The Department for Business, Energy and Industrial Strategy (BEIS) and the devolved governments published an initial government response to their consultation on developing the UK Emissions Trading Scheme (UK ETS), on 31 August 2022.
This consultation included a number of proposals that require implementation via legislation ahead of the 2023 scheme year, so the early response sets out final positions on these particular proposals before they take effect. BEIS will publish a full response to the remaining proposals in the consultation at a later date, including on aligning the UK ETS cap with net zero. The response to these proposals will be key to the scheme’s success, as it aims to provide a carbon pricing mechanism as a tool for achieving the UK's 2050 net zero target.
The government’s early response to the consultation outlines the feedback received and indicates:
- Flights from the UK to Switzerland will be included from January 2023.
- Virtual site visits for verifiers of aviation activities will be allowed in normal circumstances provided that the regulator's approval is obtained prior to the submission of an operator's annual emissions report.
- References to the Renewable Transport Fuel Obligation (RTFO) sustainability criteria in UK ETS legislation will be updated where relevant to the eligibility of sustainable aviation fuels (SAF).
- Legislation will amend the (retained EU law) Activity Level Changes Regulation ((EU) 2019/1842) to omit the 2020 COVID year in the calculation of change in activity level in 2022.
- Legislation will also make the operational amendments to the UK ETS proposed in Chapter 9 of the March 2022 consultation, including minor permitting, monitoring, reporting and verification (PMRV) amendments, and a window for hospitals and small emitters to re-enter the main scheme.
The UK ETS is a cap and trade scheme that seeks to reduce greenhouse gas emissions by requiring operators of installations in certain energy-intensive sectors (including manufacturing facilities, power stations and aviation) to surrender an equal number of emission allowances as the total emissions of CO2 from the installation for that year. Allowances can be purchased at auction and some allowances are allocated for free by the regulator to certain industries.
The new UK ETS was launched on 1 January 2021 by the UK ETS Authority (UK Government, Scottish Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland), to replace the UK's participation in the EU ETS after the end of the Brexit transition period. This new scheme follows the EU ETS closely and is separate from the UK Emissions Trading Scheme that ran from 2002 to 2006.
We regularly advise clients on participation in the UK ETS scheme. If you need any support with this scheme please get in touch with Michael Barlow or any other member of the environment team.
Written by Isobel Annan
We are committed to increasing the ambition of the scheme and ensuring it plays a crucial role in achieving the UK’s ambitious climate targets, including net zero greenhouse gas emissions by 2050