Guidance

Participating in the UK ETS

Updated 30 July 2025

This page provides an overview of the UK Emissions Trading Scheme, who it applies to, and the first steps for participants looking to engage with the scheme.

See also:

• Policy aims of the UK ETS
• Technical guidance and other tools for current scheme participants
• Operation of the UK ETS markets - how to take part in auctions and trade on the secondary market

Overview

The UK Emissions Trading Scheme (UK ETS) came into effect on 1 January 2021.

The UK Government, Scottish Government, Welsh Government and the Northern Ireland Department of Agriculture, Environment and Rural Affairs – collectively making up the UK ETS Authority – established the scheme to increase the climate ambition of the UK’s carbon pricing policy, while protecting the competitiveness of UK businesses.

The UK ETS is established through The Greenhouse Gas Emissions Trading Scheme Order 2020 (the Order).

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.

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, installation operators and aircraft operators covered by the scheme must surrender allowances to cover their emissions. The cap is reduced over time, so that total emissions must fall.

The UK ETS currently applies to energy intensive industries and the power generation sector (installations) and the aviation industry. Activities in scope of the UK ETS are listed in Schedule 1 (aviation) and Schedule 2 (installations) of the Order.

The UK ETS regulators are responsible for enforcing compliance with the UK ETS Regulations, including operational functions such as issuing and ensuring compliance with permits (for installations) and emissions plans (for aviation).

The jurisdictions of the regulators are set out in Article 10 of the Order. The applicable regulator depends on the location of an installation, or where the business is registered for aviation.

Regulator contact details

Nation	Regulator	Contact address
England (and aircraft operators registered outside the UK)	Environment Agency (EA)	ethelp@environment-agency.gov.uk (installations) etaviationhelp@environment-agency.gov.uk (aviation) etmaritimehelp@environment-agency.gov.uk (maritime)
Scotland	Scottish Environment Protection Agency (SEPA)	emission.trading@sepa.org.uk
Wales	Natural Resources Wales (NRW)	GHGHelp@cyfoethnaturiolcymru.gov.uk
Northern Ireland	Northern Ireland Environment Agency (NIEA)	emissions.trading@daera-ni.gov.uk
Offshore oil and gas (DESNZ)	Offshore Petroleum Regulator for Environment and Decommissioning (OPRED)	OPRED@energysecurity.gov.uk

Installations and aircraft operators

Operators of installations, and aviation operators who meet the criteria for having an obligation under UK ETS in a given scheme year, have the following obligations under the scheme:

• by 31 March each year, to submit a verified emissions report to their regulator that covers their emissions for the previous calendar year (or “scheme year”)
• by 30 April each year, to have surrendered sufficient UK allowances to meet the total emissions generated under the UK ETS to be compliant

Installations

The UK ETS applies to regulated activities which result in greenhouse gas emissions, including combustion of fuels on a site where combustion units with a total rated thermal input exceeding 20MW are operated (except in installations where the primary purpose is the incineration of hazardous or municipal waste).

Northern Ireland electricity generators remain in the EU ETS under the Ireland / Northern Ireland Protocol.

Aviation

The routes covered by the UK ETS include:

• UK domestic flights
• flights between the UK and Gibraltar
• flights departing the UK to European Economic Area states

These routes can be flown by any aircraft operators, regardless of nationality.

Aircraft operators covered by the scheme will have will an obligation under the UK ETS unless they are exempted under article 7 or article 8 of the Order for a given scheme year.

Simplified provisions for installations with lower emissions

Hospitals and small emitters (HSEs)

There are simplified provisions for hospitals and for any installation with emissions lower than 25,000t CO2e per annum, where that installation carrying out the activity of combustion has rated thermal capacity below 35MW.

While these installations must still report their annual emissions, HSEs are subject to emissions targets instead of having an obligation to surrender allowances. If HSEs exceed their targets for a given scheme year, they are required to pay the applicable UK ETS carbon price for each tonne of CO2 emitted above their target.

• List of all installations that are HSEs for the 2021 – 2025 allocation period

Ultra-small emitters (USEs)

If eligible, installations with emissions lower than 2,500t CO2e per annum may obtain ultra-small emitter status. They are not required to hold a permit but are still required to monitor their emissions and must notify their regulator if they go over the threshold.

