On May 10, the UK Government published its guidance on the supply of emissions allowances in the UK Emissions Trading Scheme (UK ETS). The UK ETS was introduced on January 1, replacing the United Kingdom’s participation in the EU Emission Trading System following the end of the post-Brexit transition period.
The guidance set forth by the UK Government includes:
- hosting UK ETS auctions every two weeks from May 19;
- announcing the first trade date on the secondary market: the UK Allowance Futures Contract is May 19, and the UK Allowance Daily Futures is May 21;
- announcing that the 2022 auction calendar will be published by July 15;
- publishing the allocation table setting out stationary installations’ entitlement to free allowances for 2021-25. The aviation allocation table will be published in June and will set out the entitlement for aircraft operators. Free allocations will follow after the publication of the tables. Free allocations for 2022 will be issued by February 28, 2022 for both stationary and aircraft operators; and
- managing the UK ETS through an auction reserve price (the minimum price for bids is set at £22) and using the cost containment mechanism (CCM) to mitigate sustained high prices. For the CCM to be triggered, the average December 2021 futures contract price as traded on the Intercontinental Exchange would need to remain above £46 for three consecutive months.