Updates to the Vehicle Emissions Trading Schemes (VETS) Order 2023
Published 17 October 2025
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This publication is available at https://www.gov.uk/government/publications/vehicle-emissions-trading-schemes-vets-order-2023-updates/updates-to-the-vehicle-emissions-trading-schemes-vets-order-2023
On 24 December 2024, the UK government and devolved governments launched a consultation on measures to support the transition to zero emission cars and vans. A joint government response to the consultation then confirmed changes to the Vehicle Emissions Trading Schemes (VETS) Order 2023, subject to further engagement on detailed legislative implementation, which was completed on 7 August 2025.
The VETS order, as now amended, is summarised below.
Overview of the VETS order
The VETS order consists of 4 trading schemes that implement a zero emission vehicle (ZEV) mandate and a carbon dioxide (CO2) standard for new cars and vans registered in the UK.
The ZEV mandate is described as the:
- non zero emission car registration trading scheme (CRTS)
- non zero emission van registration trading scheme (VRTS)
The CO2 standard is described as the:
- non zero emission car CO2 trading scheme (CCTS)
- non zero emission van CO2 trading scheme (VCTS)
CRTS and VRTS targets
The ZEV mandate sets percentage targets for the proportion of a manufacturer’s new car and van registrations that must be zero emissions each calendar year. The ZEV targets start at:
- 22% for cars in 2024, rising steadily to 80% of cars by 2030
- 10% for vans in 2024, rising steadily to 70% of vans by 2030
Table 1: zero emission vehicle registration targets of the VETS
| Year | Car (CRTS) | Van (VRTS) |
|---|---|---|
| 2024 | 22% | 10% |
| 2025 | 28% | 16% |
| 2026 | 33% | 24% |
| 2027 | 38% | 34% |
| 2028 | 52% | 46% |
| 2029 | 66% | 58% |
| 2030 | 80% | 70% |
The legislation works by setting targets for how many vehicle registrations in a manufacturer’s fleet can be non-ZEV (petrol/diesel/hybrid/plug-in hybrid electric), per calendar year. These percentage targets are the inverse of the ZEV target – in 2024, the car ZEV target was 22%, so manufacturer car fleets were permitted to be up to 78% non-ZEV.
These targets are enforced by providing manufacturers with ‘allowances’ equal to the manufacturer’s registrations in a given year multiplied by that year’s non-ZEV target and requiring vehicle manufacturers to surrender an allowance for every new non-ZEV vehicle registered in a calendar year. An allowance, therefore, ‘allows’ the registration of a non-zero emission car or van.
Proportion of non-ZEVs registered by a manufacturer remains below CRTS or VRTS targets
If the proportion of non-zero emission vehicles registered by a manufacturer remains below the CRTS or VRTS target (by registering more ZEVs than required/registering fewer non-ZEVs than allowed), they will have excess allowances available at the end of the year (to potentially trade, bank or convert for use in the other trading schemes).
Manufacturers exceed their non-ZEV targets
If a manufacturer exceeds their non-zero emission vehicle target (by registering too many non-ZEVs/registering too few ZEVs), they will not receive enough allowances from the administrator to be compliant.
They will, therefore, need to meet the shortfall by acquiring allowances through other means (such as trading, borrowing or conversion to the other trading schemes) or paying a compliance payment.
CCTS and VCTS baseline targets
The CCTS and VCTS (the CO2 standards for non-ZEVs) apply an average CO2 emissions baseline target to each manufacturer. It is calculated based on the manufacturer’s previous emissions performance in 2021 – the full methodology for the calculation of baseline targets is set out in Schedule 1. The target remains the same from 2024 to 2030.
As with the ZEV mandate, manufacturers receive allowances, permitting them to emit CO2 up to that pre-determined level and taking into account the number of non-ZEVs they register.
These baseline targets are enforced by requiring one CCTS allowance to be surrendered per 1gCO2/km emitted by a manufacturer’s new cars and one VCTS allowance to be surrendered per 1gCO2/km emitted by a manufacturer’s new vans.
Manufacturers maintain their per-vehicle average emissions
If a manufacturer has maintained their per-vehicle average emissions relative to their baseline target, then they will have enough allowances to be compliant.
Manufacturers reduce their per-vehicle average emissions
If a manufacturer reduces their per-vehicle average emissions compared to their target, they will have excess CCTS or VCTS allowances (to potentially trade or convert).
Manufacturers increase their per-vehicle average emissions
If a manufacturer increases their per-vehicle average emissions compared to their baseline target, they will not have enough allowances to be compliant.
They will, therefore, need to meet the shortfall by acquiring allowances through other means (such as trading or conversion).
Flexibilities
To assist manufacturers in complying with requirements while still safeguarding carbon reductions and ZEV deployment, a number of flexibilities are built into the legislation to facilitate different compliance strategies. These flexibilities are summarised in the following sections.
