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• EU Emissions Trading Scheme Contacts

EU ETS Phase 2: New Entrants and Closures

The UK has decided to set aside a number of allowances to be allocated for free to Phase II new entrants.

The Phase II New Entrant Reserve (NER) will comprise 81.6 million allowances, which represents 7% of the total number of allowances to be allocated for Phase II.  The components of the NER are as follows:

• 27.5 million allowances will be for use by Good Quality Combined Heat & Power (CHP) Phase II new entrants
• 44.9 million allowances will be for use by non-CHP Phase II new entrants
• 6.8 million allowances will be used to provide Phase II allowances for new entrants that start towards the end of Phase I; and
• 2.4 million allowances will form a contingency fund

Details of the Phase II new entrant and closure regime are contained in Appendix D of the National Allocation Plan.

• EU emissions trading scheme: approved UK phase II national allocation plan. Appendix D: new entrants and closures (139KB)
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The key issues covered in Appendix D are:

• how the NER is quantified and how sectors contribute to it
• how new entrants are defined and their eligibility for allowances
• how new entrants' allocations are calculated
• rates of allocation to new entrants
• closure and rationalisation rules
• how the allocation process works, including the role of the regulator
• provision of Phase II allocations for later Phase I new entrants
• provision of allowances for later and missing installations through the contingency fund

Calculating the allocation to new entrants

The Government has also consulted separately to review, validate and revise the existing benchmarks that will be used to calculate the allocations for new entrants in Phase II.  The final spreadsheet (Appendix D1) can be found below:

• Appendix D1 to the UK's national allocation plan for phase II of the EU emissions trading scheme: new entrant spreadsheet (569KB)
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Applications for NER allowances

Operators will need to apply to their regulator for free allowances from the NER.  Applications by later Phase I new entrants (see below) can be made from 1 May 2007.  Applications by Phase II new entrants can be made from 1 August 2007. The application form can be found on the Environment Agency website.

Verification of applications

All applications to the Phase II NER will need to be independently verified (although some elements of later Phase I applications may not require further verification). 

Later Phase I new entrants

The Phase II Final Allocation Decision published in March 2007 took into account changes at installations that took place before 30 June 2006.  Phase II allowances for changes that take place between 1 July 2006 and 31 December 2007 (such as increases in net capacity, return from temporary closure and rationalisation) will come from the Phase II NER.

Installations that were opted out of the EU ETS in Phase II, or which are affected by the expansion of scope in Phase II, are also eligible to apply for Phase II allowances to cover changes in this period.