UK Emissions Trading Scheme (ETS)

UK ETS stands for UK Emissions Trading System. It replaces the European Union Emissions Trading System (EU ETS) from 1 January 2021 onward and regulates emissions from UK power stations, industrial plants and aviation. UK ETS was created to fill the void EU ETS left following the UK’s withdrawal from the European Union. In terms of design and how the system works, UK ETS mostly resembles its older brother EU ETS. However, the regulator was also inspired by CORSIA because participating aircraft operators have the possibility to use one of five fuel use monitoring methodologies approved for use under CORSIA. It makes sense because that way you will not need to use a different method for compliance with UK ETS from the one you use for compliance with CORSIA. 

Phase 1 and 2

Same as with EU ETS, UK ETS is split into different phases. The first phase starts in 2021 and ends in 2030. It is sub divided into Phase 1 (a), covering the first three years, and Phase 1 (b) for the remaining 7 years. This separation allows the regulator to review the existing regulation and make changes where necessary not too long after the coming into force of UK ETS. The integration of CORSIA is of particular interest because, as it stands, aircraft operators pay double for emissions from certain flights due to the overlapping of UK ETS and CORSIA.

There will be another review right before the end of phase 1 (b). Any modifications resulting from this second review will affect the second phase of UK ETS which spans from 2031 to 2040. Ultimately, policy makers want to make sure that the system meets its carbon reduction goals while keeping the admin burden low for its participants.

Participation in UK ETS means first of all adherence to the rules of monitoring, reporting and verification (MRV) and, ultimately, the purchase and surrendering of emission allowances.

Not all aircraft operators must participate. Only those who are above the applicable exemption threshold and who have at least one flight falling under the UK ETS scope. The exemption threshold is different depending on whether you have an AOC or not.

If you have an AOC, you are below the exemption threshold if your full scope emissions are below 10,000 t CO2 or if the number of full scope flights is below 243 per period for three consecutive four-month periods.

Without an AOC, you are below the exemption threshold if your full scope emissions are below 1,000 t CO2.

Full Scope

We keep using the term ‘full scope’ so what does this actually mean?

To clarify, the full scope covers flights that either depart from or land at an airport situated in the UK, the European Economic Area (EEA) or Switzerland. The EEA consists of the 27 EU member states (*), Norway, Iceland and Liechtenstein.

To make it even more complicated, the EEA also includes:

• the territories Ceuta, Melilla, Aland Islands, Jan Mayen and Gibraltar,
• as well as the 9 EU outermost regions Canary Islands, French Guiana, Guadeloupe, Martinique, Mayotte, Réunion, Saint-Martin, Azores and Madeira.

UK ETS Scope

The UK ETS scope includes:

• UK domestic flights,
• Flights between the UK and Gibraltar,
• Flights from the UK to Switzerland (since 2023), and
• Flights from the UK to the EEA
  • This also includes flights from the UK to the following EU Member State territories: Ceuta and Melilla (Spain), the Åland Islands (Finland) and Jan Mayen (Norway).

Flights to the following regions are outside of the UK ETS scope:

• Flights from the UK to the nine EU Outermost regions Canary Islands, French Guiana, Guadeloupe, Martinique, Mayotte, Réunion, Saint-Martin, Azores and Madeira
• Flights to and from the three Crown Dependencies of the Isle of Man, the Bailiwicks of Jersey and Guernsey

Aircraft and Flight Exemptions

In terms of aircraft and flight exemptions, UK ETS sticks to the exemption rules that we are accustomed to under EU ETS. So there are no changes here either.
Aircraft with a MTOW of less than 5,700 Kg are exempt under UK ETS, too. And then we have all the other aircraft and flight exemptions, such as training or circular flights. Click here for a complete list.

Participating aircraft operators also require an emissions monitoring plan. This is the document in which you describe all the data processing steps from the moment flight data is recorded to the submission of your annual emissions report. In addition, your monitoring plan contains information on your company, the aircraft types you operate, what method you use for calculating fuel consumption and emissions, and it defines the tasks and responsibilities of all those involved in the compliance process.

