What is the UK ETS?
Cap and trade scheme: the UK ETS works on the "cap and trade" principle. This means there is a "cap", or limit, on the total amount of certain greenhouse gases that can be emitted by the factories, power plants and other installations in the system. Within this cap, companies receive emission allowances which they can sell to or buy (trade) from one another as needed. The limit (CAP) on the total number of allowances available ensures that they have a value.
Surrender allowances: at the end April following the reporting year each installation or aircraft operator must surrender enough allowances to cover all its emissions, otherwise heavy fines are imposed.
Emissions reduction: if each installation or aircraft operator reduces its emissions, it can keep the spare allowances to cover its future needs or else sell them to another each installation or aircraft operator that is short of allowances. The flexibility that trading brings ensures that emissions are cut where it costs least to do so.
Mandatory verification: each installation or aircraft operator (except those in the hospital and small emitter opt out scheme) must have their CO2(e) emissions and if applicable activity level verified each year to a reasonable level of assurance by an independent accredited verification body. If you are in the hospital and small emitter opt out scheme, BSI can continue to provide verification service to ensure your data remains robust, accurate and complete.