You don’t need to participate in the UK Emissions Trading Scheme (UK ETS) if you are an operator that provides services to hospitals or your installation is classed as a small emitter. You can instead register your installation as a ‘hospital or small emitter’ under the Hospital or Small Emitter (HSE) scheme.

This guidance tells you:

• how to register your installation as an HSE
• how to comply with your emissions targets as an HSE
• what to do if you no longer qualify as an HSE

Read more information about participating in the UK ETS.

Eligibility

Eligibility for operators providing services to hospitals

You can apply if at least 85% of the heat produced by your installation in a scheme year is used by or supplied to one or more hospitals.

Eligibility for small emitters

You can apply if you are classed as a ‘small emitter.’ Your installation is a small emitter if it:

• emits less than 25,000 tonnes of carbon dioxide equivalent (CO2eq) each scheme year in the relevant period
• has a total rated thermal input of less than 35 megawatts (MW) in the relevant period (if applicable)

Aircraft operators cannot apply to register as small emitters. Read separate guidance for aircraft operators with low emissions.

Eligibility for the 2021 to 2025 allocation period

We have published a list of all installations that are hospital or small emitters.

List of hospital or small emitters for the 2021 to 2025 allocation period

MS Excel Spreadsheet, 44.1 KB

Your installation is an HSE for the 2021 to 2025 allocation period if both of the following apply:

• your installation is included in the hospital or small emitter list
• you started carrying out a regulated activity before 1 November 2020

There will be no new HSE entrants during the 2021 to 2025 allocation period.

Eligibility for the 2026 to 2030 allocation period

If you primarily provide services to a hospital

Your installation is eligible if all of the following apply:

• your installation primarily provides services to a hospital in the 2023 scheme year
• you have not started carrying out a regulated activity at your installation when you apply to be an HSE, but you meet both of the following:
  • begin carrying out a regulated activity at your installation before 1 November 2025
  • be primarily providing services to a hospital after you start operating

If you do not primarily provide services to a hospital

Your installation is eligible to be an HSE if all of the following apply:

• you were carrying out a regulated activity at your installation on or before 1 January 2021
• your installation’s reportable emissions are 25,000t CO2eq or below in 2021, 2022 and 2023
• if you are carrying out combustion activities, your installation’s rated thermal input is below 35MW in 2021, 2022 and 2023

If you were not carrying out a regulated activity on or before 1 January 2021, your installation is eligible if all of the following apply:

• you are carrying out a regulated activity at your installation on the date of your application or you will be carrying out a regulated activity before 1 November 2025
• you can evidence that your installation’s reportable emissions were below 25,000t CO2eq for each year after you started operating
• your installation’s reportable emissions are likely to be below 25,000t CO2eq for each year between 2026 and 2030
• if you are carrying out combustion activities, you provide evidence that your installation’s rated thermal input was below 35MW for each year after you started operating and is likely to remain below 35MW for each year between 2026 and 2030

How to apply

Applications for the 2021 to 2025 allocation period are closed.

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As part of your application for the 2026 to 2030 allocation period, you will need to submit the following to your regulator:

• details of your installation, including details of any any UK ETS permit permit in force
• evidence to demonstrate that your installation meets the eligibility criteria and supporting information

Evidence of reportable emissions must be verified before being submitted to your regulator. This evidence of historic reportable emissions must be verified as satisfactory in accordance with the Verification Regulation or self-verified,self-verified if you had had HSE status status during the 2021 to 2025 allocation period.

After you have submitted your application

Once you submit your application, your regulator will make a preliminary assessment of whether your installation meets the criteria required to be an HSE.

Your regulator will then send this preliminary assessment to the UK ETS authority for a final assessment. If the UK ETS authority considers that the installation meets the criteria, it will include the installation in the hospital or small emitter list for 2026 to 2030.

If your installation is included in the list, it will be an HSE for the 2026 to 2030 allocation period, provided that regulated activities start being carried out at the installation before 1 November 2025. This list will be published by the UK ETS authority by 30 April 2025.

The regulator will either:

• vary your existing hospital or small emitter permit so that it includes emissions targets for scheme years 2026 to 2030
• convert your greenhouse gas emissions permit to a hospital or small emitter permit

If you do not have a permit (because you were an ultra-small emitter for the 2021 to 2025 allocation period), you will have to apply to your regulator for a hospital or small emitter permit.

