UK ETS Phase 1: Has It Been a Success?

UK ETS Phase 1 – Emissions Trends and Performance

In 2021, emissions reported under the UK ETS totalled approximately 108 million tCO₂e. By 2024, this had fallen to around 86 million tCO₂e — a significant decline over just three years.

At first glance, this suggests that UK ETS Phase 1 is achieving its intended purpose: reducing carbon emissions across key industrial and energy sectors. However, a closer look reveals a more complex picture. The number and type of installations reporting under the scheme has been in flux, and changes at individual sites can have a large impact on national totals.

For example, emissions from Port Talbot steelworks dropped from over 6.6 million tCO₂e in 2021 to 3.4 million tCO₂e in 2024 — not because of major decarbonisation, but due to the site’s gradual shutdown.

That said, there are genuine signs of progress. Several studies attribute a portion of the overall emissions reduction to the transition away from coal and other carbon-intensive fuels toward natural gas and renewable energy sources. Whether this progress is directly driven by the UK ETS Phase 1 or by complementary policies (such as renewable subsidies) remains open to debate.

A NAO/DESNZ Report published in June 2025 identifies that is challenging to assess how much of this can be attributed to the scheme, or whether other schemes, such as subsidies for renewables, should also take some credit.

ETS: Ever Transforming Scheme?

Since its inception, the UK ETS has evolved significantly. Early operational changes, including the introduction of the METS reporting portal (replacing ETSWAP), have streamlined compliance and data submission. The UK ETS Authority has also issued refined guidance, tightening permit conditions and clarifying monitoring requirements.

Looking ahead, the Authority has consulted extensively on a range of major changes to be implemented from 2026 to 2030, including the integration of new sectors and activities:

1. Maritime Sector

• July 2026 Proposed Start Date

• Affected Entities: Domestic ships over 5000 gross tonnes

• Consultation & Interim Response

• • Swan Energy Article

2. Waste Sector

3. Greenhouse Gas Removals (GGRs)

The Future of UK ETS: EU Linking and Beyond 2030

A key topic shaping the next phase of the scheme is the potential relinking of the UK ETS with the EU ETS. At the UK-EU Summit in May 2025, both parties signalled their intent to explore this alignment in the Common Understanding document. Although no legal commitments or timelines were confirmed, efforts are expected to focus on harmonising methodologies and cap trajectories to ease future linkage.

Meanwhile, discussions continue around the future of UK ETS beyond 2030. Under the current  GHG ETS Order 2020, the system is set to operate until the end of 2030. However, a February 2025 consultation revealed that the UK ETS Authority is “strongly minded” to extend the scheme beyond this date.

In Swan Energy’s experience, this typically signals that unless substantial opposition or alternative climate mechanisms emerge, UK ETS Phase 2 (post-2030) is all but confirmed — ensuring continuity for participants from 1 January 2031 onward.

At Swan Energy, our team works with over 90 UK ETS installations across England, Wales, and Scotland. We remain committed to staying informed and supporting our clients as the scheme continues to develop. If you’d like to discuss how UK ETS Phase 1 or the upcoming changes may affect your installation, get in touch with our team — we’re here to help you navigate the evolving landscape of UK carbon compliance.