UK ETS Allowance Cost Calculator
The UK Emissions Trading Scheme (UK ETS) requires installations, aviation operators, and shipping companies to surrender allowances for every tonne of CO2 they emit. Each allowance covers 1 tonne of CO2 equivalent.
Frequently Asked Questions
What is the UK Emissions Trading Scheme?
The UK ETS is a carbon pricing mechanism that replaced the EU ETS for UK installations from January 2021. It covers power generation, energy-intensive industry (steel, cement, glass), and aviation. Participants must surrender one allowance for every tonne of CO2 they emit.
What sectors are covered by UK ETS?
UK ETS covers: power generators, energy-intensive industries (iron/steel, cement, glass, lime, paper, aluminium, chemicals), aviation (domestic and UK-European routes), and shipping from 2026. Below a 2,500 tCO2/year threshold, installations may use the Small Emitter Opt-out.
What is the current UK ETS allowance price?
The UK ETS allowance price fluctuates in the secondary market. It traded in the £30–£60 range through 2023–2025. Check ICE Futures Europe for live prices. The government sets a cost containment mechanism (CCM) price floor to prevent extreme spikes.
What is a free allocation in UK ETS?
Free allocations are permits given to installations in industries deemed at risk of carbon leakage — where businesses might relocate production outside the UK to avoid carbon costs. The number of free allowances allocated reduces over time under the UK's net zero trajectory.
What is the penalty for not surrendering UK ETS allowances?
The penalty for failing to surrender sufficient allowances by 30 April is £100 per tonne (index-linked to RPI). The obligation to surrender remains even after the penalty is paid — so full compliance is still required.
How does UK ETS link to climate targets?
The UK ETS cap (total allowances issued) declines each year on a trajectory consistent with the UK's legally binding net zero by 2050 target. The cap reduction creates long-term price pressure on allowances, incentivising decarbonisation.
What is the UK ETS Small Emitter Opt-out?
Installations emitting less than 2,500 tCO2/year can apply for the Ultra-Small Emitter scheme, paying a fixed fee instead of participating in full UK ETS. Hospitals and small generators can opt for a simplified pathway.
Did UK ETS replace the EU ETS?
Yes. Following Brexit, UK ETS replaced the EU ETS for UK installations from 1 January 2021. UK and EU ETS prices diverged significantly after separation. BEIS oversees UK ETS; HMRC and the Environment Agency administer compliance.
How are UK ETS allowances purchased?
Allowances can be purchased at quarterly auctions run by the government, or on the secondary market through ICE Futures Europe (exchange-traded contracts). Installations can also hold forward contracts to hedge price risk.
Can UK ETS allowances be banked or borrowed?
Allowances can be banked (saved for future use) indefinitely within a Phase. Borrowing (using future-period allowances to meet current obligations) is not permitted in UK ETS.
What is the UK ETS Net Zero Consistent Cap?
DESNZ publishes an annual Statement of Emissions Cap showing the declining trajectory of total allowances issued. The 2024 reform aligned the UK ETS cap more closely with the UK's carbon budgets and net zero trajectory.
Does UK ETS apply to offshore oil and gas?
Offshore oil and gas platforms were brought into UK ETS from January 2024. They now face the same allowance surrender obligations as other energy-intensive industries, increasing decarbonisation pressure on North Sea operators.