An entity which has a legal obligation to comply to the Emissions Trading Scheme by surrendering a number of allowances equivalent to its emissions at the end of the compliance cycle.
In the context of an emissions trading system, a compliance entity is a facility or entity (such as a power plant, factory, or airline) that is subject to the obligations of the carbon market. This means it must:
- Monitor and report its greenhouse gas emissions,
- Surrender each year a number of emission allowances corresponding to its actual emissions,
- And, if necessary, purchase additional allowances on the carbon market.
In the European Union, compliance entities are designated according to criteria set by the EU directive (type of activity, emission thresholds, etc.). In other words, they are the regulated actors required to participate in the European carbon market in order to comply with the law.
Since the 2024 extension, the scope of the EU ETS includes industrial and power installations, municipal waste management, airlines, and shipping companies.
Within these sectors, the regulated activities are those emitting carbon dioxide (CO₂), but also nitrous oxide (N₂O) and perfluorocarbons (PFCs).
It is the installations themselves—not the companies—that are covered, provided they are located in the EU, Norway, Iceland, or Northern Ireland.
This includes over 10,000 installations in Europe, including more than 1,000 in France, as well as 350 airlines (150 of them in France).
More broadly, the term compliance entity (or liable party) refers to any natural or legal person that is subject to a legal or regulatory obligation. This may include:
- A taxpayer subject to income tax,
- A business subject to VAT,
- Or any economic actor required to comply with a specific legal or regulatory framework.
It is a legal term frequently used in tax or regulatory contexts.