These flexibilities mean that manufacturers and the vehicle market as a whole can be compliant without meeting the headline ZEV targets through the registration of zero emission vehicle registrations alone.
Banking
Manufacturers that over-comply with the CRTS or VRTS targets in one year will have excess allowances. These excess allowances can be banked for use against future CRTS and VRTS targets for up to 3 years.
Borrowing
Manufacturers that do not meet their CRTS or VRTS targets in one year will be in a deficit of allowances. To cover this deficit, manufacturers are permitted to borrow allowances from their future years’ allocation of CRTS / VRTS allowances.
Borrowing is subject to annual caps and must be repaid by 2030 with 3.5% annually compounding interest.
Multiplying the borrowing cap (noted in tables 2 and 3) by the number of cars or vans registered gives the maximum number of allowances that a manufacturer may borrow in one year.
Table 2: CRTS borrowing caps
| Year | Borrowable percentage of cars ZEV trajectory | Cars ZEV trajectory | CRTS borrowing cap (as a proportion of overall car registrations) |
|---|---|---|---|
| 2024 | 75% | 22% | 0.75 x 0.22 = 16.5% |
| 2025 | 70% | 28% | 0.70 x 0.28 = 19.6% |
| 2026 | 25% | 33% | 0.25 x 0.33 = 8.25% |
| 2027 | 20% | 38% | 0.2 x 0.38 = 7.6% |
| 2028 | 15% | 52% | 0.15 x 0.52 = 7.8% |
| 2029 | 10% | 66% | 0.1 x 0.66 = 6.6% |
| 2030 | 0% | 80% | 0 x 0.8 = 0% |
Table note: Each cap was determined by multiplying the ZEV percentage target by the borrowable percentage of the ZEV trajectory, to give the percentage of overall car registrations that may be borrowed each year.
Table 3: VRTS borrowing caps
| Year | Borrowable percentage of cars ZEV trajectory | Vans ZEV trajectory | VRTS Borrowing Cap (as a proportion of overall van registrations) |
|---|---|---|---|
| 2024 | 90% | 10% | 0.9x 0.1 = 9% |
| 2025 | 70% | 16% | 0.70 x 0.16 = 11.2% |
| 2026 | 25% | 24% | 0.25 x 0.24 = 6% |
| 2027 | 20% | 34% | 0.2 x 0.34 = 6.8% |
| 2028 | 15% | 46% | 0.15 x 0.46 = 6.9% |
| 2029 | 10% | 58% | 0.1 x 0.58 = 5.8% |
| 2030 | 0% | 70% | 0 x 0.7 = 0% |
Table note: Each cap was determined by multiplying the ZEV percentage target by the borrowable percentage of the ZEV trajectory, to give the percentage of overall van registrations that may be borrowed each year.
Conversions
Manufacturers that over-comply with the targets from one trading scheme will have excess allowances that can be converted for use against targets from other trading schemes.
Many conversion routes exist, and they are each subject to annual conversion caps.
Converting excess compliance between CRTS and CCTS
Manufacturers can convert excess compliance from the ZEV car scheme (CRTS) to the CO2 car scheme (CCTS) and vice versa.
Converting excess compliance between VRTS and VCTS
Manufacturers can also convert excess compliance from the ZEV van scheme (VRTS) to the CO2 van scheme (VCTS) and vice versa.
Converting excess compliance between CRTS and VRTS
Manufacturers can convert excess compliance from the ZEV car scheme (CRTS) to the ZEV van scheme (VRTS) and vice versa.
Table 4: conversion routes and eligibility
| Conversion routes | Detail |
|---|---|
| CRTS to CCTS | • Exchange rate of 1 CRTS allowance for 135 CCTS allowances • CRTS participant must be compliant with CRTS target using in year allocated CRTS allowances plus banked CRTS allowance |
| CRTS to VRTS | • CRTS participant must be compliant with CRTS target using in year allocated CRTS allowances, plus banked CRTS allowances plus any CRTS credits from CCTS to CRTS conversion • Exchange rate of 1 CRTS allowance for 0.4 VRTS credits • CRTS SPV-only manufacturers may also convert CRTS SPV credits at the same exchange rate • Resulting VRTS credits cannot be traded or converted further |
| VRTS to VCTS | • Exchange rate of 1 VRTS allowance for 206 VCTS allowances • VRTS participant must be compliant with VRTS target using in year allocated VRTS allowances plus banked VRTS allowances |
| VRTS to CRTS | • VRTS participant must be compliant with VRTS target using in year allocated VRTS allowances plus banked VRTS allowances plus any VRTS credits from VCTS to VRTS conversion • Exchange rate of 1 VRTS allowance for 2 CRTS credits • VRTS SPV-only manufacturers may also convert VRTS SPV credits at the same exchange rate • Resulting CRTS credits cannot be traded or converted further |
| VCTS to VRTS | Exchange rate of 216 VCTS allowances for 1 VRTS credit |
| CCTS to CRTS | Exchange rate of 167 CCTS allowances for 1 CRTS credit |
Derogations
Manufacturers registering under 2,500 cars and/or vans in any calendar year may be eligible for a derogation from the ZEV targets.
