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.

As an existing permit holder you should continue to comply with your existing permit conditions and obligations in the EU ETS up until 30 April 2021, as outlined in the EU Emissions Trading Scheme.

What has changed

The legislation has changed so that all the functions originally carried out by the EU have been transferred to the UK. This includes a new UK ETS authority that includes the Secretary of State, the Scottish Ministers, the Welsh Ministers and the relevant Northern Ireland department acting jointly.

In terms of the day-to-day operations very little has changed and you are required to continue to monitor and measure emissions in the same way as the EU ETS.

If you are a full participant eligible for free allocation then there are additional requirements for you to have a Monitoring Methodology Plan (MMP) and to produce an additional Activity Level Report.

Permit conversions

All greenhouse gas emissions permits including hospital and small emitter permits have been re-issued.

In addition, all greenhouse gas emissions permits will be varied as required by mid-January 2021.

This is to include conditions relating to the free allocation of allowances and, where relevant, to attach your monitoring methodology plan to your permit.

There will be a consolidated version of the permit attached to the variation notice.

Obligations under existing EU ETS permits

The permit conversion and subsequent variation of greenhouse gas emissions permits do not affect your obligations under your existing EU ETS permit in respect of your emissions in 2020 or earlier.

If you have changed status from:

  • an installation in the main EU ETS to a UK ETS hospital or small emitter or
  • from an excluded installation in the EU ETS to an installation in the main UK ETS

you need to be aware that your converted permit applies to your 2021 emissions only from 1 January 2021 and onwards and that you must still comply with the obligations under your EU ETS permit in relation to your 2020 emissions. 

Free allocation conditions

The free allocation conditions apply only to ‘FA installations’ as defined in the Order. They apply to you only if:

  • you have applied for a free allocation of allowances for the period 2021-2025 and
  • only from the point at which the UK ETS authority publishes the allocation table for the 2021-2025 period that includes an entry for your installation.

Please note that, if you have applied for a free allocation of allowances, even though the free allocation conditions do not yet apply, you are required to:

  • monitor your activity levels in accordance with the Free Allocation Regulation (FAR) and your approved MMP and
  • modify your MMP in accordance with the FAR

This is because the FAR (as amended by the Order) continues to apply in the UK and contains requirements which apply to all operators of installations that have applied for a free allocation.

The inclusion of the free allocation conditions and approved MMP (if relevant) in your permit does not necessarily mean that your application for a free allocation of allowances will be determined as valid by the UK ETS authority. 

This decision will be made by the UK ETS authority as soon as possible in 2021.

Activity level report

One of the free allocation conditions is the requirement to submit verified activity level reports.

In relation to activity levels in 2019 and 2020, you must submit the report on or before 30 June 2021.

Please note that this deadline is different to the date currently specified in the Activity Level Changes Regulation.

For activity levels in 2021 and for every scheme year thereafter, the deadline for the report is 31 March in the following year.

Hospital or small emitter permits

Your converted permit will contain your emissions targets for the period 2021-2025.

These targets are different to the targets previously calculated for your installation for the purposes of the EU ETS, due to different reduction factors applying in the UK ETS.

This means that your UK ETS targets are 5% less than your EU ETS targets.

The reduction factors in the UK ETS Order are as follows: 

Scheme year Reduction factor

2021 

0.8697 

2022 

0.8461 

2023 

0.8224 

2024 

0.7988 

2025 

0.7751 

Please see Schedule 7, paragraph 16 to the UK ETS Order for full details.

Ultra-small emitters

If you are an ultra-small emitter for the period 2021-2025, you will have already received your revocation notice.   

As an ultra-small emitter, you are not required to hold a permit from 1 January 2021.

UK Emissions Trading Scheme charges

Read more about charges for the UK Emission Trading Scheme.

If you have any queries relating to charges in the UK ETS then contact us at ghghelp@naturalresourceswales.gov.uk

How to pay for your permit

Electronic 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
Bank: RBS
Address: National Westminster Bank Plc., 2 1/2 Devonshire Square, London, EC2M 4BA
Sort code: 60-70-80
Account number: 10014438

You must include your company name. 

You should include the BACS payment reference on the application form itself. If you do not quote your payment reference number, there may be a delay in processing your payment and application. 

Pay for your permit by telephone 

Call us on 0300 065 3000 (Mon-Fri, 9am-5pm) 

Email enquiries@naturalresourceswales.gov.uk 

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