UK Emissions Trading Scheme
UK ETS: who is in, and what each year asks of them
The UK ETS is the UK’s cap-and-trade scheme for heavy industry, power, aviation and, since 1 July 2026, shipping.
A covered operator reports verified emissions for the calendar year by 31 March and surrenders allowances by 30 April.
This page sets out the coverage tests, the annual cycle, and where the scheme meets UK CBAM, ESOS and SECR.
The scheme
One UK-wide Order, four territorial regulators
The UK ETS came into effect on 1 January 2021 under the Greenhouse Gas Emissions Trading Scheme Order 2020, after the UK left the EU system.
It is run by the UK ETS Authority, made up of the UK Government, the Scottish Government, the Welsh Government and the Northern Ireland Department of Agriculture, Environment and Rural Affairs.
Article 3 says the Order “extends to the whole of the United Kingdom”, but compliance is enforced by the regulator for the territory where the installation sits.
Northern Ireland electricity generators are the exception: they remain in the EU ETS under the Protocol.
The Authority’s policy overview puts coverage at approximately 25% of UK territorial emissions.
The cap sets how many allowances exist, each worth one tonne of CO₂ equivalent, and it falls over time so that covered emissions must fall.
Participants get allowances free, buy them at auction, or trade for them on the secondary market.
Who regulates whom
| Where | Regulator |
|---|---|
| England, and aircraft operators registered outside the UK | Environment Agency |
| Scotland | SEPA |
| Wales | Natural Resources Wales |
| Northern Ireland | Northern Ireland Environment Agency |
| Offshore oil and gas | OPRED (DESNZ) |
Source: Participating in the UK ETS, regulator contact table
Coverage
Three thresholds decide what an installation owes
The activities are listed in Schedule 2 to the Order, and the first entry catches most sites: combustion of fuels where units with a total rated thermal input “exceeding 20 megawatts” are operated.
The same 20 MW test recurs in the ferrous-metals, secondary-aluminium and non-ferrous-metals entries.
Installations whose primary purpose is incinerating hazardous or municipal waste are carved out.
Once in, an installation’s size decides the regime it lives under.
| Status | Legal test | What it owes | How it is obtained |
|---|---|---|---|
| Full participant | A Schedule 2 activity, e.g. combustion > 20 MW rated thermal input | Greenhouse gas emissions permit; verified report by 31 March; surrender by 30 April | Permit from the regulator |
| Hospital or small emitter (HSE) | Up to 24,999 tCO₂e a year, biomass excluded; for combustion, rated thermal input below 35 MW (2026–2030) | Reports emissions; meets an emissions target instead of surrendering allowances | By list or application — not automatic |
| Ultra-small emitter (USE) | Up to 2,499 tCO₂e a year, biomass excluded | No permit; must still monitor, and notify the regulator if it goes over | By list — not automatic |
The Order states the maxima as 24,999 and 2,499 tonnes, so “under 25,000” and “under 2,500” describe the same line, but “25,000 or less” does not.
Exactly 20 MW is outside the combustion activity, because the word is “exceeding”.
For how the scheme lands on particular industries, see our energy and utilities guide and manufacturing guide.
The compliance year
Allocate, report, verify, surrender
An installation must hold a greenhouse gas emissions permit, or a hospital or small emitter permit, issued by its regulator.
Aircraft operators hold an emissions monitoring plan instead.
Applications, reports and verifications run through the Manage your UK ETS reporting service, known as METS, and allowances sit in the UK Emissions Trading Registry.
The Authority’s participation guide sets two fixed dates: a verified emissions report by 31 March, and enough allowances surrendered by 30 April.
They are separate duties a month apart, and missing either is a breach.
Where an activity level report shows a change of more than 15% against historic levels, free allocation is recalculated up or down.
The verifier must be accredited by UKAS to ISO 14065 and the Verification Regulation, and its scope must cover the activity reported, as the installations compliance guidance puts it.
How verification standards fit together more widely is explained on our ISO 14064 page.
Each scheme year
- By 28 FebFree allocation issued
To eligible installations, into their registry holding accounts.
- By 31 MarVerified emissions report
For the previous calendar year; installations on the allocation table also file a verified activity level report.
- By 30 AprSurrender allowances
Enough UK allowances to cover the reported emissions.
Source: Participating in the UK ETS
Mobile emitters
Aviation, and shipping from July 2026
Aircraft operators are covered for UK domestic flights, flights between the UK and Gibraltar, and flights departing the UK to the European Economic Area and Switzerland.
Arriving flights, and most flights to other destinations, are outside the scheme.
Free allocation for aircraft operators has been phased out from 2026, so every aviation tonne now needs a bought or banked allowance.
Shipping joined on 1 July 2026 under S.I. 2026/392, for ships of 5,000 gross tonnage and above, whatever their flag.
