The UK Emissions Trading Scheme Authority has announced a new series of package reforms that will limit emissions for the power sector, energy intensive industries, and aviation from 2023. Moving forward, domestic maritime transport and waste businesses will also be included in the UK ETS.

The scheme, which is run by the UK Government, Scottish Government, Welsh Government and Department of Agriculture, Environment and Rural Affairs in Northern Ireland, has been active since 2021 when it replaced the EU’s ETS. Its initial phase will last until 2030.

Businesses must cap greenhouse gas emissions

The recently announced reforms will build on the prior success of the UK ETS by limiting further the total amount of greenhouse gases aviation, power and other intensive industries can emit. From 2024, these industries must decrease their emissions enough to reach net zero goals.

The scheme aims to encourage businesses to both act now and look at the longer term goals: investing in cleaner, more sustainable forms of energy, such as wind and solar, rather than continuing to use fossil fuels.

How will the change be introduced?

To ease the transition, the cap will be set at the highest level of the range consulted on, in line with net zero – allowing maximum flexibility for industries. Extra allowances will also be made available to the market between 2024 and 2027, while the current levels of free allocation of allowances for industry has also been guaranteed until 2026, to continue to protect them from international pressures.

UK ETS to include more sectors

In the same announcement, the Authority extended the UK ETS to include more sectors: domestic maritime transport from 2026 and waste from 2028. A phased removal of free carbon allowances will be implemented simultaneously in 2026 in support of new Greenhouse Gas Removal Technologies.

In a joint statement, UK ETS Authority Ministers, including Lord Callanan, Julie James MS, Màiri McAllan MSP and Gareth Davies MP said, “Our UK Emissions Trading Scheme, along with other interventions, forms part of a wider strategy to provide a long-term framework to incentivise UK industries to decarbonise – seizing the huge opportunities that are arising from a rapidly expanding clean energy sector, and providing the certainty that industries need to invest in new green technologies.”

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