What is the EU ETS

The EU ETS is the European emissions trading system for emission allowances.

In the Czech Republic, the basic obligations of installation operators are laid down in Act No. 383/2012 Coll., on the Conditions for Trading in Greenhouse Gas Emission Allowances.

One emission allowance represents the right to emit one tonne of carbon dioxide equivalent.

For an operator, however, the most important thing is first to find out whether its installation falls within the system at all.

In practice: The mere fact that a company burns natural gas or emits CO₂ does not mean that it is in the EU ETS. What decides is the type of activity and the capacity of the installation under Annex No. 1 to Act No. 383/2012 Coll.

The most common entry into the EU ETS: combustion above 20 MW

The most common reason for an industrial operation to be included in the EU ETS is the combustion of fuels.

Annex No. 1 to the Act covers the combustion of fuels in installations with a total rated thermal input exceeding 20 MW, subject to the exceptions laid down in the legislation.

Beware of two things.

The first is that what decides is the thermal input, not the electrical output or the thermal output stated on the rating plate.

The second is that, when assessing the whole site, the aggregation of combustion units may apply.

A company therefore does not need to have a single boiler with an input of 25 MW. The threshold may be reached by a combination of several boilers, furnaces, cogeneration units or other combustion equipment, if under the EU ETS rules they are counted towards the total input.

The EU ETS does not concern boiler plants only

The system may also cover specific industrial activities listed in Annex No. 1 to the Act.

These include, for example, selected operations in the field of:

  • oil refining,
  • coke production,
  • iron and steel production,
  • production and processing of certain non-ferrous metals,
  • cement and lime production,
  • glass and ceramics production,
  • production of pulp, paper and board,
  • the chemical industry,
  • production of certain organic and inorganic chemical substances.

For these activities, the Annex lays down specific capacity or technological conditions.

It is therefore not enough to check only the 20 MW threshold.

A large industrial operation may fall within the EU ETS on the basis of its production activity as well.

Municipal waste incineration installations have a special regime

Since 2024, the EU ETS rules also apply to municipal waste incineration installations with a total rated thermal input exceeding 20 MW.

For these installations, however, it is necessary to distinguish between full inclusion in the EU ETS and the obligation only to monitor, report and verify emissions.

For incinerators, waste-to-energy plants (ZEVO) and installations using waste or fuels produced from waste, we therefore recommend always checking the specific regime of the installation. The type of waste, the origin of the fuel and the way it is used may be decisive.

How to tell whether the EU ETS applies to your operation

For an initial assessment, you usually need to know:

  • all combustion units on the site,
  • their rated thermal inputs,
  • the fuels used,
  • the main production technology,
  • the designed production capacity,
  • any furnaces, dryers, cogeneration units or process heating,
  • the links between the individual installations within one site.

In more complex sites, determining the boundaries of the installation is often one of the most important questions.

It is not advisable to assess each boiler or production building in isolation without checking the EU ETS rules.

If the installation falls within the EU ETS, it needs a permit

The operator of an installation included in the EU ETS may operate it only on the basis of, and in accordance with, a greenhouse gas emissions permit issued by the Ministry of the Environment.

The application must also include an emissions monitoring and reporting plan.

The monitoring plan describes in particular:

  • the boundaries of the installation,
  • emission sources,
  • the fuels and materials used,
  • the method of determining their quantities,
  • emission factors,
  • the method of calculating emissions,
  • the measuring instruments used,
  • the method of data control and retention.

A monitoring plan is not a document that is drawn up once and never revisited by the company.

If the technology, the fuel, the consumption measurement or any other circumstance significant for determining emissions changes, the plan may need to be updated and the change notified to the Ministry of the Environment (MŽP).

CO₂ is usually not measured at the stack

Operators are sometimes surprised that the EU ETS usually does not work in the same way as the authorised measurement of NOₓ, CO or dust emissions.

For many installations, CO₂ emissions are determined by calculation.

In simplified terms, the starting points are, for example, the quantity of fuel consumed, its calorific value, the emission factor and other parameters laid down by the monitoring plan and the European rules.

Billing meters for natural gas, fuel weighing, laboratory analyses or records of material flows can therefore be extremely important for the EU ETS.

In practice: In the EU ETS, it is not enough to calculate the emissions correctly. You must be able to demonstrate retrospectively what data the calculation was based on and that this data corresponds to the approved monitoring plan.

Every year is followed by reporting and independent verification

Throughout the calendar year, the operator collects data in accordance with the approved monitoring plan.

After the end of the year, it draws up an annual emissions report from that data.

The reported quantity of emissions must be verified by an accredited greenhouse gas emissions verifier.

