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Emissions Trading

Last updated: 14 January 2014

The European Union Emissions Trading System (EU ETS) is one of a number of measures used by the EU to reduce greenhouse gas emissions and combat the global threat of climate change. The system is designed to help meet the EU’s targets set in the Kyoto Protocol. The first phase began in January 2005 and ran until December 2007, the second phase coincided with the first phase of the Kyoto Commitment Period 2008-2012, and the third phase commenced on 1 January 2013 and runs to 2020.

In Phase I and II of the system the emphasis was on Carbon Dioxide (CO2) reduction, and this continues in phase III with a tightening of the cap on emissions by the commission which has resulted in a major reduction in the levels of free allocation of allowances to installations. Other greenhouse gases such as Nitrous Oxide (N2O) are included in the scheme for Phase III.

In Phase III of the system, existing operators will receive allowances based on their benchmarked emissions data submitted to the commission by DECC in 2011, and updated in April 2012Opens in New window. Further information can be found on the DECC websiteOpens in New window.

New Entrants to the system or extension of an installations capacity may be entitled to a free allocation, but this must be applied for through the phase III New Entrant Reserve (NER) in ETSWAP.

Annex 1 of 'The Greenhouse Gas Emissions Trading system Directive 2011 sets out that  any installation carrying out an Annex 1 activity must have a Greenhouse Gas Emissions Permit.

Phase III free allocation

The UK submitted its National Implementation Measures to the European Commission on 12 December 2011. The allocations have been determined in accordance with EU harmonised rules, using data provided from operators of EU ETS Phase III installations in 2010/11.  This can be viewed on the DECC Website.Opens in New window

Approved allowances will be allocated to operators on an annual basis following the Comission notification to the UK Administrator on 18th December 2013. Details of the rules on ‘allocation and adjustment of allowances’ can be found in Schedule 6 of the Greenhouse Gas Emissions Trading Scheme Regulations 2012Opens in New window.


Guidance on ‘How to comply with the EUETS and the Small Emitter and Hospital Opt out scheme’ can be found on the Environment Agency websiteOpens in New window. Other useful regulatory guidance documents are also available from this site.

Installations within Northern Ireland that are included in the system comprise major power generation facilities and industrial manufacturers, as well as any site with a thermal input capacity of over 20MWth (Megawatt thermal is the amount of thermal power or heat produced by a combustion unit eg. Burner, Furnace, Generator or Flare).

This covers any site, whatever the operation; including some hospitals and universities.

If you think that your installation may be covered by Schedule 1 of the Regulations, please contact us on 028 9056 9299 or email with your query.

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