Proposals to expand the UK Emissions Trading Scheme

The UK Emissions Trading Scheme (ETS) Authority has today published a package of consultations on expanding the UK ETS to include the energy from waste and waste incineration sectors. It is also consulting on how engineered greenhouse gas removals, such as direct air carbon capture, could be integrated, and on whether high-quality nature-based removals, such as soil, peatland and forestry, could be suitable for the scheme.

The ETS is a key part of the UK’s approach to addressing climate change. It requires operators under the scheme to obtain allowances for every unit of carbon they emit. These allowances can be traded between participants, generating a carbon price that spurs businesses to invest in cleaner or renewable energy sources and improved energy efficiency.

The UK ETS currently applies to the aviation, power, and industry sectors, but since its establishment in 2021 the Authority has been examining how carbon pricing can drive decarbonisation across more of the economy.

Stakeholders are invited to share views on the two consultations to further limit carbon emissions and support progress to net zero. It follows previous commitments to consult, made last year as part of ambitious reforms to the scheme.

The consultations present an opportunity to ensure that soil, peatland and forestry sequestration are considered fully by the UK ETS Authority.

In a joint statement, UK Emissions Trading Scheme Authority ministers Lord Callanan, Huw Irranca-Davies MS, Màiri McAllan MSP, Andrew Muir MLA, Anthony Browne MP and Gareth Davies MP said, “These consultations deliver on our commitments to provide further clarity on the expansion of the UK ETS to the energy from waste and waste incineration sectors, and the integration of greenhouse gas removals into the scheme.

“The consultation covering waste emissions will help bring certainty to drive investment in decarbonisation, as well as helping businesses make the necessary preparations for the expansion of the scheme. For greenhouse gas removals, this is an important step towards building a thriving market for carbon removals in the UK”

The consultations cover:

How the UK ETS will expand to include fossil CO2 emissions from energy from waste and waste incineration from 2028. This includes a two-year phasing-in period for the sector from 2026 during which emissions will be monitored, reported and verified, with no obligation to purchase or surrender UK ETS allowances until their full membership in 2028. This will work alongside other initiatives to decarbonise the sector by providing an incentive for industry to adopt decarbonisation technologies.

How UK-based engineered greenhouse gas removal technologies such as Direct Air Carbon Capture, where carbon dioxide is removed from the air and permanently stored, could be integrated into the UK ETS. This aims to provide a long-term market for GGRs. It also asks whether carbon stored by the creation of new UK woodland could be integrated into the UK ETS.

These will be followed by two further consultations in due course, on how to expand the UK ETS scheme into the domestic maritime sector from 2026, and on how the scheme would recognise non-pipeline methods for moving captured CO2 into storage, including by road, rail or shipping.

The UK ETS Authority is made up of the UK Government, the Scottish Government, the Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland. The scheme launched in January 2021, following the United Kingdom’s exit from the EU ETS.

The consultations are open now:

UK Emissions Trading Scheme Scope Expansion: Waste (closing 18 July 2024)

Integrating Greenhouse Gas Removals in the UK Emissions Trading Scheme (closing on 15 August 2024)

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