The UK government introduced on June 3rd, 2023 new changes to its existent Emission Trading Scheme (ETS) that set the country’s path to a decarbonized economy.
The UK Emissions Trading Scheme Authority announced they tighten the UK ETS expanding it to more industrial sectors, setting new limits on emissions confirmed for power sector, energy-intensive industries and aviation and including carbon removal technologies to the ETS. The changes will come into force in 2024.
The sectors that will be added to the UK ETS are domestic maritime transport from 2026 and waste from 2028. A phased removal of free carbon allowances for the aviation industry will also be rolled out in 2026.
The new limit on emissions for the power sector, energy-intensive industries and aviation, from 2024 is changed to the top of the consulted range of 887-936 million allowances, down from the current cap of 1,365 million, according to the consultation papers.
The authorities will also release additional 53.5 million allowances from reserves between 2024 and 2027 to ensure that there is no sudden drop in allowance supply between 2023 and 2024. The level of freely allocated allowances that the industry receives to protect it from international competition in markets with looser climate policies has been guaranteed until 2026.
The government also announced that the UK ETS is an appropriate long-term market for Greenhouse Gas Removal (GGR) technology. That move will open a new market for carbon dioxide removals (CDR) and will support investment decisions into the technologies.
Such CDR solutions include direct air capture, bioenergy with carbon capture and storage (BECCS), ocean carbon removals, nature-based carbon removals, etc. UK ETS may also offer an appropriate long-term market for high-quality nature-based CO2 removals which is subject to further consideration, according to the announcement. The news was enthusiastically welcomed by environmental groups and companies that take part in the decarbonization industry.
“We also welcome the Government’s decision to include engineered Greenhouse Gas Removal technologies in the UK ETS. This will provide a regulated compliance market that will drive investment in high-quality carbon removal technologies such as energy-from-waste with CCS… We look forward to working with national and local government and our waste collection partners to develop a transition plan that ensures a smooth entry into the ETS that works for all of the waste supply chain,” commented for Carbon Herald Mike Maudsley, CEO of enfinium – one of the UK’s largest energy from waste operators.
Drax, one of the UK’s largest energy companies managing biomass and coal plants, also welcomed the government’s decision to include carbon removal technologies in the emissions trading scheme.
“The development of such a market is an important step towards deploying large-scale carbon removal technologies such as Bioenergy with Carbon Capture and Storage (BECCS)… With the right support from the UK Government, Drax plans to invest billions into delivering BECCS at our power station in North Yorkshire,” said Ross McKenzie, Drax’s Interim Group Director of Corporate Affairs.
The UK ETS was launched in 2021 to replace the UK’s participation in the EU ETS. The government determines the emissions cap for the industry and the companies participating in the ETS are required to obtain and surrender allowances to cover their annual greenhouse gas emissions. The new changes to the program that will come into force in 2024 are an important milestone in the UK’s transition towards a more sustainable economy.