EU ETS: allowances
Allowances and Kyoto units: how to buy or apply for free allowances, trade and transfer allowances or units, and surrender allowances.
Types of allowances
The European Union (EU) issues 2 types of allowances:
- general allowances
- aviation allowances
Installation operators entitled to a free allocation receive general allowances. Aircraft operators entitled to a free allocation receive aviation allowances.
Installation operators must surrender general allowances to cover their verified emissions. They cannot hold or surrender aviation allowances.
Aircraft operators can hold and surrender both aviation allowances and general allowances.
In addition to EU allowances, Union Registry accounts can also hold and trade eligible Kyoto units.
Installations: free allowances from the New Entrant Reserve (NER)
The European Commission has set aside some free allowances for installation operators in the NER.
You could be eligible for free allowances if you started carrying out regulated activities, or significantly increased capacity, after June 2011. You must apply to the NER for free allowances within 12 months of starting operations or of increasing capacity.
The European Commission website has more information about how free allowances are allocated and what is viewed as new activity or significantly increased capacity.
You apply for free allowances from the NER using your ETSWAP account. You also need to submit a verification statement to support your application.
You need to pay a fee with your application for free allowances from the NER: see the guide EU ETS charges.
Aviation: free allowances allocations
The number of free allowances issued to aircraft operators between 2013 and 2020 inclusive has been reduced in proportion to the reduced scope of EU ETS aviation. See the amended allocation for each eligible aircraft operator.
Buy allowances
If you are not eligible for free allowances, or if your free allocation is not sufficient to meet your surrender obligation, you need to buy allowances on the carbon market or through an auction.
You can access the secondary carbon market to buy allowances or Kyoto units through:
- trading directly with another operator or aircraft operator that has a Union Registry account and is selling surplus allowances
- buying or selling from intermediaries, for example banks and specialist traders or brokers
- joining one of the exchanges that list carbon allowance products
Allowance auctions
The UK appointed ICE Futures Europe to conduct auctions of EU ETS Phase III allowances on behalf of the Department of Business, Energy and Industrial Strategy.
You will find guidance on how to participate in these auctions and the timetable for auctions on the ICE emissions auctions website.
Surrender allowances
By the statutory surrender deadline, you need to surrender allowances from your Union Registry account equal to your annual reportable emissions for the previous year. This figure will include any surrender deficit which has accrued since 1 January 2013, including any deficit due to a retrospective correction of emissions. To do this, follow these steps:
-
One of your Authorised Representatives (ARs) must propose the surrender transaction from the ‘Holdings’ page of your Union Registry account.
-
To confirm the proposal, they will be asked to enter their EU login (previously ECAS) password and the mobile phone number they use to login to the Union Registry.
-
They will then receive a 16 digit confirmation code on their mobile phone which they need to enter into the Union Registry.
-
Before the surrender transaction can be finalised, a second person will need to approve the surrender. If you have appointed an Additional Authorised Representative (AAR) to your account they will need to approve the surrender. If you do not have an AAR a second AR will need to approve the transaction.
-
To confirm the surrender transaction, the approver will need to select the transaction from their Union Registry task list. They need to ‘claim the task’ and then ‘approve’ it. Once they have approved the surrender, they will need to enter a 16 digit confirmation code that will be sent to their mobile phone.
If you think you have made an error in your surrender transaction, email the Union Registry team immediately at etregistryhelp@environment-agency.gov.uk.
If you do not do this within 5 working days, they will not be able to reverse the surrender transaction.
Surrendering allowances is a mandatory requirement. You will be liable for a substantial mandatory civil penalty if you do not comply.
Excluded installations: surrender allowances
Excluded installations do not need to surrender allowances. Instead they have to meet annual emissions targets. The guide EU ETS: monitoring and reporting has more information.
Trade or transfer allowances
The following types of Union Registry account holders can transfer or ‘trade’ allowances and Kyoto units eligible for use in the EU ETS to another Union Registry account holder:
- Operator Holding Account (OHA)
- Aircraft Operator Holding Account (AOHA)
- Person Holding Account
- Trading Account
These Union Registry accounts begin with an EU-100 number. Person Holding Accounts and Trading Accounts cannot be used for compliance purposes. They can only be used for trading.
Process for transferring allowances or units
To transfer allowances or Kyoto Units to another Union Registry account from an account other than a Trading Account, you need to set up that third party’s Union Registry account as a Trusted Account (unless you have a Trading Account with an AAR).