How to comply with your emissions targets as a hospital or small emitter

For every scheme year for which your installation is a hospital or small emitter, you must ensure that your installation’s reportable emissions do not exceed that year’s emissions target. Targets are included in your hospital or small emitter permit based on your installation’s historic emissions, multiplied by the annual reduction factor.

Targets for the 2021 to 2025 allocation period

The targets for the first allocation period for each installation were set in accordance with paragraph 16 of Schedule 7 to the Greenhouse Gas Emissions Trading Scheme Order 2020 (the UK ETS Order).

Targets for the 2026 to 2030 allocation period

The targets for the 2026 to 2030 allocation period for each installation will be set according to paragraph 17 of Schedule 7 to the UK ETS Order.

Targets where you do not have a full year of emissions data

If you do not have a full year of emissions data when your installation becomes an HSE, your initial target will be based upon an estimate of forecasted emissions. When a full year of emissions data is available, the regulator will calculate targets for the remainder of the relevant allocation period.

For all sectors, irrespective of carbon leakage status, subsequent annual targets will reduce each year.

If you emit less than your target

If your installation’s reportable emissions are less than your target, you can ‘bank’ that overachievement. Your regulator will take account of the overachievement by increasing your installation’s target for the next scheme year by the ‘bankable amount’.

For small emitters, if increasing the emissions target for the next scheme year would result in an emissions target that exceeds 24,999tCO2eq, the emissions target will only be increased to a maximum of 24,999tCO2eq. This does not apply to you if you primarily provide services to a hospital.

Bankable amounts will only be permitted within allocation periods (2021 to 2025 and 2026 to 2030). Any remaining bankable amounts will not carry over between allocation periods.

If you exceed your emissions target

If you exceed your emissions target in any scheme year, you are liable to a civil penalty for those excess emissions. Further civil penalties apply where the civil penalty is not paid by the date specified in the civil penalty notice, usually 1 month from the date of issue.

If you exceed your emissions target, the civil penalty can be calculated using the following formula:

(RE minus ET) multiplied by CP

‘RE’ is your installation’s reportable emissions in the scheme year.

‘ET’ is your installation’s emissions target for the scheme year.

‘CP’ is the carbon price for the scheme year.

Monitoring and reporting

Monitoring and reporting modifications for hospital or small emitters

The Monitoring and Reporting Regulation 2018 (MRR) is modified by paragraph 13 of Schedule 7 to the UK ETS Order for HSEs.

You must comply with all conditions in your hospital or small emitter permit, which includes monitoring, reporting and notification requirements.

You must monitor your reportable emissions in each scheme year in accordance with your monitoring plan and the modified MRR. You must submit an annual emissions report by 31 March of the following year.

Your report must be verified as satisfactory in accordance with the Verification Regulation or accompanied by a declaration stating that:

• in preparing your emissions report, you have complied with the MRR
• you have complied with the monitoring plan
• your emissions report is free from material misstatement

For the purpose of verifier site visits, if you are using an accredited verifier, you will be treated as a category A installation.

Auditing

An initial check and risk assessment will be carried out by the regulator and a proportion of HSEs are audited each year.

If you no longer qualify as a hospital or small emitter

You cannot voluntarily cease to be an HSE during the allocation periods.

Your installation will no longer be an HSE if either:

• your installation ceases to primarily provide services to a hospital
• your installation’s annual reportable emissions exceed 25,000tCO2 in any of the scheme years 2021 to 2023 in relation to the 2021 to 2025 allocation period or in any of the scheme years 2026 to 2028 in relation to the 2026 to 2030 allocation period

Entry to the UK ETS main scheme

If your installation ceases to be an HSE, you must notify your regulator by 31 March of the scheme year. You will then enter into the UK ETS main scheme in the following scheme year.

You will need to comply with the rules of the UK ETS and you will require a registry account. Read more about meeting obligations under the UK ETS.

If you enter the UK ETS main scheme, you will remain liable for any unpaid penalties and any further sanctions applied for non-payment of those penalties arising from your time as a HSE.

Free allocation

If your installation is a HSE, you do not need to surrender allowances to cover your emissions and are not entitled to receive any free allocation.

Further information

We are evaluating the UK ETS, in part through a survey of Hospital or Small Emitter (HSE) and Ultra-Small Emitter (USE) participants. This HSE/USE survey privacy notice explains how we will use the personal data to contact you to take part in the survey, and what your rights are.