In June 2023 the UK government, Scottish government, Welsh government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland announced that the UK Emissions Trading (ETS) Scheme has expanded, to include domestic maritime by 2026 and energy from waste and waste incineration in 2028.
The statement takes into account the challenges posed by the rise in the cost of energy and cost of living, which expands the scope of the scheme. This includes additional sectors in the UK ETS and capping a greater proportion of UK emissions, to help contribute to delivering net zero and UK carbon reduction targets.
Changes expected to the scheme, including expanding the scope of the plan, are subject to further consultation on details of implementation. The UK ETS Authority is currently undertaking an evaluation to understand the effectiveness of the scheme’s implementation, the early outcomes of the scheme and its longer terms impacts. This is expected to be a two phase process over the next three years.
The ETS Authority published an initial response in August 2022, to a consultation from March 2022, on developing the UK ETS scheme. Auctions then began in May 2021.
The UK ETS replaced the UK’s participation in the European Union Emissions Trading Scheme (EU ETS) on 1 January 2021 and was established through the greenhouse gas emissions trading scheme order 2020.
The scheme operates as a cap-and-trade system. An upper limit on the total level of greenhouse gases that can be emitted per participant is set and reduced over time, with participants buying and selling their emission allowances to others under the scheme. This system creates a carbon market, incentivises decarbonisation and acts as a contributor to meeting net-zero targets.
The UK ETS applies to energy intensive industries, the power generation sector and aviation. Activities in scope of the UK ETS are listed in the aviation and installations sections of the greenhouse gas emissions trading scheme order 2020.
We recommend consideration of compliance issues in relation to current operations, to assess whether the ETS applies and if it should be participated in. Subsequently, the scope and requirements of the scheme should also be assessed, as well as considering how any further changes to the scope of the scheme may have an impact.
For more information, please contact the energy and resource management team.