Under the current Act, the operator submits to the MŽP the emissions report for the previous calendar year and the documents proving its verification by 15 March of the following year.

It is therefore not advisable to start preparing the inputs only a few days before this deadline.

The verifier must be able to check the calculations, the source data, the measuring instruments, the methodology and compliance with the monitoring plan.

Allowances are surrendered by 30 September

After the emissions have been verified, the next important step follows.

Every year by 30 September, the operator must surrender from the registry a quantity of allowances corresponding to the verified emissions for the previous year.

If, for example, an installation reports 12,500 tonnes of CO₂, the operator must hold a corresponding quantity of allowances and then surrender them in the registry.

It is therefore necessary to separate two things:

emissions reporting determines how many tonnes of greenhouse gases the installation actually emitted,

whereas allowance management concerns whether the company has the necessary quantity of allowances to surrender.

A change of technology may also affect the EU ETS

When a new boiler, furnace or cogeneration unit is installed, or the fuel is changed, the usual considerations are air protection, building permits or IPPC.

The EU ETS should not be forgotten either.

The Act requires the operator to notify the MŽP of an intended change in the use or manner of operation of the installation if it may require a change to the conditions of monitoring or reporting of emissions.

Typical examples may include:

  • a new combustion source,
  • an increase or decrease in capacity,
  • a change of fuel,
  • a change in consumption measurement,
  • a new production line,
  • a change in the boundaries of the installation,
  • a significant interruption or resumption of operation.

It is therefore advisable to review the EU ETS before the change is implemented.

The EU ETS is not the same as a company's carbon footprint

These two areas are often confused.

The EU ETS is a statutory system for specific installations and activities.

The carbon footprint of an organisation or product is a broader calculation of greenhouse gas emissions, which may include, for example, electricity purchased from the grid, transport, company vehicles, purchased materials or supply chain emissions.

A company may therefore calculate a carbon footprint and not fall within the EU ETS at all.

Conversely, a company included in the EU ETS may, alongside the statutory EU ETS report, also prepare a separate carbon footprint for a customer, for ESG reporting or for its own climate strategy.

In practice: If a customer requests a "GHG report", first clarify whether it wants statutory EU ETS reporting, an organisational carbon footprint, a product carbon footprint or another type of reporting. These are not the same documents.

The most common operator mistakes

The first mistake is finding out too late that the operation has exceeded the threshold for inclusion in the EU ETS.

Another problem is an incorrectly determined installation boundary or the failure to count a combustion unit.

Differences between the approved monitoring plan and actual operation are also common. A company starts, for example, to use a new fuel or a different meter but does not update the documentation.

Poor-quality records can also be a problem. If at the end of the year the operator cannot document fuel consumption, meter calibrations or the origin of the calculation factors used, this complicates the subsequent verification.

What you can send us for assessment

If you do not know whether the EU ETS applies to your operation, send us a list of combustion installations, their rated thermal inputs, the fuels used, a brief description of production and the designed capacities of the main technologies.

For an installation that is already in the EU ETS, you can add the existing permit, the monitoring plan, an overview of fuels and raw materials, data on measuring instruments and the latest annual emissions report.

From these inputs, we will check whether the operation may fall within the EU ETS, which parts of the installation are decisive for the assessment and what data needs to be prepared for monitoring and reporting greenhouse gas emissions.

You will find more information on the page NATURCHEM Services.

Brief summary

The EU ETS concerns above all large energy and industrial installations. The most common entry threshold is the combustion of fuels in installations with a total rated thermal input exceeding 20 MW, but certain other specific industrial activities also fall within the system.

The operator of an installation in the EU ETS needs an MŽP permit and an approved monitoring plan.

It must monitor emissions during the year in accordance with this plan, draw up a report after the end of the year, arrange for its verification by an accredited verifier and submit the report to the MŽP by 15 March.

By 30 September, it then surrenders a quantity of allowances corresponding to the verified emissions of the previous year.

The EU ETS is not the same as a general calculation of a company's carbon footprint.

Factual basis of the article

The basic Czech legislation is Act No. 383/2012 Coll., on the Conditions for Trading in Greenhouse Gas Emission Allowances.

Annex No. 1 to the Act lays down the activities and greenhouse gases to which the system applies.

Section 3 governs the greenhouse gas emissions permit and the requirement for a monitoring plan.

Section 4 deals with changes to the installation and the obligation to notify changes significant for monitoring and reporting.

Section 15 governs the determination, reporting and verification of emissions.

The detailed monitoring rules are laid down in Commission Implementing Regulation (EU) 2018/2066, under which monitoring must be complete, consistent, transparent and retrospectively verifiable.