Your monitoring plan does not require a verification, but you need to submit it for approval to your UK competent authority using the UK’s web-based reporting platform, ETSWAP.
And once approved, it’s important you stick to the procedures as described in the monitoring plan and keep all the information herein up to date.
Any permanent changes that affect your monitoring plan must be notified to the Environment Agency. In case of minor changes, you can notify them by the end of the year. However, significant changes, such as changes of your monitoring methodology, must be notified without undue delay by submitting a variation request in ETSWAP.

An important question that we haven't answered yet is who is your UK competent authority. If you are already administered by a UK competent authority, such as UK Environment Agency or Scottish Environment Protection Agency, for EU ETS purposes then the same competent authority will be your point of contact for UK ETS. If your current EU ETS administering member state is not the UK then you will be assigned to the UK Environment Agency.

Lastly, it's important to know by when you need to submit an emissions monitoring plan (also referred to as EMP). If you are regulated by the UK for EU ETS, your UK competent authority should be in touch to discuss the creation of a new UK ETS EMP. If you are not regulated by the UK for EU ETS, you will need to notify the UK Environment Agency and apply for a UK ETS EMP within 6 weeks of falling under UK ETS or as soon as possible if you miss this deadline. 

You have to pick a monitoring method which defines the way you calculate fuel consumption and emissions. It can either be one of the five fuel use monitoring methodologies approved under CORSIA (not including CERT) or the simplified procedure if you are eligible.

The five methods approved under CORSIA are based on actual fuel consumption, whereas the simplified procedure is an estimate of your emissions based on aircraft and distance information. Question 10 of CORSIA: The Definitive Guide tells you what these CORSIA approved methods are and how fuel is calculated. 

Simplified Procedure

If you go with the simplified procedure, you can either use the Small Emitters Tool or the ETS Support Facility. Both tools are from EUROCONTROL and use formulas derived from regression analysis to estimate emissions.

You can use the Small Emitters Tool if your emissions from full scope flights are less than 25,000 t CO2 or if you have fewer than 243 full scope flights in each of the three four-month periods.

It’s important to note that if your emissions report is based on the Small Emitters Tool then you need to go through a verification. IMPORTANT: You must use a United Kingdom Accreditation Service (UKAS) accredited verifier for this task. Verifiers with accreditations from other EU member states are not accepted.

By contrast, the verification is not required if your annual emissions report in ETSWAP is the result of uploading data from the ETS Support Facility (as is) without modification.

You can use the ETS Support Facility if your emissions from full scope flights are less than 25,000 t CO2 or if your emissions from flights covered by the UK ETS are below 3,000 t CO2.

Unless you are exempt from UK ETS, you have to submit an annual emissions report through ETSWAP by 31 March of the year following the reporting year. The first reporting period is 2021 which means that you have to report your emissions from 2021 by 31 March 2022 at the latest.

Read our answer to question 2 (Who must Participate in UK ETS) to find out whether or not you have any reporting obligations under UK ETS. 

Yes, but only if you are NOT exempt (see Who must Participate in UK ETS).

To clarify, surrendering means to hand over emission allowances to the regulator. The number of emission allowances you surrender must match the number of tonnes CO2 reported in your annual emissions report.

At this stage, you can only use UK Allowances to meet your surrendering obligations. European Union Allowances (EUAs), European Union Aviation Allowances (EUAAs) or international credits are not permitted.

The deadline by which the regulator must have received your allowances is 30 April. Missing this deadline or not surrendering enough emission allowances on time can lead to significant civil penalties.

Most importantly, you can only aquire and surrender allowances if you have Aircraft Operator Holding Account (AOHA) in the UK ETS. As a prerequisite, you first need an approved EMP. As soon as you have one, your UK competent authority will instruct the UK registry administrator to open an AOHA for you. They will then contact you to start the on-boarding process. 

You get emission allowances for free or you have to purchase them from a brokerage firm.

You can apply for free allowances by submitting 2010 verified tonne-kilometre (TKM) data to your UK ETS competent authority. Your TKM report must include tonne-kilometre data from both full and UK ETS scope flights. The allocation of free allowances will be done based on the proportion of UK ETS scope emissions to full scope emissions. Click here for more information about the free allocation and how you can apply.

It is worth noting, however, that the share of free allowances will be reduced by 5 percent every year in line with the reduction of the UK’s overall emissions cap.

* List of EU Member States: Austria, Belgium, Bulgaria, Cyprus, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.