The Department for Energy Security and Net Zero (DESNZ) has confirmed that a “tighter cap” will be imposed on emissions from selected high energy emission industries such as industrial and power, to ensure the UK meets its net zero target.
The package of reforms was announced today (3 July) by the UK Emissions Trading Scheme Authority (UK ETS) – comprised of the UK Government, Scottish Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland.
The joint body was formed in 2021 and aims to limit the amount of greenhouse gas emissions (GHG) produced by energy-intensive sectors and incentivise the move to renewable technologies. This is achieved through a process of buying and selling emissions allowances, which companies must obtain for every tonne of emissions produced each year.
Following the reform, the aforementioned industries will be required to bring their emissions down at the rate required to reach net zero goals.
To ease the transition the cap will be set at the highest end of the range consulted on to be in line with net zero.
The cap for Phase I of the UK ETS was initially set at 5% below the UK’s expected notional share of the EU ETS’s Phase IV cap at 1,365 million allowances.
The new cap will see an estimated 30-35% fewer allowances, somewhere between 887 million and 936 million.
To ease the transition, extra allowances will be made available to the market between 2024 and 2027, as well as current levels of free allocation of allowances for industry being guaranteed until 2026.
“With the recent rises in energy prices, it is more important than ever that we accelerate the transition away from costly fossil fuels, towards greener and more secure energy,” said UK ETS Authority Ministers including Lord Callanan, Julie James MS, Màiri McAllan MSP and Gareth Davies MP in a joint statement.
“Our UK Emissions Trading Scheme, along with other interventions, forms part of a wider strategy to provide a long-term framework to incentivise UK industries to decarbonise – seizing the huge opportunities that are arising from a rapidly expanding clean energy sector, and providing the certainty that industries need to invest in new green technologies.
“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.”
The announcement follows the Climate Change Committee’s report last week criticising the UK Government’s lack of delivery on net zero targets.
