techUK responds to government’s proposals to amend the UK ETS on behalf of the data centre industry
techUK has submitted its response to the government’s consultation on technical and operational amendments to the UK Emissions Trading Scheme (UK ETS).
The consultation proposed the revision of eligibility criteria to obtain the ultra-small emitters (USE) status, which allows operators in scope of the UK ETS (those with an installed capacity exceeding 20MWth) that emit less than 2,500 tCO2e annually to reduce both their costs and administrative obligations by opting out of the full UK ETS scheme. Many data centres fall under the USE category, with most existing sites having successfully applied during the previous window in 2019/20. However, operators who opened new data centres after 2020 or received their GHG permits post-2020 were not eligible, as they were not operational at the time. The upcoming application window for the next phase (2026-2030) is scheduled from 1 April to 30 June 2025, but current guidance only permits applications from installations that were operational before 1 January 2021, excluding newer facilities from benefiting from this opt-out. Proposal 3 in the consultation suggests extending this eligibility date to include operators who commenced regulated activities by 1 January 2024.
In the response, techUK welcomed Proposal 3, but also raised concerns about the lengthy application process for the USE status. Under the current UK ETS rules, operators must comply with the scheme for at least three consecutive years to accumulate verified emissions data before they can apply. Furthermore, the application windows only open every five years, meaning that data centres might have to wait up to 10 years before being accepted, placing a prolonged administrative and financial burden on operators.
While Proposal 3 suggests shortening the required data verification period to one year, we pointed out that even with this amendment, some operators may still face over six years of full ETS compliance before qualifying for the exemption. This is particularly burdensome for new data centres, which must navigate this process without prior emissions data.
Given the mismatch between the scheme’s design and the data centre industry’s operational realities, techUK made a wider call for reforms to the UK ETS.
Data centres are primarily reliant on electricity rather than fuel combustion, and their backup generators which fall under the UK ETS are rarely used. Therefore, their inclusion yields minimal environmental benefits but imposes significant financial and administrative burdens, as compliance costs often outweigh the cost of emissions allowances.
techUK recommended that the government reconsider the inclusion of data centres in the UK ETS, using Germany’s approach as a model. In Germany, data centres are excluded from the emissions trading scheme because it has been recognised that their backup generators are rarely in operation. We argued that adopting a similar exemption in the UK would reduce unnecessary red tape, allowing data centre operators to focus resources on more impactful initiatives that contribute meaningfully to environmental goals.
The government will publish a response to the consultation before making any legislative changes, and techUK will keep members updated about any developments.
The consultation proposed the revision of eligibility criteria to obtain the ultra-small emitters (USE) status, which allows operators in scope of the UK ETS (those with an installed capacity exceeding 20MWth) that emit less than 2,500 tCO2e annually to reduce both their costs and administrative obligations by opting out of the full UK ETS scheme. Many data centres fall under the USE category, with most existing sites having successfully applied during the previous window in 2019/20. However, operators who opened new data centres after 2020 or received their GHG permits post-2020 were not eligible, as they were not operational at the time. The upcoming application window for the next phase (2026-2030) is scheduled from 1 April to 30 June 2025, but current guidance only permits applications from installations that were operational before 1 January 2021, excluding newer facilities from benefiting from this opt-out. Proposal 3 in the consultation suggests extending this eligibility date to include operators who commenced regulated activities by 1 January 2024.
In the response, techUK welcomed Proposal 3, but also raised concerns about the lengthy application process for the USE status. Under the current UK ETS rules, operators must comply with the scheme for at least three consecutive years to accumulate verified emissions data before they can apply. Furthermore, the application windows only open every five years, meaning that data centres might have to wait up to 10 years before being accepted, placing a prolonged administrative and financial burden on operators.
While Proposal 3 suggests shortening the required data verification period to one year, we pointed out that even with this amendment, some operators may still face over six years of full ETS compliance before qualifying for the exemption. This is particularly burdensome for new data centres, which must navigate this process without prior emissions data.
Given the mismatch between the scheme’s design and the data centre industry’s operational realities, techUK made a wider call for reforms to the UK ETS.
Data centres are primarily reliant on electricity rather than fuel combustion, and their backup generators which fall under the UK ETS are rarely used. Therefore, their inclusion yields minimal environmental benefits but imposes significant financial and administrative burdens, as compliance costs often outweigh the cost of emissions allowances.
techUK recommended that the government reconsider the inclusion of data centres in the UK ETS, using Germany’s approach as a model. In Germany, data centres are excluded from the emissions trading scheme because it has been recognised that their backup generators are rarely in operation. We argued that adopting a similar exemption in the UK would reduce unnecessary red tape, allowing data centre operators to focus resources on more impactful initiatives that contribute meaningfully to environmental goals.
The government will publish a response to the consultation before making any legislative changes, and techUK will keep members updated about any developments.
Data Centres Programme activities
techUK provides a collective voice for UK Data Centre operators working with government to improve the business environment for our members. We keep members up to date with the key technical and regulatory developments that may impact growth and on funding opportunities that may increase commercial competitiveness. Visit the programme page here.
techUK Report Launch - Foundations For The Future: How Data Centres Can Boost UK Economic Growth, 5 November
Join techUK, Henham Strategy and our industry experts for the launch of techUK's latest report highlighting the crucial role of the data centres sector as the backbone of the UK's digital economy. techUK commissioned Henham Strategy to develop this report, presenting quantitative and qualitative evidence to demonstrate just how significant a contribution data centres make to the UK economy, and what more can be done to sustain this infrastructure and support their growth.
Our members develop strong networks, build meaningful partnerships and grow their businesses as we all work together to create a thriving environment where industry, government and stakeholders come together to realise the positive outcomes tech can deliver.
Luisa C. Cardani is the Head of the Data Centres Programme at techUK, aiming to provide a collective voice for UK operators and working with government to improve business environment for the data centres sector.
Prior to joining techUK, Luisa worked in the Department for Digital, Culture, Media and Sport as the Head of International Data Protection, where she led on the development of elements of the UK's data protection and privacy policy. In her role, she was also the UK official representative for the EOCD Privacy Guidelines Informal Advisory Group.
She has held a number of position in government, including leading on cross-cutting data provisions in the EU-UK Trade and Cooperation Agreement, and in high priority cross-departmental projects when working in the Department of Business, Energy and Industrial Strategy.
She holds an M.Sc. from University College London's Department of Political Sciences.
Weronika joined techUK as a Programme Manager for Sustainability in October 2023.
Her role involves advocating for the tech sector in front of key policymakers and stakeholders. Weronika also leads the environmental and sustainability efforts within the Data Centres Group.
Prior to joining techUK, Weronika worked in public affairs and government relations in the legal sector, focusing on innovation and ESG within financial services. She also spent 2 years working as a Caseworker at Parliament. She holds a BA in Politics & International Relations from Queen Mary University of London.
Outside of work, Weronika can be found on a tennis court, at the gym, practicing yoga, or indulging in her love for Taylor Swift's music as a dedicated Swiftie.
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach is Programme Assistant at techUK, he works on a range of programmes including Data Centres; Climate, Environment & Sustainability; Market Access and Smart Infrastructure and Systems.
Before that Lucas who joined in 2008, held various roles in our organisation, which included his role as Office Executive, Groups and Concept Viability Administrator, and most recently he worked as Programme Executive for Public Sector. He has a postgraduate degree in International Relations from the Andrzej Frycz-Modrzewski Cracow University.
