UK Emissions Trading Scheme The UK is the first country to introduce an economy wide domestic emissions trading scheme. It is based on a cap and trade system, where companies have a fixed emissions target, reducing over time and will have to have enough allowances to cover their emissions. If companies are below their targets they will be able to sell the excess allowances and if they are above their targets they will have to buy allowances. The scheme is voluntary and the companies involved have been offered a financial incentive by the government. The UK emissions trading scheme (ETS) officially started on the 2 April 2002 with the opening of the Emissions Trading Registry. This is a government run electronic register of the participants accounts and trades. The companies who volunteered to participate set their targets through an auction process which was completed on 12 March 2002. In the auction, companies had to bid in the level of emissions reductions they would make below their baseline level in 2006. These bids are used to set emissions targets for the next five years. The auction finished at a price of £53.37 per tonne of carbon dioxide equivalent emission bid into the auction. Read an Introduction to the UK ETS (December 2001). Read about The Environment Business' contribution to the development of the ETS More information can be obtained from the DEFRA website.