Emissions trading and the Energy Savings Opportunity Scheme
Information about economic incentives aimed at tackling climate change
Emissions trading is a market-based approach to controlling pollution by providing economic incentives for reducing the emissions of pollutants.
The EU Emissions Trading Scheme (EU ETS)
The EU ETS is a multi-sector greenhouse gas emissions trading system. It includes around 11,000 Europe-wide installations, including aviation, and accounts for about 45% of EU carbon dioxide emissions.
Installations covered by the EU ETS include: power stations, oil refineries, offshore platforms and industries that produce iron and steel, cement and lime, paper, glass, ceramics and chemicals. Other organisations, including universities and hospitals may be covered by the EU ETS depending on the combustion capacity of equipment at their sites. Aviation operators flying into or from a European airport are also covered.
The UK Emissions Trading Scheme (UK ETS)
The UK Emissions Trading Scheme (UK ETS) replaced the UK's participation in the EU Emissions Trading System (EU ETS) on 1 January 2021 as a result of EU exit. It is an equivalent scheme to the EU ETS in which all those functions originally carried out in the EU have transferred to government departments in the UK.
It applies to all those installations that were part of the EU ETS.
The Energy Savings Opportunity Scheme
The Energy Savings Opportunity Scheme (ESOS) is a mandatory energy assessment scheme for large organisations based in the UK that requires organisations that meet the qualification criteria to audit and report on at least 90% of their energy usage every 4 years.
Our role in the schemes
In general, the role of Natural Resources Wales is:
- EU ETS: compliance, enforcement, permitting (issue, variation, transfer and surrender of GHG Permits) and provision of advice and guidance
- UK ETS: compliance, enforcement, permitting (issue, variation, transfer and surrender of GHG Permits) and provision of advice and guidance
- ESOS: compliance and enforcement
The Environment Agency continue to host and administer the registration systems for all schemes, and Welsh participants should continue to use these UK wide systems to enable compliance.
Natural Resources Wales also plays its part in developing the policy that supports these schemes, and uses emission data to support Welsh Government targets.
Why we need the schemes
In recent years, the climate change policy landscape covering carbon dioxide and other greenhouse gas emissions in the UK and Europe has changed dramatically. The 2015 Paris Agreement saw 195 countries agree to limit global average temperature rise to well below two degrees and aim to limit the change to 1.5°C.
Emission targets in Wales
Wales has strengthened its legislative framework to reduce greenhouse gas emissions through The Environment (Wales) Act 2016. The Act sets a legal target of reducing emissions by a minimum of 80% by 2050.
In addition to this Welsh Government has recently accepted the Climate Change Committee's recommendation to increase this target to 95% and announced an ambition to bring forward a net zero target no later than 2050.
Get in touch
If you have further questions about the emissions trading schemes get in touch.
For Wales specific enquiries about EU ETS, UK ETS contact: firstname.lastname@example.org
ESOS enquiries: email@example.com