If a manufacturer is eligible for a derogation, this will set their ZEV target to 0% and they will receive allowances covering 100% of their vehicle sales, up to a maximum of 2,499.
Transitional arrangements apply for manufacturers that move from being derogated to non-derogated in the following year.
Table 5: derogation routes and eligibility
| Manufacturer type | Vehicle registrations | Requirements |
|---|---|---|
| Micro volume | Under 1,000 car and/or under 1,000 van registrations per year | Automatically receive a 0% target |
| Small volume | Under 2,500 car and/or under 2,500 van registrations per year | May apply for a derogation. Application must demonstrate a decarbonisation plan. If successful, the manufacturer receives a 0% target |
Credits
Manufacturers may earn credits in the CRTS and the VRTS schemes only.
Credits in CRTS
Credits in CRTS are awarded for:
- registering zero emission special purpose vehicles (SPVs)
- registering zero emission wheelchair accessible vehicles (WAVs)
- selling ZEVs to car clubs
Credits in VRTS
Credits in VRTS are awarded for:
- registering zero emission SPVs
- selling ZEVs to car clubs (as WAVs don’t exist for vans)
Pooling
Manufacturers owned by the same parent entity may form a pool, for example, be treated as a single large manufacturer instead of multiple smaller ones, to reduce administrative burdens.
Trading
Manufacturers that over-comply with any of the targets from CRTS, VRTS, CCTS or VCTS will have an excess of allowances.
These excess allowances can be traded (at any price) with other manufacturers that may have missed their targets or wish to purchase said allowances.
Table 6: trading routes and eligibility
| Manufacturer | Trading routes available |
|---|---|
| CRTS participant | • Can trade with CRTS participants • Can also bidirectionally trade with VRTS participants at an exchange rate of 1 CRTS allowance for 0.4 VRTS credits. Resulting VRTS credits cannot be traded or converted further • Prior to the bidirectional trade, the CRTS participant must be compliant with the CRTS target using in year allocated CRTS allowances plus banked CRTS allowances plus any CRTS credits from CCTS to CRTS conversion |
| VRTS participant | • Can trade with VRTS participants • Can bidirectionally trade with CRTS participants at an exchange rate of 1 VRTS allowance for 2 CRTS credits. Resulting CRTS credits cannot be traded or converted further • Prior to the bidirectional trade, VRTS participant must be compliant with VRTS target using in year allocated VRTS allowances plus banked VRTS allowances plus any VRTS credits from VCTS to VRTS conversion |
| SPV car manufacturer | • Can trade with CRTS participants • Can bidirectionally trade with VRTS participants at an exchange rate of 1 CRTS credit for 0.4 VRTS credits. Resulting VRTS credits cannot be traded or converted further |
| SPV van manufacturer | • Can trade with VRTS participants • Can bidirectionally trade with CRTS participants at an exchange rate of 1 VRTS credit for 2 CRTS credits. Resulting CRTS credits cannot be traded or converted further |
| CCTS participant | Can trade with CCTS participants |
| VCTS Participant | Can trade with VCTS participants |
Plug-in hybrid flexibility
The CO2 standard measures a manufacturer’s CO2 emissions against a 2021 ‘baseline’. Due to wider changes in CO2 emissions reporting for plug-in hybrids, manufacturers will be required to test vehicles to new standards, which will increase the recorded CO2 values of plug-in hybrids. These uplifts will take place in 2025 and 2027, respectively.
For the VETS order, manufacturers are permitted to apply for the CO2 emission values of relevant plug-in hybrids to be determined so that those values are approximated to the old test procedure calculations (rather than the updated calculations coming into force in 2025 and 2027). The instrument allows this alternative reporting until 2030.
Compliance payments
Manufacturers that do not meet their targets (after utilising trading and all of the flexibilities listed above) must pay compliance payments.
ZEV mandate
For the ZEV mandate, this is:
- £15,000 per car in 2024
- £9,000 per van in 2024
From 2025, this is:
- £12,000 per car
- £15,000 per van
CO2 standard
For the CO2 standard, this is £86 per gram of CO2 missed.
Further information
This summary is not intended to be exhaustive and should not be construed as a definitive view or as legally binding.
Manufacturers should consult the:
For further information, contact the VETS administrator: VETSadmin@dft.gov.uk.