What is UK ETS?
The UK ETS is a multi-country, multi-sector greenhouse gas (GHG) emissions trading system. It is the world’s biggest emissions trading market, accounting for more than three-quarters of international carbon trading. It covers more than 11,000 installations and 45% of EU emissions. The scheme targets energy-intensive business activities and covers approximately 1,000 sites in the UK. Its aim is to achieve emissions reductions by placing a limit on the total emissions related to each business sector, allocating emissions allowances and allowing them to be traded in an EU-wide carbon market.
Who needs to comply?
The UK ETS scheme is aimed at very large energy consumers that have significant on-site generation assets. Generally, sites where combustion of fuels has a total rated thermal input of more than 20MW will fall under UK ETS. Businesses affected include those in the oil, steel and cement industries, other energy-intensive manufacturing processes and large data centres with considerable standby generation assets.
How do you comply?
All participants must obtain GHG emissions permits to carry out activities covered by the UK ETS. Qualifying organisations are required to have a monitoring plan, approved by the regulator, which sets out how they will measure and report their emissions. The annual emissions reported must be verified by an independent verifier and, subsequently, participants are required to surrender allowances to cover their emissions for the compliance year.
Participants can acquire allowances through a mixture of free allocation, auctioning and trading. You can surrender all or part of your free allocation to cover your emissions, you can buy additional allowances or even sell surplus allowances if you manage to reduce emissions below your allocation level.