ETS—divergences between the EU ETS and the UK ETS
Produced in partnership with Steven Gray of DLA Piper UK LLP
Last updated on 06/01/2022

The following Environment practice note produced in partnership with Steven Gray of DLA Piper UK LLP provides comprehensive and up to date legal information covering:

  • ETS—divergences between the EU ETS and the UK ETS
  • The legal frameworks
  • Key similarities between the UK ETS and the EU ETS
  • 1. Fundamental elements of the schemes
  • 2. Scope and sectors covered
  • 3. Free allocation
  • 4. Monitoring, reporting and verification rules
  • 5. Tradability of allowances
  • 6. Small emitter exemption
  • Key differences between the UK ETS and the EU ETS
  • More...

ETS—divergences between the EU ETS and the UK ETS

Since the end of the Brexit transition period (completion-day'>IP completion day) on 31 December 2020, the UK no longer participates in the Emissions Trading System (ETS) of the EU. The EU ETS seeks to limit the total amount of certain greenhouse gases (GHG) emitted by factories, power plants and other installations in the system through a scheme of allowance trading under a cap and trade system. For more details on the EU ETS and carbon trading, see Practice Notes:

  1. EU ETS Directive 2003/87/EC—snapshot

  2. EU Emissions trading system—outline

  3. Carbon markets—basic principles and future developments

  4. Carbon markets—carbon trading agreements

  5. Carbon markets—price of Carbon

  6. Carbon markets—international emissions trading schemes

  7. When is a greenhouse gas permit required under Phase III EU ETS? [Archived]

Prior to Brexit, the EU ETS was implemented in the UK by the Greenhouse Gas Emissions Trading Scheme Regulations 2012, SI 2012/3038 which extend to the whole of the UK. For more information of the UK’s participation in the EU ETS before the end of IP completion day, see Practice Notes:

  1. EU ETS Phase III UK implementation—legal framework, key obligations and administration [Archived]

  2. EU ETS Phase III UK implementation—regulated activities, operators, and installations [Archived]

  3. EU ETS Phase III UK implementation—allocation of allowances and auctioning [Archived]

  4. EU ETS Phase III UK implementation—compliance, enforcement and appeals [Archived]

To replace its participation in

Related documents:
Key definition:
EU ETS definition
What does EU ETS mean?

EU Emissions Trading System: Formerly referred to as the EU Emissions Trading Scheme, the EU ETS is one of the key policies introduced by the EU to help meet its greenhouse gas emissions target of 8 percent below 1990 levels under the protocol'>Kyoto Protocol. It is a Europewide cap and trade scheme that started in 2005 and is the first of its kind. Each EU member state must develop a National Allocation Plan approved by the European Commission which sets an overall cap on the total emissions allowed from all the installations covered by the System. This is then converted into allowances (1 allowance equals 1 tonne of CO2) which are distributed by EU member states to installations covered by the System. At the end of each year, installations are required to surrender allowances to account for their actual emissions. Installations can emit more than their allocation by buying allowances from the market or can sell surplus allowances to the market.

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