• List of all installations that are USEs for the 2021 – 2025 allocation period

Maritime operators (onboarding)

The interim response to the 2024 UK ETS Expansion to Maritime consultation was published in July 2025 to enable operators to prepare for the scheme and express interest in voluntary onboarding with the Environment Agency. The response outlines: 

• our intention to launch the UK ETS Maritime regime on 1 July 2026
• the scope, which will include UK domestic journeys and emissions while in UK ports for vessels of 5000 gross tonnage (GT) and above
• details of MRV requirements and who is responsible for complying with the scheme

Early onboarding and regulators

Maritime operators who have their registered address or are resident in England or outside of the UK will be regulated under the UK ETS by the Environment Agency.

Maritime operators can:

• express interest in voluntary onboarding in advance of the launch of the scheme
• apply for an emissions monitoring plan (EMP) and familiarise themselves with the features of METS. There is no charge for voluntary early onboarding
• sign up for Environment Agency newsletters or
• contact the Environment Agency through their helpdesk: etmaritimehelp@environmentagency.gov.uk

The Environment Agency will confirm when it is ready to start voluntary early onboarding.

Maritime operators with a registered address, or who are resident, in Scotland, Wales or Northern Ireland should contact the helpdesk of the relevant regulator to register interest in onboarding and for any other queries. 

Permitting, monitoring, reporting and verification

If a business carries out an activity covered by the UK ETS, it must hold either:

• a greenhouse gas emissions permit or a hospital or small emitter permit if it is an installation
• an emissions monitoring plan if it is an aircraft operator

Permits and emissions monitoring plans are issued by the UK ETS regulators.

Failure to comply with the conditions of a permit or obligations under the Order may lead to significant civil penalties being applied.

The UK ETS reporting service

Operators can apply for permits and submit reports online, using the Manage your UK ETS reporting service (METS).

Operators, regulators and verifiers can:

• apply for, pay for, and manage a permit (installations) or EMP (aviation)
• create, submit, or verify annual emissions reports or improvement reports (verifiers)
• manage other reporting such as determining emissions, non-compliances, and activity level changes

UK ETS verifiers

UK ETS-accredited verifiers are required to verify the annual emission reports of installations and aircraft operators, as well as the annual activity level reports of installations receiving free allocation, that are submitted to their regulator.

The Verification Regulation 2018 (as amended by the Order) requires verifiers to be a legal person or another legal entity that is carrying out verification activities for the purpose of UK ETS, and be accredited by the UK Accreditation Service (UKAS).

UKAS is also responsible for the supervision of verifiers in the UK and for maintaining a list of those verifiers.

There is no requirement for UK ETS accredited verifiers to have a physical office in the UK or to be a legal entity registered in the UK.

For further details on verification, see the applicable section of the how to comply guidance.

The UK Emissions Trading Registry

The UK Emissions Trading Registry operates in a similar way to an online bank account. It is a secure web-based application that serves as both:

• the UK ETS Registry (the Registry) holding UK allowances
• the UK Kyoto Protocol Registry holding international units (see Access your UK Kyoto Protocol Registry account).

The Registry records include:

• the UK allowances held in operator holding accounts (OHA), aircraft operator holding accounts (AOHA), trading accounts and government accounts
• the movement of allowances between accounts
• the details of verified emissions and allowances surrendered by operators

Registry holding accounts

To acquire and surrender allowances in line with their UK ETS obligations, installation operators must have an open OHA in the Registry, while aircraft operators must have an open AOHA.

OHAs and AOHAs can also be used to trade allowances (UKAs) in the UK ETS markets.

Trading accounts

UK ETS trading accounts are available for the holding and trading of UKAs as an activity unrelated to UK ETS compliance. Trading accounts cannot be used for UK ETS compliance.

Further information

• apply for an initial sign-in to the Registry
• see the relevant how to comply guidance
• documents required for opening an UK Emissions Trading Registry account

Free allocation of allowances - installations

The free allocation of allowances to eligible installation operators and aircraft operators is provided to reduce the risk of carbon leakage for UK businesses.

Free allocation is provided on or before 28 February of each calendar year.

Free allocation for installation operators

The UK ETS Allocation Table 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.