To set up a Trusted Account, one of your ARs needs to follow these steps:
-
Login to your account and go to the Trusted Account page.
-
Select the option ‘add a Trusted Account’.
-
Enter the full account number of the account to be added.
-
Confirm the addition by entering the 16 digit code sent to their mobile phone.
-
If you have appointed an AAR, they will need to approve the addition of the Trusted Account by selecting the approval task from their task list.
-
If you have not appointed an AAR, your second AR will need to approve the addition.
-
Either your AAR (if applicable) or your second AR then needs to confirm the addition and enter the 16 digit code sent to their mobile phone.
Once your AAR or second AR has approved the addition, the account will take 7 working days to be set up as a Trusted Account.
Once your Trusted Account has been set up, if you have not appointed an AAR to your account, then one of you ARs can transfer the allowances with no further approvals from other ARs. They will be asked to confirm the transfer using a code sent to their mobile phone.
If you have appointed an AAR, they will need to approve every transfer made to the Trusted Account and confirm it by entering the code sent to their mobile phone.
Time taken to process the transfer
Once your AR has proposed the transaction, and it has been ‘initiated’ by an AAR (if applicable), it will take 26 hours to process the transfer.
If you have a Trading Account, transfers to accounts on your Trusted Account list complete without the 26 hour delay. You can also make transfers to accounts not on your Trusted Account list if you have an AAR appointed to approve the transaction. These transactions will be subject to the 26 hour delay.
In addition to the potential 26 hour delay, transactions can only be initiated between 10am and 4pm Central European Time. Transactions initiated after 4pm start processing at 10am on the next working day.
Payment for allowances transferred
Payment for allowances traded or transferred takes place outside of the Union Registry system and is arranged directly between the parties involved. No payment details are recorded in the Union Registry. Transacting parties must keep their own records.
Kyoto units
In addition to EU allowances, Union Registry accounts can also hold and trade eligible Kyoto units.
Union Registry accounts that begin with an EU-100 number can hold EU allowances and Kyoto units eligible for use in EU ETS. This applies to these types of accounts:
- Operator Holding Accounts
- Aircraft Operator Holding Accounts
- Person Holding Accounts
- Trading Accounts
Union Registry accounts that begin with GB-120 (former OHA) or GB-121 (Person Accounts in the National Registry) can hold any type of Kyoto unit, but cannot hold EU allowances.
More information on Kyoto units can be found on the European Commission website.
Exchange Kyoto units
If you want to exchange Kyoto units held in your Union Registry OHA or AOHA, one of your ARs needs to ‘propose’ an exchange transaction from the Holdings page of your Union Registry account.
Eligible Kyoto units can be exchanged for:
- aviation allowances by aircraft operators
- general allowances by installation operators
Exchanges need to be within the limits set on the account. The limits on the type and quantity of units are specified in the ETS Directive and Registry Regulation
The transaction needs to be authorised using a code sent to the AR’s mobile phone. It then needs to be approved by an AAR if you have one, or a second AR, also using a code sent to their mobile phone.
Help
These documents have more information on requirements for EU ETS:
EU ETS Phase III: guidance for installations
EU ETS Phase III: guidance for aircraft operators
The European Commission has also produced guidance for operators that will help with compliance requirements:
The Monitoring and Reporting Regulation: general guidance for installations
The Monitoring and Reporting Regulation: general guidance for aircraft operators
For help with Union Registry queries email etregistryhelp@environment-agency.gov.uk.
For other EU ETS queries contact your regulator:
Environment Agency
Installations email: ethelp@environment-agency.gov.uk
Aircraft operators email: etaviationhelp@environment-agency.gov.uk
Department for Business, Energy and Industrial Strategy - Offshore Petroleum Regulator for Environment and Decommissioning
Email: emt@beis.gov.uk
Scottish Environment Protection Agency
Email: emission.trading@sepa.org.uk
Natural Resources Wales
Email: ghghelp@naturalresourceswales.gov.uk
Northern Ireland - The Department of Agriculture, Environment and Rural Affairs (DAERA)
Updates to this page
Published 23 April 2014Last updated 6 February 2018 + show all updates
-
Page updated to reflect the recent changes to requirements in the EU ETS Directive (as amended), and UK Regulations (2017).
-
Removal of section ‘Aviation: free allowances from the special reserve’, as no longer applicable.
-
New section: Aviation: free allowances allocations. Update to section: Aviation: free allowances from the Special Reserve.
-
First published.