Jurisdiction(s):
United Kingdom

Key definition

EU ETS definition

What does EU ETS mean? EU Emissions Trading System (EU ETS): In practice, the EU ETS is the EU/EEA’s cap-and-trade carbon pricing scheme for power and heat generation, energy‑intensive industries, intra‑EEA aviation and, from 2024, maritime transport. It is established in legislation (Directive 2003/87/EC, as amended) and widely referenced in contracts, compliance programmes, M&A and project finance. An EU‑wide cap declines annually. Covered operators must monitor, report and verify (MRV) their greenhouse gas emissions and, by 30 April each year, surrender EU Allowances (EUAs) equal to their verified emissions (one EUA = one tonne CO2e). EUAs are largely auctioned; free allocation remains for carbon‑leakage sectors using...

Post‑Brexit comparison of EU and UK ETS: frameworks, scope, allocation, MRV, pricing and market stability, with CBAM, ETS II, aviation/maritime and 2024–26 reforms

Published by a LexisNexis Environment expert

Practice notes

Following the close of the Brexit transition period (IP completion day) on 31 December 2020, the UK stopped participating in the EU’s Emissions Trading System (ETS). The EU ETS is designed to reduce the overall volume of specified greenhouse gases (GHG) released by factories, power stations and other covered installations, by operating an allowance market within a cap-and-trade framework. For further information on the EU ETS and carbon trading, see the following Practice Notes:

EU Emissions Trading System (ETS) Phase IV—Directive 2003/87/EC
EU Emissions trading system—outline
EU Emissions Trading System (ETS) for aviation
EU Emissions Trading System (ETS) for maritime transport
EU Emissions Trading System (ETS II) for buildings, road transport, and additional sectors
Carbon markets—basic principles and future developments
Carbon markets—carbon trading agreements
Carbon markets—price of Carbon
Carbon markets—international emissions trading schemes

Before Brexit, the EU ETS was given effect in the UK by the Greenhouse Gas Emissions Trading Scheme Regulations 2012, SI 2012/3038, which apply throughout the UK. For more on the UK’s participation in the EU ETS before the end of IP completion day, see Practice Notes:

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Web page updated on 21/05/2026

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