, where relevant, how the amount is calculated);

(c) the date by which the non-escalating penalty must be paid (the “due date”), which must not be less than 28 days after the day on which the notice is given;

(d) the person to whom payment must be made (which must be either the regulator or the appropriate national authority);

(e) how payment may be made;

(f) information about rights of appeal.

(5) Where the civil penalty to which the person is liable consists of both a non-escalating penalty and a daily penalty and the regulator considers that the regulator may wish to impose a daily penalty, the regulator must, before giving a penalty notice to the person, first give a notice (an “initial notice”) to the person.

(5A) Where the person is liable to a civil penalty under article 53 or 65A, an initial notice may not be given until at least 28 days have expired since—

(a) in the case of a civil penalty under article 53, the day on or before which the person is required to transfer or, as the case may be, surrender allowances;

(b) in the case of a civil penalty under article 65A, the deficit surrender date set out in the deficit notice (see article 44A(3)(d)).

(6) The initial notice must set out—

(a) the grounds for liability;

(b) the maximum amount of the non-escalating penalty that may be imposed;

(d) the maximum daily rate of the daily penalty and the maximum amount (if any) of the daily penalty that may be imposed.

(7) Where, after an initial notice is given to a person, the regulator considers that the total amount of the daily penalty to which the person is liable can be calculated (including where the daily penalty reaches its maximum amount), the regulator may give a penalty notice to the person.

(7A) A penalty notice imposing a civil penalty that consists of a daily penalty under article 53(2)(b), 64A(2)(b) or 65A(2)(b) (for which there is no maximum) may be given at such intervals as the regulator considers appropriate.

(8) The penalty notice must set out—

(a) the grounds for liability;

(b) the amount of the civil penalty (including how the amount is calculated), which may include—

(i) a non-escalating penalty; and

(ii) a daily penalty;

(c) the date by which the civil penalty must be paid (the “due date”), which must not be less than 28 days after the day on which the notice is given;

(d) the person to whom payment must be made (which must be either the regulator or the appropriate national authority);

(e) how payment may be made;

(f) information about rights of appeal.

(9) The person to whom a penalty notice is given must pay the civil penalty set out in the notice to the person set out in the notice on or before the due date.

(10) A civil penalty imposed by a penalty notice is recoverable by the regulator as a civil debt.

(11) The regulator must, as soon as reasonably practicable—

(a) inform the appropriate national authority of a penalty notice given by the regulator;

(b) pay all sums received or recovered under a penalty notice to the appropriate national authority.

(12) In this article and article 48—

“appropriate national authority” means—in the case of a penalty notice given by the chief inspector, the Department of Agriculture, Environment and Rural Affairs;in the case of a penalty notice given by SEPA, the Scottish Ministers;in the case of a penalty notice given by NRW, the Welsh Ministers;in any other case, the Secretary of State;

“daily penalty” means a daily penalty set out in articles 51(3)(b), 53(2)(b), 55(2)(b), 60A(2)(b), 61(2)(b), 62(2)(b), 63(2)(b), 64(2)(b), 64A(2)(b), 65(2)(b) , 65A(2)(b) or 66(2)(b);

“non-escalating penalty” means a civil penalty under articles 50 to 68 that is not a daily penalty.

(13) This article is subject to article 48.

Penalty notices: supplementary

48

(1) Subject to paragraph (3), a penalty notice imposing a civil penalty under any of articles 50 to 68 (the “relevant provision”) may set out—

(a) a non-escalating penalty of an amount lower than the amount referred to in the relevant provision;

(b) where the civil penalty consists of both a non-escalating penalty and a daily penalty—

(i) a daily penalty based on a daily rate of an amount lower than the amount referred to in the relevant provision; or

(ii) no daily penalty.

(2) Subject to paragraphs (3) and (4), the regulator may, by giving notice to the person to whom a penalty notice is given—

(a) extend the due date for payment set out in the penalty notice;

(b) amend the penalty notice by substituting a lower non-escalating penalty or a daily penalty based on a lower daily rate;

(3) Paragraphs (1) and (2) do not apply to—

(a) a penalty notice imposing the excess emissions penalty referred to in article 52;

(b) a penalty notice imposing a civil penalty under article 54, except where paragraph (3) of that article applies;

(d) a penalty notice imposing a civil penalty under article 65A, but if the penalty imposed consists of both a non-escalating penalty and a daily penalty, paragraphs (1) and (2) apply to the notice in relation to the daily penalty only.

