UK Emissions Trading System charging scheme to replace EU’s

12 April 2021

The Government has introduced a new charging scheme to manage the UK Emissions Trading System (ETS) that replaces the EU Emissions Trading System (ETS).

The new scheme will pay for the regulatory work undertaken by the Environment Agency (EA) to run a carbon pricing scheme to replace the EU ETS. The UK was a key player in developing the EU ETS and the introduction of a UK scheme aims to provide continuity of emissions trading for UK businesses.

An ETS works 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. This limits the total amount of carbon that can be emitted, and the number of credits issued decreases over time, which provides added incentives for businesses to adapt new ways to reduce emissions.

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. Governments earn revenue by auctioning off the credits.

The UK ETS will apply to energy intensive industries, the power generation sector and aviation, and many of the features and processes in the new UK scheme will be familiar to operators.

The EA has now published the UK ETS charges for those sectors that were applicable for participating in the EU Emissions Trading System.

The permit application charge is £1232 which is composed of £948 for permit determination and £284 for the opening of an operator holding account in the registry. Charges will rise annually in line with the Consumer Price Index.

The annual subsistence charge is £3046 for installations with greenhouse gas emissions permits in receipt of a free allocation of allowances. For installations with hospital or small emitter permits, the charge is set at £1874.

Full details of the EA charging scheme for UK ETS are available here.