On Wednesday 12th February, the UK ETS Authority released their latest Consultation about extending the UK ETS Cap Beyond 2030. Currently the UK ETS is legislated to run until 30 December 2030. However, to align with the long-term pathway of UK ETS that was released in December 2023 and the UK’s net zero trajectory, the UK ETS Authority requires a consultation, in order to extend UK ETS and this focuses on the following questions:
- Extension of UK ETS into a second phase from 1st January 2031.
- The length of a post 2031 phase.
- Whether to allow banking of UK ETS allowances (UKAs) between Phase I & Phase II.
The Consultation states the UK ETS Authority is strongly minded to legislate for a Phase II of UK ETS and seeks views from stakeholders as to whether they agree.
Possible Lengths of UK ETS Phase II.
The Consultation document proposes 3 possible options for the length of Phase II:
- 2031 – 2037: aligning with the end of the UK-wide Sixth Carbon Budget and bringing UK ETS into cycle with the 5 year UK-wide carbon budget cycle.
- 2031 – 2040: continue with 10 year phases to provide greater certainty for stakeholders than a 7-year phase and align with UK ETS Phase I approach.
- 2031 – 2042: aligning with the end of the UK-wide Seventh Carbon Budget whilst providing greater certainty to stakeholders.
The consultation asks stakeholders if they have a preference for any of the above options, or if any other durations should be considered.
Inter-Phase Banking of UKAs.
The UK ETS Authority is strongly minded to allow the banking of allowances between Phase I and Phase II of the scheme. This will avoid the situation where Phase I UKAs would lose all value in the lead up to Phase II, and the potential for high emissions to ‘use up’ all remaining Phase I allowances in the late stage of Phase I.
The consultation asks whether stakeholders agree banking of allowances should be permitted between phases of the scheme.
The consultation documents and details are available here. The UK ETS Authority is hosting a webinar to give an overview of the consultation on 27th February at 14:05, individuals can sign up here.