(4) But the regulator may withdraw a penalty notice referred to in paragraph (3) if there is an error in the notice (including an error in the basis on which the civil penalty imposed by the notice is calculated).

Regulator must publish names of persons subject to civil penalty under article 52

49

(1) The regulator must publish the name of every person on whom the excess emissions penalty referred to in article 52 is imposed as soon as reasonably practicable after—

(a) the expiry of the period for bringing an appeal against the penalty notice imposing the penalty; or

(b) if an appeal is brought, the determination or withdrawal of the appeal.

(2) But paragraph (1) does not apply if, following an appeal, the person is found not to be liable to a civil penalty.

(3) This article is subject to article 75C (national security).

Installations: carrying out regulated activity without permit contrary to article 26

50

(1) Where a regulated activity that is not authorised by a permit is carried out at an installation in a scheme year, contrary to article 26, the operator of the installation is (after the end of the scheme year) liable to a civil penalty.

(2) Subject to paragraph (3), the civil penalty is CA + (RE x CP), where—

CA is an estimate of the costs avoided by the operator in the scheme year as a result of carrying out the regulated activity without the authorisation of a permit;

RE is an estimate of the installation's reportable emissions in the part of the scheme year during which a regulated activity that was not authorised by a permit was carried out;

CP is the carbon price for the scheme year.

(3) When setting the amount of the civil penalty to be imposed, the regulator may increase the amount calculated under paragraph (2) by a factor designed to ensure that the amount of the civil penalty exceeds the value of any economic benefit that the operator has obtained as a result of failing to comply with article 26.

(4) The regulator must—

(a) estimate CA and RE under paragraph (2); and

(b) exercise the regulator's functions under paragraph (3),

in accordance with a direction given by the relevant national authority under section 52 of CCA 2008.

(5) This article is subject to paragraph 7(6)(b) of Schedule 8.

Installations: failure to comply with conditions of permit, etc.

51

(1) The operator of an installation is liable to the civil penalty referred to in paragraph (3) where the operator fails to comply (or to comply on time) with—

(a) a condition of a greenhouse gas emissions permit;

(b) a condition of a hospital or small emitter permit;

(d) a requirement of a revocation notice set out in paragraph 12(5)(b)(i) or (ii) of that Schedule.

(2) But an operator is not liable to the civil penalty referred to in paragraph (3) where the failure to comply with a condition of a permit gives rise to liability for a civil penalty under—

(a) article 52;

(b) article 56.

(3) The civil penalty is—

(a) £20,000; and

(b) a daily penalty at a daily rate of £500 for each day that the operator fails to comply with the condition or requirement, beginning with the day on which the initial notice is given, up to a maximum of £45,000.

Failure to surrender allowances

52

(1) Subject to paragraphs (4) to (9), the operator of an installation or an aircraft operator is liable to the civil penalty (the “excess emissions penalty”) referred to in paragraph (2) where—

(a) in the case of the operator, the operator fails to surrender sufficient allowances, contrary to—

(i) article 27;

(ii) the requirement of a surrender notice set out in paragraph 11(4)(b)(iii) of Schedule 6;

(iii) the requirement of a revocation notice set out in paragraph 12(5)(b)(iii) of that Schedule;

(b) in the case of the aircraft operator, the aircraft operator fails to surrender sufficient allowances, contrary to article 34.

(2) The excess emissions penalty is £100 multiplied by the inflation factor for each allowance that the operator or the aircraft operator fails to surrender.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) This paragraph applies where—

(a) the regulator becomes aware that an installation's reportable emissions (as determined by the regulator under article 45) in a scheme year exceed the installation's verified reportable emissions for that year; and

(b) the operator of the installation failed to surrender allowances equal to the difference—

(i) on or before 30th April in the year following the scheme year referred to in sub-paragraph (a); or

(ii) where the end date set out in a surrender notice under paragraph 11 of Schedule 6 or a revocation notice under paragraph 12 of that Schedule falls in the scheme year referred to in sub-paragraph (a), on or before the date set out in the notice for the surrender of allowances.

(5) In paragraph (4), “verified reportable emissions” means reportable emissions—

(a) verified in accordance with a condition of a permit included under paragraph 4(2)(b) of Schedule 6 (including for the purpose of complying with the requirements of a surrender notice under paragraph 11, or a revocation notice under paragraph 12, of that Schedule); or

(b) previously determined by the regulator under article 45.

(6) Where paragraph (4) applies, the operator is liable to the civil penalty referred to in paragraph (10) (and not the excess emissions penalty) in respect of the failure to surrender allowances referred to in paragraph (4)(b).

