The UK Emissions Trading Scheme (UK ETS) Authority has approved a tighter cap on CO2 emissions for power sector, energy intensive industries and aviation from 2024.
The UK ETS was introduced in 2021 to replace the UK’s participation in the EU ETS and to limit the total amount of greenhouse gas (GHG) emissions for aviation, power and other energy intensive industries. As of 2024, those sectors will have to reduce their emissions at the rate needed to reach net zero goals. The net-zero cap will be cut from 1,365 million to 887-936 million allowances. To allow more flexibility for industries, the emission cap will be set at the highest level of the range consulted on (in line with net zero), extra allowances (53.5 million allowances) will be made available to the market between 2024 and 2027, and the current levels of free allocation of allowances for industry will be guaranteed until 2026.
In addition, the UK ETS will be extended to cover more sectors, namely domestic maritime transport from 2026 and waste from 2028. Free carbon allowances for the aviation sector will be removed in 2026 and investments are planned in new Greenhouse Gas Removal technologies.