Guide
Comply with UK Emissions Trading Scheme
How to meet your annual UK ETS compliance obligations if you operate a regulated installation, run aviation operations, or will be covered by maritime expansion from 2026. Covers the monitoring, reporting and verification (MRV) cycle, surrendering allowances, and penalties for non-compliance.
If you operate a regulated installation, fly aircraft within the UK ETS scope, or (from July 2026) operate qualifying maritime vessels, you must comply with the UK Emissions Trading Scheme each year. The annual compliance cycle centres on monitoring your greenhouse gas emissions, having them independently verified, reporting to your regulator, and surrendering enough allowances to cover what you emitted.
Failure to comply triggers automatic financial penalties and can escalate to permit revocation. This guide explains each stage of the annual cycle and how to stay compliant.
Who must comply
UK ETS obligations apply to:
- Installations with combustion units whose total rated thermal input exceeds 20 MW, or that carry out energy-intensive industrial processes (cement, steel, refineries, chemicals, glass, ceramics, paper, aluminium)
- Aviation operators administering flights under UK ETS (flights within the UK, UK to EEA, and UK Crown Dependencies)
- Maritime operators of vessels with 5,000 gross tonnage or more on qualifying voyages to, from, or within UK ports (from 1 July 2026 for domestic voyages; international expansion expected from 2028)
If your installation falls below key emissions thresholds, you may qualify for Hospital and Small Emitter (HSE) status (below 25,000 tonnes CO2e per year) or Ultra Small Emitter (USE) status (below 2,500 tonnes CO2e per year). These simplified routes replace full allowance surrender with emissions targets or exemptions.
The annual MRV cycle
UK ETS compliance follows a strict annual cycle. Each scheme year runs from 1 January to 31 December. After the year ends, you have defined windows to report and surrender.
Step 1: Monitor emissions throughout the year
You must continuously monitor your greenhouse gas emissions according to your approved monitoring plan. Your plan details which emission sources to measure, which calculation or measurement methods to use, and how to handle data gaps. The plan must comply with the Monitoring and Reporting Regulation (MRR) 2018.
If your operations change (new equipment, different fuel types, additional emission sources), you must apply to your regulator to amend your monitoring plan before implementing changes. Notify your regulator by 31 December of any changes affecting the current scheme year.
Step 2: Compile your annual emissions report
After the scheme year ends, compile your emissions data into the annual emissions report. Use the templates provided through the Manage Your UK ETS Reporting (METS) service. The report must include:
- Total verified emissions in tonnes of CO2 equivalent
- Emissions broken down by source stream or measurement point
- Any data gaps and how they were addressed
- Changes to the monitoring plan during the year
Step 3: Obtain independent verification
Your emissions report must be independently verified by a UKAS-accredited verifier (accredited to ISO 14065). The verifier checks that your data is accurate, your monitoring plan was followed, and your report complies with MRR requirements.
Appoint your verifier early. Engage a verifier by July at the latest. Verifiers become heavily booked from January onwards as operators rush to meet the March deadline. Late appointment risks missing the submission window entirely.
The verifier will issue one of three opinions:
- Verified - report is satisfactory
- Verified with comments - verified, but improvements recommended (you may need to submit an improvement report by 30 June)
- Not verified - material issues found; you must resolve these before your report can be submitted
Step 4: Submit verified report by 31 March
Submit your verified emissions report to your regulator through METS by 31 March following the end of the scheme year. Only reports with a 'verified' or 'verified with comments' opinion are accepted.
Step 5: Surrender allowances by 30 April
Surrender UK ETS allowances equal to your verified emissions through your Operator Holding Account (OHA) in the UK Emissions Trading Registry by 30 April. Surrendered allowances are permanently removed from your account.
If your free allocation does not cover your total emissions, you must purchase additional allowances at auction (bi-weekly via ICE Futures Europe) or on the secondary market from other account holders before the surrender deadline.
Free allocations
Eligible installations receive free allowances based on industry benchmarks. Free allocation is credited to your registry account on or before 28 February each year. However, free allocation rarely covers 100% of emissions, so most operators need to purchase additional allowances.
The second allocation period has been moved from 2026 to 2027, creating a standalone transitional year in 2026. Applications for the 2027-2030 period will use updated industry benchmarks.
No free allocation is available for aviation operators in the allocation period starting January 2026.
Penalties for non-compliance
UK ETS penalties are automatic and cumulative. The obligation to surrender does not disappear even after paying a penalty.
Excess emissions penalty
If you fail to surrender sufficient allowances by 30 April:
- Penalty rate: currently increasing from £22 to £28 per tonne in 2026, with annual inflation adjustments from 2027
- Continued obligation: you must still surrender the missing allowances on top of the penalty
- Publication: your name may be published as non-compliant
Reporting penalties
Failure to submit your verified emissions report by 31 March triggers:
- Fixed penalty of £3,750
- Plus £375 per day of continued non-compliance
- Maximum total penalty of £33,750
Late reporting also prevents you from surrendering allowances, which can trigger the excess emissions penalty on top.
How to avoid penalties
- Set internal deadlines 2-4 weeks before regulatory deadlines
- Appoint your verifier by July, not January
- Purchase allowances well before 30 April
- Keep detailed records for a minimum of 10 years
- Notify your regulator immediately if you anticipate difficulties
UK ETS Registry account
All compliance transactions happen through the UK Emissions Trading Registry. Your regulator arranges the opening of your Operator Holding Account (OHA) after your greenhouse gas emissions permit is issued. Allow up to 2 months for account opening.
Two-factor authentication is mandatory. Download and configure an authenticator app (such as FreeOTP) before first access. Keep backup codes secure.
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1. Confirm UK ETS applies to your operations
Check whether your installation exceeds 20 MW total rated thermal input, or whether your aviation or maritime activities fall within UK ETS scope. Review HSE and USE simplified routes if your emissions are below 25,000 or 2,500 tonnes CO2e per year.
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2. Obtain or maintain your greenhouse gas emissions permit
Apply to your environmental regulator (EA, SEPA, NRW, or NIEA) via the METS service. Submit your monitoring plan detailing how you will measure emissions. Update the plan whenever your operations change.
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3. Monitor emissions throughout the scheme year
Follow your approved monitoring plan from 1 January to 31 December. Record all data, flag any gaps, and notify your regulator of operational changes.
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4. Appoint a UKAS-accredited verifier by July
Engage a verifier accredited to ISO 14065 well before the year end. Do not wait until January when verifiers are heavily booked.
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5. Submit verified emissions report by 31 March
Compile your emissions data, obtain verification, and submit through METS by 31 March. Only reports with a verified or verified-with-comments opinion are accepted.
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6. Surrender allowances by 30 April
Log into the UK Emissions Trading Registry. Surrender allowances equal to your verified emissions from your Operator Holding Account. Purchase additional allowances at auction or on the secondary market if your free allocation is insufficient.
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7. Keep records for 10 years
Retain all monitoring data, emissions reports, verification opinions, allowance transactions, and regulatory correspondence for at least 10 years.