(7) This paragraph applies where the regulator becomes aware that—

(a) an aircraft operator's aviation emissions (as determined by the regulator under article 45) in a scheme year exceed the aircraft operator's verified aviation emissions for that year; and

(b) the aircraft operator failed to surrender allowances equal to the difference on or before 30th April in the year following the scheme year referred to in sub-paragraph (a).

(8) In paragraph (7), “verified aviation emissions” means aviation emissions—

(a) verified under article 33(1);

(b) considered verified under article 33(2); or

(9) Where paragraph (7) applies, the aircraft operator is liable to the civil penalty referred to in paragraph (10) (and not the excess emissions penalty) in respect of the failure to surrender allowances referred to in paragraph (7)(b).

(10) The civil penalty is £20 multiplied by the inflation factor for each allowance that the operator or the aircraft operator failed to surrender.

(11) For the purposes of this article, the inflation factor is CPI₂ /CPI₁ or 1, whichever is greater, where—

CPI₂ is the consumer prices index for the month preceding the month that includes the day on or before which the allowance was required to be surrendered;

CPI₁ is the consumer prices index for March 2021.

(12) In paragraph (11), “consumer prices index” means—

(a) the all items consumer prices index published by the Statistics Board ; or

(b) if that index is not published for a month, any substituted index or index figures published for that month by the Statistics Board.

Installations: failure to transfer or surrender allowances where underreporting discovered after transfer

53

(1) A person is liable to a civil penalty where the person fails—

(a) to effect a transfer (or to effect a transfer on time) of allowances, contrary to paragraph 10(3) of Schedule 6 (transfer of permits: underreporting discovered after transfer);

(b) to surrender (or to surrender on time) allowances, contrary to paragraph 10(4) of that Schedule.

(2) The civil penalty is—

(a) CP x 1.5 for each allowance that the person fails to transfer or surrender, where CP is the carbon price for the scheme year after the scheme year to which the report referred to in sub-paragraph (1) of paragraph 10 of Schedule 6 relates; and

(b) a daily penalty at a daily rate of £1,000 for each day that sub-paragraph (3) or, as the case may be, (4) of that paragraph has not been complied with, beginning with the day on which the initial notice is given (see article 47(5)).

Hospitals and small emitters: exceeding emissions target

54

(1) Where an installation's reportable emissions in a scheme year for which the installation is a hospital or small emitter exceed the installation's emissions target for that year, contrary to paragraph 19 of Schedule 7, the operator of the installation is liable to a civil penalty.

(2) The civil penalty is (RE-ET) x CP, where—

RE is the installation's reportable emissions in the scheme year;

ET is the installation's emissions target for the scheme year;

CP is the carbon price for the scheme year.

(3) For the purposes of article 47(2)(b), this paragraph applies where the regulator considers that the installation's emissions target for the scheme year was incorrectly calculated.

(4) In this article, “emissions target” has the meaning given in paragraph 1 of Schedule 7.

Hospitals and small emitters: failure to pay civil penalty for exceeding emissions target

55

(1) Where the operator of an installation fails to pay a civil penalty (the “first penalty”) under article 54 on or before the due date set out in the penalty notice imposing the first penalty, the operator is liable to a further civil penalty.

(2) The further civil penalty is—

(a) 10% of the first penalty; and

(b) a daily penalty at a daily rate of £150 for each day that the operator fails to pay the first penalty beginning with the day on which the initial notice is given, up to a maximum of £13,500.

Hospitals and small emitters: under-reporting of emissions

56

(1) The operator of an installation is liable to a civil penalty where the installation has unreported emissions in a scheme year for which the installation is a hospital or small emitter, that is to say reportable emissions in the scheme year that—

(a) are not reported in the emissions report submitted for the scheme year under paragraph 11(2)(b) of Schedule 7; but

(b) are determined by the regulator under article 45.

(2) The civil penalty is £5,000 + (UE x £10 x the inflation factor), where—

UE is the unreported emissions in the scheme year (in tonnes of carbon dioxide equivalent);

....

(3) In this article, “inflation factor” has the meaning given in article 52(11), except that CPI₂ is the consumer prices index (as defined in article 52(12)) for the month preceding the month that includes the day on or before which the emissions report was required to be submitted.

