UK Emissions Trading Scheme (UK ETS)
The UK ETS works on a cap-and-trade principle, whereby a cap is set on the amount of carbon emissions that can be produced by installations within scope. It currently applies to Energy Intensive Industries and Electricity Generators (known as stationary installations) and Aviation. Within the cap, installations receive or purchase carbon allowances, with 1 allowance being equal to 1 tonne Carbon Dioxide (CO2) equivalent.
The UKG and DAs, acting jointly as the UK ETS Authority, consulted in Spring 2022 on proposals to align the design of the UK ETS with the UK Government and DAs’ net zero targets (“Developing the UK ETS”). This included a call for evidence on proposals to include emissions from waste incineration and energy from waste within scope. The Government Response to the consultation, published on 3 July 2023, announced the intention to bring emissions from this sector within scope by 2028. In this response, the UK ETS Authority also stated that it is minded to include a 2 year phasing period from 2026-2028, whereby installations within scope would monitor their emissions, without the requirement to purchase carbon allowances.
Type of Change
Statutory
Affected Stakeholders
- Waste incineration installations
- Waste management companies
- Local Authorities
Changes
Expansion of scope of the UK ETS to cover emissions from waste incineration and Energy from Waste. Once fully implemented, this will require waste incinerators to monitor their carbon emissions from fossil based waste streams, and to purchase and surrender carbon allowances to commensurate with theses emissions on an annual basis.
Status
In the UK ETS Authority Government Response to the 'Developing the UK ETS' consultation referred to in paragraph 2 above. A commitment was given to extend the UK ETS to this sector by 1 January 2028, with a 'minded to' 2 year period starting on 1 January 2026. Whereby installations within scope would be required to Monitor, Report and Verify their emissions without the requirement to purchase carbon allowances. The Authority committed to consulting further on the detail on this expansion of scope before the end of 2023. This has not yet taken place however is expected to proceed in the near future.
Expected Timeline
Consultation expected in 2024.