What is EU ETS and does it apply to my installation?

What is EU ETS and does it apply to my installation?

This is the first in a series of updates about the EU Emission Trading System (EU ETS) and talks about what it is, carbon allowances and inclusion criteria.

What is the EU ETS? 

The EU ETS (EU Emissions Trading system) is a cap and trade system, aimed with reducing the total GHG emissions from energy intensive industries. It covers over 11,000 installations across the EU which is equivalent to 45% of EU Emissions.

Emissions are converted into tradable allowances, with the capped emissions reducing each year to provide an economic incentive for installations to decarbonise.

To comply with the scheme, installations emissions must be monitored and reported annually, and enough allowances surrendered to cover their emissions.

We are currently coming towards the end of Phase III which has been running since 2013. This will be replaced by the EU ETS Phase IV, or the anticipated UK ETS Phase I.

Carbon Allowances

Allowances can be bought and traded on the carbon market; however, to reduce the risk of carbon leakage, some industries receive a portion of their allowances for free.

Free allowances are allocated based on GHG performance benchmarks, determined by most efficient 10% of installations within that industry. Power generators have not received free allowances since 2013 and over Phase IV the proportion of free allowances for other sectors will decrease, in line with ambitious GHG reduction targets.

Does ETS apply to you?

The inclusion criteria for ETS is stationary combustion activities with a combined thermal input capacity > 20 MW thermal, made up of units > 3 MW thermal.

Once the >20 MWth threshold is met all units are included in site capacity and annual reporting. See the example below.

If you are a low emitter and produce < 25,000 tCO2 annually, or have a total input capacity < 35 MW thermal, then you may be able to opt out of the main scheme and join one of the small emitter schemes. This will be explained in our next blog.

Please call us on 01484 843867 or email info@swanenergy.co.uk if you need help with EU ETS.


EU ETS – Opt-Out Schemes

Joe Youldon

Operations Manager

Joe Youldon

Operations Director

Joe joined the Swan Energy team in November 2019. He graduated from the University of Leeds with a BSc in Environmental Science (International) in July 2019, having spent a year in Melbourne studying as part of his course.

In his role, to which has has recently been promoted, Joe manages the company’s portfolio across the UK, mentoring the team of Carbon Analysts. Joe is London-based.