It counts three gases — carbon dioxide, methane and nitrous oxide — which is wider than the carbon-dioxide-only basis people tend to assume.
Government and military ships, fish-catching and fish-processing ships, and ferries serving Scottish islands and remote peninsulas are exempt.
A maritime operator must apply for an emissions monitoring plan within 42 days of its first maritime activity.
The new civil penalties for failing to apply for or comply with a plan, or to monitor or report, are £20,000 plus £500 a day, capped at £45,000.
Cap and price
The base is not the cap, and the floor is not the price
S.I. 2026/392 raised the “base” for each scheme year from 2026 to 2030 to make room for shipping.
The base is not the cap.
Article 20 caps allowances at the base multiplied by the 2026–2030 hospital and small emitter reduction factor, a formula computed from verified emissions, before further carve-outs for reserves.
So a headline such as “the UK ETS cap for 2026 is 80 million” overstates it.
Legislation.gov.uk’s revised text of the Order may still display the pre-July figures, with the substitution listed as an effect yet to be applied.
On price, the statutory figure is the auction reserve price: £28 from 8 April 2026, up from £22.
From 1 January 2027 it rises each 1 January by the annual change in the GDP deflator, so £28 is good only until then.
The market price of an allowance moves daily and is not stated here.
The Authority has extended the scheme into a Phase II running from 2031 to 2040, and allowances can be banked between the phases.
| Scheme year | Base from 1 Jul 2026 |
|---|---|
| 2026 | 80,063,992 |
| 2027 | 72,317,337 |
| 2028 | 55,618,096 |
| 2029 | 52,964,678 |
| 2030 | 51,284,366 |
2027 to 2030
Free allocation is settled, and shrinking for CBAM sectors
The second allocation period for installations was moved from 2026 to 2027 to line up with the start of the UK CBAM.
The free allocation review response of 26 November 2025 settles the rules for 2027 to 2030.
Current benchmark values are used for 2027, with an intent to adopt updated EU benchmark values for 2028 to 2030, subject to impact assessment.
The EU ETS Phase IV carbon leakage list is retained for the whole period.
Sectors not on that list keep a reduced free allocation until 2030, when it is fully phased out.
For sectors covered by UK CBAM, the phase-out starts in 2027 on a trajectory that mirrors the EU’s, using the factors in S.I. 2026/278.
The Authority says its free allocation policy may change following the outcome of a linking agreement.
| Year | CBAM reduction factor |
|---|---|
| 2027 | 0.975 |
| 2028 | 0.95 |
| 2029 | 0.9 |
| 2030 | 0.775 |
What is moving
Waste is delayed, and the EU link is not done
Waste incineration was due to join in 2028.
On 26 August 2026 the government published an update saying that expansion “will not take place in 2028 as originally intended”, and that a new timeline will be set out in due course.
The UK and EU agreed in the Common Understanding of 19 May 2025 to work towards linking their systems.
The conditions in that text include dynamic alignment with EU rules, a UK cap at least as ambitious as the EU’s, a financial contribution and a role for the Court of Justice on EU law.
Negotiations are in progress, and no linking agreement had been signed when this page was checked.
Until one is, the UK ETS is not linked to the EU ETS, and both carbon border adjustment mechanisms apply in both directions.
Beside other regimes
The UK ETS does not discharge ESOS or SECR
The Environment Agency’s ESOS Phase 4 guidance says participation in the UK ETS “does not automatically count as ESOS compliance” for the energy it covers.
The same data can be reused, which our guide to ESOS Phase 4 explains alongside the compliance routes that do count.
SECR is a disclosure in the annual report, and the SECR guidance says there is no requirement in the legislation for its energy and emissions data to be independently assured.
A UK ETS verified report is a different thing: verification of a regulated emissions report, which is mandatory.
It is not evidence that sustainability assurance is required anywhere else, and the SECR requirements do not borrow it.
A company in the scheme that also reports under SECR can draw on the same meter and fuel records, measured with the DESNZ conversion factors for the SECR disclosure.
To talk a specific installation through, you can book a free 15-minute call.
Frequently asked
Questions people ask
Who has to take part in the UK ETS?
Operators of installations carrying out the activities in Schedule 2 to the Greenhouse Gas Emissions Trading Scheme Order 2020 — most commonly combustion of fuels on a site where combustion units with a total rated thermal input exceeding 20 megawatts are operated — plus aircraft operators flying covered routes and, from 1 July 2026, operators of ships of 5,000 gross tonnage and above.
What are the UK ETS deadlines each year?
Installation and aircraft operators must submit a verified emissions report for the previous calendar year to their regulator by 31 March, and must have surrendered enough UK allowances to cover those emissions by 30 April. Free allocation is issued on or before 28 February, and installations receiving it also file a verified activity level report by 31 March.
Is a 20 MW site automatically in the UK ETS?