Hospitals and small emitters: failure to notify when ceasing to meet criteria

57

(1) This article applies where—

(a) either—

(i) a hospital-qualifying installation ceases to be an installation that primarily provides services to a hospital in a scheme year for which the installation is a hospital or small emitter; or

(ii) the reportable emissions of an installation (other than a hospital-qualifying installation) in a scheme year for which the installation is a hospital or small emitter exceed the maximum amount; and

(b) the operator of the installation fails to comply (or to comply on time) with a requirement to give notice on or before 31st March in the following year (the “default year”) under a condition of a hospital or small emitter permit included under paragraph 11(3)(a) or (4) of Schedule 7.

(2) Where the operator fails to give notice on or before 31st March in the default year, but does give notice on or before 31st October in that year, the operator is liable to a civil penalty of £2,500.

(3) Where the operator fails to give notice on or before 31st October in the default year—

(a) if there is no penalty year, the operator is liable to a civil penalty of £2,500;

(b) if there is a penalty year, subject to paragraph (4A), the operator is liable (after the end of the last penalty year), to a civil penalty of the sum of the avoided compliance costs for all penalty years.

(4) The avoided compliance costs, for each penalty year, are ((RE – FA) x CP) – PP, where—

RE is the installation's reportable emissions (determined as if the modification made to Article 38(2) of the Monitoring and Reporting Regulation 2018 by paragraph 13(4)(a)(i) of Schedule 7 did not apply) in the penalty year;

FA is—where—an application in respect of the installation was made under the Free Allocation Regulation for free allocation in the same allocation period as the penalty year is in; andthe UK ETS authority informed the regulator under Article 15a(4) of that Regulation that the application was valid,the number of tonnes of carbon dioxide equivalent represented by the final annual number of allowances that would have been allocated under Part 4A in respect of the installation for the penalty year if the installation had not been a hospital or small emitter for the penalty year, disregarding any adjustment to free allocation that might have been made under the Activity Level Changes Regulation;in any other case, zero;

CP is the carbon price for the penalty year;

PP is, where a penalty notice imposing a civil penalty under article 54 in respect of the penalty year has previously been given to the operator, the amount of the civil penalty.

(4A) When setting the amount of the civil penalty to be imposed under paragraph (3)(b), the regulator may increase the sum of the avoided compliance costs for all penalty years (before any reduction under article 48) by 10% of the total or £2,500, whichever is higher.

(5) In this article—

“hospital-qualifying installation” has the meaning given in paragraph 1 of Schedule 7;

“maximum amount” has the meaning given in that paragraph;

“penalty year” means a scheme year for which the installation—is a hospital or small emitter; butwould not have been a hospital or small emitter if, by reason of the matters referred to in paragraph (1)(a)(i) or (ii), the regulator had, in the default year, given a conversion notice as required by paragraph 23(1) to (3) of Schedule 7 to the operator of the installation.

Installations: failure to apply to surrender permit

58

The operator of an installation is liable to a civil penalty of £5,000 where the operator fails to apply (or to apply on time) to surrender a permit, contrary to paragraph 11(1) of Schedule 6.

Ultra-small emitters: reportable emissions exceeding maximum amount

59

(1) Subject to paragraph (3), where an installation's reportable emissions in a scheme year for which the installation is an ultra-small emitter exceed the maximum amount, the operator of the installation is liable to a civil penalty.

(2) The civil penalty is (RE – maximum amount) x CP, where—

RE is the installation's reportable emissions in the scheme year;

CP is the carbon price for the scheme year.

(3) A civil penalty under this article may be imposed only in respect of—

(a) the first scheme year in the period beginning with 1st January 2021 and ending with 31st December 2025, or in the 2026-2030 period, in which the installation's reportable emissions exceed the maximum amount; and

(b) if the following scheme year is in the same ... period, that scheme year.

(4) In this article, “maximum amount” has the meaning given in paragraph 1 of Schedule 8.

Ultra-small emitters: failure to notify where reportable emissions exceed maximum amount

60

(1) Where—

(a) an installation's reportable emissions in a scheme year (the “excess year”) for which the installation is an ultra-small emitter exceed the maximum amount; and

(b) the operator of the installation fails to give notice to the regulator under paragraph 6 of Schedule 8 on or before 31st March in the following year (the “default year”) or at all,

the operator is liable to a civil penalty.

(2) Subject to paragraph (5), the civil penalty is—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) CA + ((RE – FA) x CP) for each scheme year (or part of a scheme year) falling within the penalty period (if any), where—

CA is an estimate of the costs avoided by the operator in the scheme year (or part of the scheme year) as a result of carrying out a regulated activity without the authorisation of the relevant permit;

RE is an estimate of the installation's reportable emissions in the scheme year (or part of the scheme year) during which a regulated activity that was not authorised by a permit was carried out;

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