The UK Emission Trading Scheme (UK ETS)
Emissions trading in the UK
A UK Emissions Trading Scheme (UK ETS) has replaced the UK's participation in the EU Emissions Trading Scheme (EU ETS) from 01 January 2021.
The Government has established the scheme to increase the climate ambition of the UK’s carbon pricing policy and provides continuity of emissions trading for UK businesses. Many of the features and processes in the new UK scheme will be familiar to operators. The UK ETS was established through The Greenhouse Gas Emissions Trading Scheme Order 2020.
The UK Government, Scottish Government, Welsh Government and Department of Agriculture, Environment and Rural Affairs for Northern Ireland collectively constitute the UK ETS Authority to oversee the scheme.
How the UK ETS works
Emissions trading schemes work on the ‘cap and trade’ principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme. This limits the total amount of carbon that can be emitted and, as it decreases over time, will make a significant contribution to how we meet our Net Zero 2050 target and other legally binding carbon reduction commitments.
Buying and selling emission allowances
Within this cap, participants receive free allowances and/or buy emission allowances at auction or on the secondary market which they can trade with other participants as needed.
Each year, installations and aircraft operators covered by the scheme must surrender allowances to cover their reportable emissions.
The cap is reduced over time, so total emissions must fall.
Who the UK ETS applies to
The UK ETS applies to energy intensive industries, the power generation sector and aviation.
It covers regulated activities which result in greenhouse gas emissions, including the combustion of fuels in installations with combustion units with a total rated thermal input exceeding 20MW (except in installations for the incineration of hazardous or municipal waste).
If you carry out a regulated activity at an installation in a scheme year, you are required to hold a greenhouse gas emissions permit for the installation that authorises the regulated activity to be carried out.
If you do not hold a permit for an installation or certain parts of the installation are not covered by the permit then you are liable to a civil penalty as directed by Welsh Government for article 50.
The aviation routes covered by the UK ETS include UK domestic flights, flights between the UK and Gibraltar, the UK and Switzerland and flights departing the UK to European Economic Area states conducted by all included aircraft operators, regardless of nationality.
Activities in scope of the UK ETS are listed in Schedule 1 (aviation) and Schedule 2 (installations) of the Greenhouse Gas Emissions Trading Scheme Order 2020.
For information on how to comply with the scheme use the following guidance:
Hospitals & small emitters (HSEs)
In the UK ETS, there are simplified provisions for hospitals and small emitters with emissions lower than 25,000t CO2e per annum and a net-rated thermal capacity below 35MW. These installations are subject to emissions targets instead of trading allowances.
If you are classed as a small emitter or a hospital then you will need a separate hospital or small emitter permit.
Separate simplified provisions are available to installations with emissions lower than 2,500t CO2e per annum that are classed as ultra-small emitters.
If you are classed as an ultra-small emitter then you are not required to hold a permit but are still required to monitor your emissions and must notify us if you go over the agreed threshold.
If, in a scheme year as an ultra-small emitter, you exceed your agreed threshold and fail to notify us by 31 March the following year, you are liable for a civil penalty as directed by Welsh Government for article 60.
UK Emissions Trading Scheme charges
The UK Emissions Trading Scheme charges are update annually.
How to pay for your UK ETS permitting charges
- You must include your company name and UK ETS permit ID number with the payment.
- You may pay for your UK ETS permitting charges by BACS electronic bank transfer or credit card by telephone.
Pay by BACS transfer
If you want to pay for your permit or licence application by electronic transfer please use the information below to make your payment.
Company name: Natural Resources Wales
Company address: Income Department, PO Box 663, Cardiff, CF24 0TP
Address: National Westminster Bank Plc., 2 1/2 Devonshire Square, London, EC2M 4BA
Sort code: 60-70-80
Account number: 10014438
When you're setting up your BACS transfer, please include your company name and UK ETS permit ID number in the reference section.
Pay for your permit by telephone
Call us on 0300 065 3000 (Mon-Fri, 9am-5pm)
If paying by telephone choose option 5 to speak to an operator rather than option 3 and please provide your company name and UK ETS permit ID number.