The UK Emissions Trading Scheme Authority has announced a package of reforms to tighten limits on industrial, power and aviation emissions from 2024.
In particular, UK power and industrial sectors to trailblaze the way to decarbonisation, as a tighter cap confirmed for emissions from selected high energy industries that will set a path to the country’s ambitious climate goals.
As explained, from next year, these industries will be required to bring their emissions down at the rate needed to reach net zero goals – sending a clear signal to industry to invest in the long-term decarbonisation that will help the UK to maintain its world-leading position in cutting carbon emissions.
At a glance:
– New limit on emissions confirmed for power sector, energy intensive industries and aviation, from 2024
– Emissions cap will be expanded to more UK sectors – domestic maritime transport and waste – driving forward the UK’s position as a world-leader in decarbonisation
– Gradual transition for industries as they take the next step to decarbonise, with changes phased and measured
To ease this 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.
With the recent rises in energy prices, it is more important than ever that we accelerate the transition away from costly fossil fuels, towards greener and more secure energy. The decisions taken here will not only put us on the path to net zero, but will also support crucial industries on their path to long term sustainability.
..said in a joint statement, UK ETS Authority Ministers, including Lord Callanan, Julie James MS, Màiri McAllan MSP and Gareth Davies MP.
It is important that as the details of the scheme become clear it helps, rather than hinders, the drive towards net zero. This means ETS funds raised from domestic shipping must be used to aid the transition to net zero for the sector. This should include supporting the development of zero-emission vessels, fuels and technology and associated port infrastructure.
…said a UK Chamber of Shipping spokesperson.
The UK ETS was launched in 2021 to replace the UK’s participation in the EU ETS. The scheme incentivises decarbonisation through a process of buying and selling emissions allowances, which companies must obtain for every tonne of emissions they produce each year. Companies that are successful in reducing their emissions can sell unused allowances to other firms.
UK ETS cap
The ambitious range consulted on last year for the UK ETS cap remains consistent with delivering on net zero. Opting for the top of this range will support a smooth transition for participants and enable continued flexibility to mitigate market risks and carbon leakage. In line with prior commitments, the net zero cap will be implemented for 2024.
There will be a smooth transition to the net zero cap – by releasing additional allowances from reserve pots to the market between 2024 and 2027 the UK ETS Authority will ensure that there is no sudden drop in allowance supply between 2023 and 2024. These allowances have already been created in previous scheme years within the overall cap limits, so the strength of overall climate ambition will not be affected.
Maritime transport and waste sectors added to ETS
For the first time the domestic maritime transport, waste incineration and energy from waste sector will be added to the scheme. This is in line with commitments to bring other high-emitting sectors in the UK ETS and will encourage companies in those sectors to cut their emissions and invest in cleaner alternatives. The scheme will be applicable to large maritime vessels only, of 5000 gross tonnage and above.
Greenhouse Gas Removals
The Authority has also announced the decision that the UK ETS is an appropriate long-term market for Greenhouse Gas Removal (GGR) technology, in a move to support investment in technologies that will be vital for meeting net zero. Bringing GGR technologies into the UK ETS will drive early investment in new technologies – such as Direct Air Capture, that extract carbon emissions directly from the atmosphere to store in rocks beneath the earth’s surface. The UK ETS may also offer an appropriate long-term market for high-quality nature-based Greenhouse Gas Removals, subject to further consideration.