Not at exactly 20 MW. Schedule 2 covers combustion where total rated thermal input is "exceeding 20 megawatts", so a site at exactly 20 MW is outside that activity. Installations whose primary purpose is incinerating hazardous or municipal waste are carved out.
Do small emitters have to surrender allowances?
A hospital or small emitter — up to 24,999 tonnes CO2e a year and, for combustion, rated thermal input below 35 MW — still reports its emissions but meets an emissions target instead of surrendering allowances. An ultra-small emitter, up to 2,499 tonnes, needs no permit but must monitor and tell its regulator if it goes over. Both statuses come from a list or an application, not automatically.
Does the UK ETS cover shipping?
Yes, from 1 July 2026. S.I. 2026/392 extends the scheme to maritime activities by ships of 5,000 gross tonnage and above, counting carbon dioxide, methane and nitrous oxide, with some exemptions including government, military and fish-catching ships and ferries to Scottish islands and remote peninsulas.
Will waste incineration join the UK ETS in 2028?
No. On 26 August 2026 the government said expansion of the UK ETS to waste incineration "will not take place in 2028 as originally intended" and that a new timeline will be set out in due course. No new date has been given.
Is the UK ETS linked to the EU ETS?
Not yet. The UK and the EU agreed on 19 May 2025 to work towards a link, and negotiations are in progress, but no linking agreement has been signed. Until one exists, the two systems run separately and both carbon border adjustment mechanisms apply in both directions.
What is the UK ETS auction reserve price?
£28 per allowance from 8 April 2026, set by S.I. 2026/214. From 1 January 2027 it rises each 1 January by the annual change in the GDP deflator. The reserve price is a floor for auctions, not the market price of an allowance, which this page does not state.
Does being in the UK ETS count as ESOS compliance?
No. The Environment Agency’s Phase 4 guidance says participation in the UK ETS and similar schemes "does not automatically count as ESOS compliance" for the energy they cover, although energy data collected for them can be used in the ESOS assessment.
Who verifies a UK ETS emissions report?
A verifier accredited by UKAS to ISO 14065 and the Verification Regulation, whose accreditation scope covers the regulated activity being reported. Verification is mandatory for UK ETS reports — unlike SECR, where there is no statutory requirement for assurance.
Sources
Primary sources
Every figure, date and status on this page traces to the instrument’s owner. Secondary commentary is never the source for a number.
- legislation.gov.ukGreenhouse Gas Emissions Trading Scheme Order 2020 (S.I. 2020/1265) — Sch 2 Table C, Sch 7 paras 1 and 5, Sch 8 para 1, arts 19–22
The 20 MW combustion activity, the HSE and USE maxima, and the cap and base provisions.
- legislation.gov.ukS.I. 2020/1265, article 3 — Extent
"This Order extends to the whole of the United Kingdom."
- legislation.gov.ukS.I. 2026/392 — Extension to Maritime Activities Order 2026
Maritime from 1 July 2026; three gases; new civil penalties; the substituted base figures.
- legislation.gov.ukS.I. 2026/214 — UK ETS Auctioning (Amendment) Regulations 2026, reg 2
Auction reserve price £28 from 8 April 2026; GDP-deflator uprating from 1 January 2027.
- legislation.gov.ukS.I. 2026/278 — new Annex paragraph 14 (UK CBAM reduction factors)
The free allocation factors for CBAM sectors, 2027 to 2030.
- UK ETS AuthorityParticipating in the UK ETS
The 31 March and 30 April obligations, regulators, HSE and USE status, permits, verifiers, free allocation dates.
- UK ETS AuthorityUK Emissions Trading Scheme (UK ETS): a policy overview
Coverage of about 25% of UK territorial emissions; Phase II 2031–2040.
- Department for Energy Security and Net ZeroUK ETS for installations: how to comply — appointing an independent verifier
Verifiers accredited by UKAS to ISO 14065 and the Verification Regulation.
- UK ETS AuthorityFree allocation review — main Authority response (26 November 2025)
Benchmarks, the retained carbon leakage list and the CBAM-sector phase-out.
- UK ETS AuthorityUK ETS scope expansion: waste — update of 26 August 2026
"will not take place in 2028 as originally intended".
- Cabinet OfficeUK–EU Summit: Common Understanding (19 May 2025), Chapter IV paras 34–45
The conditions attached to linking the two systems.
- Environment AgencyHow to comply with ESOS Phase 4, §4.5
UK ETS participation does not automatically count as ESOS compliance.
- DESNZ / DefraEnvironmental Reporting Guidelines including SECR guidance (March 2019), Ch. 2 §9
No legislative requirement for SECR data to be independently assured.
Continue reading
Read next
UK CBAM
The import tax that starts on 1 January 2027 and drives the free allocation phase-out.
ESOS Phase 4
Qualification on 31 December 2026, the compliance routes and the 2027 deadline.
Energy and utilities guide
Scope 1 dominance, REGOs, and the regimes that meet in the energy sector.