The free allocation of allowances to eligible installation operators and aircraft operators continues, to reduce the risk of carbon leakage for UK businesses. The initial approach to free allocation in the UK ETS is similar to the EU’s approach for Phase IV of the EU ETS. This ensures continuity for businesses in this area of the scheme. The benchmarks used to calculate free allocation entitlement are the same as Phase IV of the EU ETS. Free allocation will be allocated on or before 28 February of each calendar year. Legislation covering free allocation is in The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2020, which came into force on 31 December 2020. Free allocation for installation operators Free allocations will be made available for operators of eligible installations who applied for a free allocation of allowances for the 2021 to 2025 allocation period and for new entrants to the UK ETS. The free allocation application validity will be determined by the UK ETS Authority. Each installation’s free allocation is published in an Allocation Table once it has been calculated by the regulators and approved by the UK ETS authority. The UK ETS Allocation Table for operators of installations contains a list of each installation’s free allocation for the 2021 to 2025 allocation period. It is updated periodically. The industry benchmarks used to calculate free allocations were published by the European Commission on 12 March 2021. Activity Level Reports and changes in allocation If you are included in the Allocation Table, you must submit a verified Activity Level Report (ALR) to your UK ETS regulator. The deadline to submit these reports is 31 March of each calendar year. If the data in your ALR shows an increase or decrease in activity of more than 15% from historic activity levels (calculated from the previous 2 years’ activity levels), your free allocation of allowances will be recalculated. Your regulator recalculates the free allocation of allowances in line with the Activity Level Change Regulation. The UK ETS Authority approves the final allocation. When approved, you will be notified by your regulator of changes to your final free allocation of allowances. Any changes to the free allocation of allowances based on ALRs will then be published in the updated Allocation Table. Some instances of free allocation amendments may be processed at a later point. They will not be reflected in the published Allocation Table until approved by the Authority. You will be contacted if this is the case. Some allowances may be withheld in which case your regulator will notify you. Any increase in allocation will be allocated to Operator Holding Accounts (OHAs) in the Registry in line with the updated allocation table, and any reductions in entitlement will mean that you must return any over-allocations from your OHA. Your regulator will confirm if you are required to return any allowances. You will be able to access your updated ALR from ETSWAP following your regulator’s review. This ALR will contain updated benchmarks and any other changes agreed with your regulator and should be used in future years. You must use the verification report template for the verification of your activity levels data. You must submit the completed verification report template to your regulator with your ALR. Cross-sectoral correction factor The UK ETS Authority has determined that no cross-sectoral correction factor (CSCF) will be applied for the 2021-2025 allocation period. Free allocation for aircraft operators Free allocation has been made available to all eligible aircraft operators who applied for a free allocation of allowances under the UK ETS during 2021. The UK ETS Aviation Allocation Table contains a list of each aircraft operator’s free allocation entitlement for the 2021 to 2025 allocation period. This table is subject to change and the years 2023-2025 should be treated as indicative, pending the outcome of the ongoing free allocation review. Allowances for the relevant scheme year will be allocated to eligible aircraft operators on or before 28 February.