The UK emissions trading scheme (UK ETS) is the UK’s principal mechanism for major emitting sectors. It replaced the UK’s participation in the EU ETS on the 1st of January 2021 and is overseen by the UK government, the Scottish government, the Welsh government and the Northern Ireland Executive.
For many installation operators, the UK ETS is now a core element of compliance strategy, investor expectations and long-term decarbonisation planning.
What is the UK ETS, and who does it apply to?
The UK ETS applies to energy-intensive industries, the power generation sector, and aviation. Activities in scope are set out in the schedules to the Greenhouse Gas Emissions Trading Scheme Order 2020, with separate lists for installations and aircraft operators.
In practical terms, if your organisation operates a combustion installation above relevant threshold limits or conducts qualifying aviation activities, you may require a greenhouse gas emissions permit and be subject to annual allowance surrender obligations. The scheme therefore affects not only large manufacturers and utilities, but also organisations with complex multi-site operations that require centralised oversight.
What are the key compliance steps?
At a high level, compliance requires operators to:
- Monitor emissions in accordance with approved monitoring plans.
- Report verified annual emissions.
- Surrender allowances to cover those emissions by the relevant deadline each scheme year.
The UK ETS framework is supported by technical guidance and tools, including monitoring, reporting and verification (MRV) requirements.
Where applicable, organisations may also engage with free allocation rules and activity-level change requirements. The direction of policy is increasingly focused on ensuring free allocation better targets genuine carbon leakage risk in the lead-up to the UK CBAM era.
What is the relationship between the UK ETS and the EU ETS?
The UK and EU have agreed to work towards linking their respective emissions trading systems, as set out following the UK–EU Summit of 19 May 2025.
For UK businesses, a future link could affect carbon price dynamics, market liquidity, and cross-border competitiveness. While timelines and final design remain subject to negotiation, organisations should treat this as a material horizon issue for carbon cost forecasting.
How can businesses simplify UK ETS compliance?
The most common operational risks arise from fragmented data, inconsistent evidence trails, and late recognition of regulatory change. A robust compliance approach typically includes:
- A controlled MRV evidence system,
- Clear ownership of monitoring plans and verification workflows,
- A central view of allowance positions, and
- A structured process for tracking Authority consultations and policy updates.
For iCOR users, these elements can be integrated through a unified compliance workflow that connects legal obligations, site-level operational tasks, evidence capture, and audit-ready reporting. This helps reduce manual risk and supports consistent decision-making across installations and corporate groups.
How is the UK ETS changing?
Recent Authority milestones highlight that the UK ETS remains a developing scheme. A net-zero-consistent cap was implemented from the start of the 2024 scheme year, signalling a tighter long-term emissions trajectory.
The UK ETS is also expanding in scope. The Authority confirmed plans to:
- Include domestic maritime emissions from 2026, and
- Include energy from waste and waste incineration from 2028, preceded by a monitoring and reporting period.
Most significantly for long-term planning, the Authority has now decided to extend the scheme into a Phase II running from 1 January 2031 to 31 December 2040, with allowance banking permitted between phases.
How can iCOR support organisations with UK ETS?
iCOR helps organisations with compliance with UK ETS by reducing reliance on spreadsheets, saving time, and feeling more confident about operational risk and legal compliance. The platform includes a self-audit tool that maps relevant UK ETS and other environmental legislation into a tailored legal register, and allows you to track compliance actions, assign responsibilities, and present your progress.
Book a demo here to learn how iCOR can help you manage UK ETS obligations, turning compliance into an integrated and continuous process that is accessible to everyone.