The start of the second allocation period for stationary installations has been moved from 2026 to 2027. The free allocation application for the 2027-2030 allocation period is a two-stage process. The first stage was during the Baseline Data Collection period of April – June 2025, with the second stage taking place from April – June 2026. Guidance will be provided to operators ahead of the second application stage.

Activity level reports and changes in allocation

If an installation is included in the Allocation Table, the operator must submit an activity level report (ALR) to their UK ETS regulator.

Operators must also submit a verification report for their activity level data signed by an accredited verifier.

The deadline to submit these reports is 31 March of each calendar year.

If the data in the ALR shows an increase or decrease in activity of more than 15% from historic activity levels (calculated from the previous 2 years’ activity levels), free allocation of allowances will be recalculated by regulators in line with the Activity Level Change Regulation.

If approved by the UK ETS Authority, operators receive further free allocation or need to return the over-allocation, as appropriate.

Any changes in free allocation is reflected in the operator’s ALR for future years.

Activity Level Changes – COVID-19

The UK ETS Authority amended the Activity Level Change Regulation to allow eligible operators of installations to apply for activity level data for the 2020 scheme year to be omitted in the redetermination of 2021 average activity levels. The average activity levels affected free allocation entitlement for the 2021 scheme year onwards.  

The application window for this process closed on 31 January 2023.

Baseline data collection 1 April - 30 June 2025

All installation operators within scope of the UK ETS were required to submit data to their regulator between 1 April and 30 June 2025, ahead of the next allocation period. This data collection period was also the application window for free allocation and for obtaining HSE and USE status for 2026-2030.  

Aircraft operators were not required to submit any data during this window.

The Hospital and Small Emitter list and Ultra Small Emitter list for 2026 - 2030 will be published by the UK ETS Authority by 17 October 2025.

The Allocation Table for 2021 - 2026 will be published by the UK ETS Authority by 31 December 2025.

Guidance will be provided for operators ahead of the second free allocation application stage which will take place between 1 April – 30 June 2026.

Cross-sectoral correction factor

The cross-sectoral correction factor (CSCF) is applied when the total amount of free allowances exceeds the scheme’s industry cap, i.e. the proportion of the total cap set aside for free allocations. If the CSCF is triggered in 2026, the UK ETS Authority will mitigate its application through the use of its allowance reserves.

Free allocation of allowances - aviation

Free allocation was made available to all eligible aircraft operators who applied for a free allocation of allowances under the UK ETS during 2021. Aviation operators receive free allowances based on a separate allocation methodology to that of installations.

The UK ETS Aviation Allocation Table lists each aircraft operator’s free allocation entitlement for the 2021 to 2025 allocation period.

As set out in the Authority’s response to the Developing the UK ETS consultation, free allocation for aviation operators will be phased out in 2026.

Supply of allowances and the Hospital and Small Emitter Reduction Factor (HSERF)

The cap sets the limit on allowances that can be created each year, as set out in Chapter 2 of the Order. The base cap is set out in Article 9(10) of the UK ETS Auctioning Regulations 2021. The final cap is determined by multiplying the base cap by the Hospital and Small Emitter Reduction Factor (HSERF).

The HSERF reduces the base cap to account for the fact that installations which opt to apply for HSE status do not take part in the main cap-and-trade elements of the UK ETS and are therefore no longer covered under the cap.

The HSERF for the 2021-2025 is 98.3882344%. This means that the final cap for the first trading period is 622,911,946, compared to a base cap of 633,116,297. This reduction has already been applied to the first trading period and factored into the auction calendars.

The HSERF for the second trading period will be published once this is calculated following the 2025 baseline data collection.

Evaluation of the UK ETS 2023 - 2026

The UK ETS Authority is undertaking an evaluation to understand:

• the effectiveness of the scheme’s implementation
• the early outcomes of the scheme
• its longer term impacts

As part of our commitment to using robust evidence to support the development, implementation, and improvement of policies, and in keeping with best practice, this will be a 2-phase process.

We commissioned CAG Consultants to undertake the evaluation of the UK ETS, in partnership with GC Insight (previously named Winning Moves), University College London and Cambridge Econometrics. The first phase of the evaluation, covering processes, outcomes and early impacts, was completed in December 2023.

The second phase began in 2025, with a second survey to collect further evidence launched in June 2025. UK ETS participants may be contacted by researchers as part of the study.