UK ETS Free Allocation Review – Final Business and Regulatory Impact Assessment

Section 2: Engagement and information gathering

Engagement approach

Below is a summary of the engagement undertaken by the Authority between 2021 and 2025 to inform the free allocation review.

Internal SG engagement/ engagement with wider Public Sector

Within Governments

The UK ETS free allocation policy is delivered jointly between all members of the Authority - comprising the UK Government, Scottish Government, Welsh Government, and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland.

The following government agencies and departments have been consulted by the Scottish Government in the Authority consultation and the preparation of this BRIA:

• The International Trade Policy & Subsidy Control Division has provided advice on proposals related to the traded sector;
• The Scottish Government Office of the Chief Economic Adviser has provided analysis and advice on the economic impacts;
• The Authority members (Welsh Government and the Department for Agriculture, Environment and Rural Affairs for Northern Ireland) and UK Government departments (Department for Energy and Net Zero, His Majesty’s Treasury and Department for Transport); and
• Scottish Environment Protection Agency (SEPA).

Public consultation

The Authority consulted extensively with stakeholders across the UK, including with Scottish stakeholders, during this period.

The Authority launched a review into free allocation policy in 2021 with a call for evidence^[10], aiming to ensure free allocation policy was working effectively in the UK context to both incentivise emissions reduction and protect energy intensive, trade exposed industries from the risk of carbon leakage.

The Authority consulted further through the Free Allocation Review Consultation (December 2023 – March 2024)^[11] and the Carbon Leakage Consultation (December 2024 – March 2025).^[12]

As part of these consultation processes, and aiming to gather as much feedback as possible, the Authority carried out UK-wide stakeholder engagement sessions. The Authority received 113 registrations for the 2023 consultation workshops, and 140 for the 2024 consultation workshops, with UK ETS participants, including Scottish stakeholders, from cross-sector business groups, trade associations, thinktanks, academics and eNGOs. These sessions included high-level summaries of the consultation and topic-specific workshops on specific areas of the consultations.

Businesses were primarily consulted through the public consultations set out above. Scottish Government officials identified responses most relevant to Scotland – including all UK ETS operators in Scotland who responded to the consultation. Scottish businesses and UK ETS operators also participated in the workshops and roundtables hosted by the Authority during the consultations.

In total, 66 written responses were received as part of the Free Allocation Review Consultation, 24 of which held a Scottish interest. For the Carbon Leakage Consultation, 54 responses were received in total, 11 of which held a Scottish interest.

The feedback received via these consultations has been instrumental in shaping the final policy decisions. The Authority Response responds to these consultations and sets out the Authority’s final policy position for the second allocation period, covering 2027 to 2030, and the phase-out of free allocations for UK CBAM covered sectors beyond 2030.