Consultation on developing the UK Emissions Trading Scheme

The UK ETS Authority is seeking views on the development of the UK Emissions Trading Scheme

The UK Emissions Trading Scheme (ETS) Authority – made up of the UK government, Scottish Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs (DAERA) in Northern Ireland – is seeking stakeholder views on proposals to develop the UK ETS which operates across England, Scotland, Wales and Northern Ireland.

This consultation is open to all, but it will be of particular interest to:

• individual companies and representatives of industrial, power and aviation sectors with obligations under the UK ETS
• environmental groups
• individual companies and representatives of maritime, waste, greenhouse gas removals and agricultural sectors

To note, this consultation does not apply to NI electricity generators who participate in the EU ETS by virtue of the Ireland / Northern Ireland Protocol.

What is being consulted on

• Chapter 1 sets out proposals for changes to align the UK ETS cap and trajectory with net zero targets.
• Chapter 2 considers the role of Free Allocation policy as a carbon leakage mitigation tool in the context of the net zero aligned cap. It also puts forward potential improvements to the current Free Allocation regime based on stakeholder views expressed in response to the 2019 consultation on carbon pricing and the call for evidence on free allocation in 2021.
• Chapter 3 sets out proposals for bringing in unallocated allowances and / or the flexible share to the market.
• Chapter 4 calls for evidence on potential drivers of evolving market conditions in the UK ETS and objectives for market stability policy as the scheme evolves.
• Chapter 5 sets out the scope of the review into UK ETS aviation policy. This includes proposals on the future of aviation free allocation, considering responses to the 2019 consultation on carbon pricing, the 2021 call for evidence, and UK government commissioned economic research. It also considers how the use of Sustainable Aviation Fuels (SAFs) could be incentivised under the UK ETS and options for expanding the coverage of the scheme within the aviation sector.
• Chapter 6 sets out proposals and calls for evidence on possible changes to the rules for sectors currently covered by the UK ETS to ensure more greenhouse gas emissions are covered by the scheme.
• Chapter 7 sets out proposals to expand the scope of the UK ETS to the domestic maritime sector and calls for evidence on expanding the UK ETS to include waste incineration and energy from waste.
• Chapter 8 calls for early views on the incorporation of greenhouse gas removal (GGR) into the UK ETS and the monitoring, reporting and verification requirements necessary to address greenhouse gas emissions in the land use and agriculture sectors. We do not propose expanding the UK ETS to agriculture.
• Chapter 9 sets out proposed amendments to support effective operation of the UK ETS by addressing a number of operational issues identified during the development of policy and legislation for the scheme.

Find out more about the consultation and ways to respond.

The consultation will close at 23:45 on 17 June 2022.

First published 25 March 2022