UK Proposes Including Carbon Removal In ETS

UK Proposes Including Carbon Removal In ETS - Carbon Herald
Source: Peggy und Marco Lachmann-Anke from Pixabay

The UK Emissions Trading Scheme (ETS) Authority has proposed extending the current carbon pricing system to encompass entirely new industries, including waste-to-energy facilities and carbon removal.

Debuting in 2021 as a replacement for the UK’s involvement in the EU’s emissions trading scheme, the UK ETS establishes a cap on greenhouse gas (GHG) emissions for significant sectors that heavily produce these gasses. 

This cap tightens over time, pressuring businesses to cut emissions and align with industry climate targets. Each year, companies receive allowances corresponding to one tonne of emissions they generate. 

Businesses that effectively reduce emissions below the cap limit can trade their surplus allowances on a secondary market with other participants, establishing a market price for carbon. 

This financial incentive encourages companies to invest in cleaner energy sources and enhance their energy efficiency.

enfinium CEO Mike Maudsley commented on the announced plans by saying: “Today’s Emissions Trading Scheme announcements underline the importance of decarbonisation to the future of the UK energy from waste sector. Even if the UK hits its recycling targets, there will still be 17 million tonnes of unrecyclable waste in the early 2040s. But by working together with national and local governments, we believe that the problem of unrecyclable waste can be turned into a net zero solution. That is why enfinium has published a detailed and independently verified Net Zero Transition Plan setting out our ambition to install carbon capture technology across our fleet over the coming years, transforming enfinium into a carbon removals business in the 2030s.”

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Sebastien Cross, co-Founder and Chief Innovation Officer of BeZero Carbon, said: “Integrating carbon removal into the UK ETS would be a step-change in delivering climate action. Carbon removal technology is absolutely critical if we are to reach net zero, and allowing UK-based projects to be traded within the ETS sends a huge signal of confidence to this burgeoning market, helping it to grow and scale here in the UK. We’re leading the charge in providing ratings for projects in the removal sector, with a number of industry firsts under our belt. Independent risk assessments should be supported to continue bolstering confidence and inform better decision-making if engineered carbon removal is integrated into the ETS.”

Currently, the UK ETS applies to airplanes, power plants, and factories, but the governing body (the Authority) is looking to expand it to encompass more of the UK’s economy. 

Last year, the Authority announced a number of changes to the ETS, including stricter emission caps for existing sectors, as well as plans to bring waste-to-energy facilities, waste incineration plants, and domestic seafaring under the scheme’s umbrella.

The Authority is proposing a two-year phase-in period starting in 2026 for the waste and incineration sector. 

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During this time, these facilities will track, report, and verify their CO2 emissions, but won’t have to buy or give up any emission allowances yet. 

The Authority also launched a separate discussion on how UK technology for removing CO2 from the atmosphere could be incorporated into the ETS. This could create a long-term market for both technological as well as nature-based carbon dioxide removal (CDR).

The consultation highlights that the UK’s independent Climate Change Committee considers removing greenhouse gasses crucial for achieving net zero emissions, and the Authority is tasked with exploring how to integrate this into the ETS policy to expand the market for such technologies.

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