The UK Government will introduce emissions limits for the power industry starting from next year. Companies will need to reduce their emissions in line with the country’s 2050 net-zero targets.
The reforms, announced by the UK Emissions Trading Scheme Authority (UK ETS Authority) on 3 July, will affect the power sector, energy-intensive industry and aviation.
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These sectors will be required to gradually decrease their emissions towards net zero. The UK ETS cap will be set at the highest emissions rate at which a net-zero scenario can still be met.
“The decisions taken here will not only put us on the path to net zero but will also support crucial industries on their path to long-term sustainability,” said Gareth Davies, Exchequer Secretary to the Treasury and the UK ETS, in a joint statement.
The UK ETS was established in 2021 to enforce emissions limits through the buying and selling of emissions allowances. It fills the role of the EU ETS, which the UK was previously part of as a member of the EU.
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The UK ETS Authority will continue to offer free emissions allowances for sectors that face significant overseas competition until 2026. Scheme administrators use these free emissions allowances to ensure that UK producers are not undermined by overseas competitors working under more relaxed decarbonisation rules.
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By GlobalDataBetween 2024 and 2027, additional allowances will be introduced to the market, which the UK ETS Authority says will ensure a “smooth transition to the net-zero cap”.
The UK Government has set a target to decarbonise all sectors and reach net zero by 2050. However, last week the UK’s statutory body for climate change issued a report stating that slow progress from ministers will mean that net-zero targets will likely not be met.
According to the report, “much more must be done to accelerate domestic delivery in key sectors and comprehensively address the UK’s low-carbon competitiveness to reduce risks of the UK falling behind other climate-progressive developed economies”.
The UK ETS Authority said that it recognises the need for “a comprehensive suite of policies including funding, regulation and carbon pricing […] to deliver the decarbonisation we need this decade and beyond”.
