Expanding and strengthening the UK Emissions Trading Scheme
UK Emissions Trading Scheme continues commitments to expand the scheme and further limit carbon emissions.
- UK ETS Authority outlines intention to include the maritime sector in scheme to cut carbon emissions and support economic growth. Proposed changes would come into effect from 2026
- scheme to recognise non-pipeline transport for carbon capture and storage – further incentivising decarbonisation for industry
- changes to remove excess free allowances from businesses who cease activity in their final year of operation
Emissions will continue to be reduced as part of proposals to expand the UK Emissions Trading Scheme (ETS) to help meet the UK’s net zero goals while supporting economic growth.
The UK ETS Authority is consulting on proposals to expand the scheme to include emissions from the maritime sector and recognise non-pipeline transport methods, such as shipping, road or rail, for moving captured carbon into geological storage.
The UK ETS Authority has also confirmed that it will make changes to free allocation rules to ensure participants who permanently cease their operations cannot benefit from surplus free allowances in their final year. This will ensure their free allocation in their final year is proportionate to their activity levels.
The changes include an exemption for sites who are ceasing activity to decarbonise. This will help support the UK ETS’s objective of incentivising a move to more carbon efficient production across the UK’s industrial sectors.
Launched in 2021, the UK ETS helps the UK to decarbonise across aviation, power and industry by setting a limit on emissions, with allowances that can be traded, creating a carbon price that incentivises businesses to reduce their emissions.
By expanding the scheme to include the maritime sector, businesses with ships operating domestic voyages would need to obtain allowances for every tonne of carbon they emit. This will ensure that the price of fuels used by the sector better reflects their environmental impacts.
Carbon capture and storage will be crucial for achieving net zero targets, especially for energy-intensive sectors such as steel, cement, and chemicals. Sites without direct pipeline connections will require alternative transport options, such as road, rail, or ship, to access carbon capture and storage technology.
Recognising this within the UK ETS will ensure that operators transporting CO2 for storage can deduct the amount they send to storage from their reportable emissions, providing economic support for industrial sites without access to pipelines.
In a joint statement, UK Emissions Trading Scheme Authority ministers Sarah Jones MP, Huw Irranca-Davies MS, Gillian Martin MSP, Andrew Muir MLA, James Murray MP and Mike Kane MP said:
Today’s publications are about engaging and providing clarity for business, and incentivising them to lower emissions as we transition to a greener future.
Expanding the UK ETS to include maritime and recognising non-pipeline transport for carbon capture and storage will encourage investment into clean technologies, a vital growth industry in the UK.
Today’s publications build on previous commitments to consult on the expansion of the scheme. The two consultations cover:
- how the UK ETS will expand to include maritime emissions, outlining the definition of a domestic voyage under the scheme, details of the threshold for ships, proposed exemptions, including to Scottish island communities, and the greenhouse gases to be covered. It also considers how the expansion could interact with regional and international emissions pricing
- how the UK ETS will recognise non-pipeline transport of CO2 using shipping, road or rail to permanent geological storage. This will mean emitters storing CO2 in this way would not have to pay a carbon price for CO2 they successfully capture
This comes after the UK Government confirmed funding to launch the UK’s first carbon capture sites which will create 4,000 jobs and attract £8 billion private investment in the North West and North East of England.
Notes to editors
The UK ETS Authority is made up of the UK Government, the Scottish Government, the Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland. The scheme launched in January 2021, following the United Kingdom’s exit from the EU ETS.
- Maritime consultation
- Non-pipeline transportation (NPT) consultation
- Free allocation response. This is an initial response to the UK ETS Authority’s 2023 Free Allocation Review consultations, covering decisions on free allocation rules for sites that cease activity. Further updates on this consultation will be published in due course.