Developing the UK Emissions Trading Scheme (UK ETS) is a joint consultation of the UK Government, the Scottish Government, the Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland.
The proposals and calls for evidence presented by the Department for Business, Energy & Industrial Strategy (BEIS) in the consultation document are in response to the UKs climate goal of achieving net-zero by 2050. At present, the UK ETS does not support the pace and scale of decarbonisation required to achieve this goal. The proposed updates to the UK ETS will align its actions with the UK’s net-zero strategy. The focus of the updates are to introduce the net-zero consistent cap, incentivise decarbonisation, expand the scope, and tighten controls on carbon leakage. Many of the changes proposed will be introduced in 2024 and 2026.
The chapters from the Developing the UK Emissions Trading Scheme (UK ETS) consultation are summarised below., and for further information, please click here.
- Chapter 1 sets out proposals for changes to align the UK ETS cap and trajectory with the UKs net zero target.
- Chapter 2 considers the role of Free Allocation policy as a carbon leakage mitigation tool in the context of the net zero aligned cap. It also puts forward potential improvements to the current Free Allocation regime based on stakeholder views expressed in response to the 2019 consultation on carbon pricing and the call for evidence on free allocation in 2021.
- Chapter 3 sets out proposals for bringing in unallocated allowances and/or the flexible share to the market.
- Chapter 4 calls for evidence on potential drivers of evolving market conditions in the UK ETS and objectives for market stability policy as the scheme evolves.
- Chapter 5 sets out the scope of the review into UK ETS aviation policy. This includes proposals on the future of aviation free allocation, how the use of Sustainable Aviation Fuels (SAFs) could be incentivised under the UK ETS, and options for expanding the coverage of the scheme within the aviation sector.
- Chapter 6 sets out proposals and calls for evidence on possible changes to the rules for sectors currently covered by the UK ETS (e.g., UK onshore and offshore upstream oil and gas sector, CCUS, and biomass) to ensure more greenhouse gas emissions are covered by the scheme.
- Chapter 7 sets out proposals to expand the scope of the UK ETS to the domestic maritime sector and calls for evidence on expanding the UK ETS to include waste incineration and energy from waste.
- Chapter 8 calls for early views on the incorporation of greenhouse gas removal (GGR) into the UK ETS and the monitoring, reporting and verification requirements necessary to address greenhouse gas emissions in the land use and agriculture sectors. BEIS does not propose expanding the UK ETS to agriculture.
- Chapter 9 sets out proposed amendments to support effective operation of the UK ETS by addressing several operational issues identified during the development of policy and legislation for the scheme (e.g., issues relating to electricity generation, PMRV, penalties and appeals, flexible share, permit transfers, and HSE statues).
This consultation closes at 11:45pm on 17 June 2022. If you would like to provide a response, please click here.
Click here for more about the UK ETS and to read about how Swan Energy supports clients.
