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The UK has operated its own Emissions Trading Scheme (UK ETS) since the start of 2021. Prior to this, it was a participant in the EU’s ETS.
The scheme operates on a ‘cap and trade’ mechanism, setting a limit on the emissions that energy-intensive businesses can produce. If businesses need to emit more, they are required to purchase additional allowances at auction or from other participants. Conversely, businesses that decarbonise more quickly can sell their surplus allowances to others.
The scheme currently covers the aviation, power and industry sectors.
Today (23 May), the Government has announced two consultations to expand the scope of the scheme, calling on stakeholders to provide input.
The first consultation addresses the inclusion of energy from waste and waste incineration.
Starting in 2028, the scheme will require fossil CO2 emissions from these sectors to be included. There will be a two-year phase-in period beginning in 2026, during which emissions will be monitored, reported and verified without the obligation to purchase or surrender allowances until full inclusion in 2028. This initiative is designed to incentivise the adoption of decarbonisation technologies and carbon capture within the industry.
The second consultation explores how UK-based engineered greenhouse gas removal (GGR) technologies, such as direct air carbon capture, can be integrated into the UK ETS.
In a joint statement, UK ETS Authority ministers Lord Callanan, Huw Irranca-Davies MS, Màiri McAllan MSP, Andrew Muir MLA, Anthony Browne MP and Gareth Davies MP said: “The consultation covering waste emissions will help bring certainty to drive investment in decarbonisation, as well as helping businesses make the necessary preparations for the expansion of the scheme.
“For greenhouse gas removals, this is an important step towards building a thriving market for carbon removals in the UK.”
Looking ahead
The consultations will also seek views on incorporating carbon storage through the creation of new UK woodlands into the scheme.
Further consultations are planned to address the expansion of the UK ETS to the domestic maritime sector by 2026 and to recognise non-pipeline methods for transporting captured CO2 for storage, including via road, rail, or shipping.
Last year, the UK Government published its first detailed pathway regarding the future of the UK ETS. It is aiming for the annual allocation of carbon permits to be 45% lower in 2027 than in 2023, with an even sharper decrease in permit allocations through to 2030. These changes are intended to align the ETS with the UK’s 2050 net-zero target.
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More needs to be done to remove organic waste at source. For example, the roll out of source segregated household waste food collections are not being adopted fast enough by local authorities. Co-mingled waste cannot be satisfactorily separated at EFW & Incineration intake points which means that food waste is combusted. It should be going to AD facilities.