In a decisive move towards achieving net-zero emissions, the UK Emissions Trading Scheme (UK ETS) is set to impose stricter emission limits on power, aviation, and energy-intensive industries. The 2024 carbon allowance auction calendar, announced by the government on 5th October, reveals a series of bold steps to help reach the UK’s net zero goals.

Starting next year, the number of carbon allowances available for purchase by companies will be reduced by 12.4%, marking their lowest level ever. By 2027, this figure will further plummet to around 44 million, a 45% reduction from 2023, before hitting approximately 24 million by 2030. This move aligns with the UK’s net zero strategy.

Carbon allowance is a term used for a certificate or permit that represents the legal right to emit one tonne of carbon dioxide or equivalent greenhouse gas. Companies and organisations typically use these permits if they are participating in a mandatory national or international carbon market.

The UK ETS operates through auctions, compelling businesses in sectors like manufacturing, power, and aviation to procure allowances for every unit of carbon they emit. With fewer allowances up for grabs, industries will be compelled to accelerate their emissions-cutting efforts.

In a joint statement, UK Emissions Trading Scheme Authority ministers, including Lord Callanan, Julie James MS, Màiri McAllan MSP and Exchequer Secretary Gareth Davies MP said, “We want to give our industries the confidence to decarbonise, by investing in efficiency measures and moving away from fossil fuels to cleaner, more secure energy.”

This announcement comes days after the launch of the EU’s new Carbon Boarder Adjustment Mechanism (CBAM), where UK exporters will face CO2 emissions tariffs on imported steel, cement, and other goods headed to the EU. Both the UK ETS and CBAM are pushing organisations to decarbonise at greater speeds.

Moving forward with decarbonisation

To ease the transition towards a net zero cap, a portion of unused allowances from 2021 to 2023 will be allocated to auctions between 2024 and 2027. This initiative will help soften the necessary reductions over this period, complemented by financial support programs in England, Wales, Scotland, and Northern Ireland to aid businesses in making the required changes.

In addition to these changes, the UK Emissions Trading Scheme Authority has said it is committed to exploring measures for the future of the carbon allowances market, including the potential implementation of a supply adjustment mechanism in response to market conditions.

The 2024 UK Emissions Trading Scheme auction calendar can be accessed on the ICE website, with ICE overseeing UK Emissions Trading Scheme auctions and secondary markets on behalf of the government.

If your organisation is in scope of the UK ETS and would like advice on the changes, get in touch for a no-obligations chat with one of our experts at Sustainable Energy First.