Key Takeaways

• The UK ETS achieved a 11.49% . This was primarily driven by a fall in power and industrial sectors.
• Power sector emissions declined by 18.20% in the UK ETS in 2024, driven by a 4.66% YoY increase in renewable generation, and a 16.72% YoY decrease in fossil generation in 2024.
• Emissions decreased by 8.90% across all industrial sectors, with the iron and steel sector experiencing the most significant reduction, registering a 30.69% YoY decline.
• cCarbon forecasted the 2024 verified emissions with a 99.25% accuracy. Our forecasts for 2024 were highly accurate across all sectors, with forecast accuracy rates ranging from 98.19% (aviation) to 99.57% (industry).

Introduction

In 2024, the UK Emissions Trading System recorded emissions of 85.63 MtCO2, a 11.49% year-on-year reduction in total emissions across the covered sectors. The decline was primarily led by power and hard to abate industrial sectors.  cCarbon had forecasted the total emissions with a 99.25% accuracy, to about 86.28 MtCO2. In this article, we’ll break down these emission reductions, the drivers behind them, and what the future holds for the UK ETS in terms of sectoral trends, forecasts, and potential market developments.

UK Power Sector Achieves % Emissions Reduction in 2024, Driven by Renewable Energy Growth

The power sector led the emissions reduction with an 18.20% YoY decline, bringing total emissions to 30.56 MtCO2 in 2024. Our forecast for the year, which predicted 30.84 MtCO2, achieved 99.09% accuracy.

Interestingly, the power sector in the UK contributes a smaller share to the nation’s total emissions compared to the EU, accounting for 36% of total emissions (a smaller share than the industrial sector emissions). Renewable energy has been a key driver of the decline in emissions from the power sector, According to the data from UK’s National Energy System Operator (NESO), renewable energy accounted for 35.27% in UK’s electricity grid in 2024, a marginal rise from 34.64% in 2023. This shift was complemented by a 16.72% decline in overall fossil generation, and a 4.66% increase in renewable generation. The growth in renewables was particularly driven by wind and solar energy, which increased by 4.70% and 3.06%, respectively.

In addition to a fall in power sector emissions, the emissions intensity of fossil generation has continued a downward path since the inception of UK ETS in 2021. In 2024, the carbon intensity of electricity recorded a 1.78% decline YoY.

Figure 1: Emission Intensity vs Power Sector Emissions Since the Inception of UK ETS

Several targeted policy interventions in 2023 and 2024 created the conditions for the UK’s rapid renewable energy buildout. Early in this period, the government accelerated planning and grid connection reforms, streamlining the approval process for new renewable projects and grid upgrades. This was followed by a significant increase in funding for the Contracts for Difference (CFD) scheme, with the 2024 auction budget rising by 50%, which unlocked record new capacity for offshore wind and solar. The removal of restrictions on onshore wind further expanded the pool of eligible projects, while doubling investment in energy efficiency and grid flexibility measures helped absorb more variable renewable generation into the system. The UK also announced an end to new oil and gas exploration licenses in 2024, narrowing the future role of fossil fuels in the energy mix. Finally, the scheduled closure of the last coal plants by October 2024 ensured that the most carbon-intensive generation was eliminated from the grid, cementing the shift toward a cleaner power sector.

UK Industries Cut Emissions by 8.90% in 2024, with Steel and Chemicals Leading the Way

In 2024, emissions from the UK’s stationary industrial sectors fell by 8.90% year-on-year to 46.08 MtCO₂, matching closely to cCarbon’s forecast of 46.28 MtCO₂ with 99.57% accuracy. The manufacture of basic iron & steel and ferro-alloys saw a sharp 30.31% reduction in emissions, while chemicals manufacturing and crude petroleum extraction decreased by 5.23% and 6.37%, respectively. In contrast, emissions increased in aluminum production by 8.55%, sugar manufacturing by 5.28%, and plastics manufacturing by 4.13%.
The table below summarizes the emissions changes across these key sectors.

Table 1: Breakdown of Industrial Emissions

In 2024, the average index of production across all UK production industries declined by 1.16% YoY. Manufacturing output remained essentially flat, recording only a marginal rise of 0.03%, while mining and quarrying experienced a sharp decline of 8.18%. This means that manufacturing industries largely held steady in terms of output. The decline in emissions from the UK’s manufacturing sector in 2024 was not primarily driven by economic contraction, but rather by decarbonisation initiatives. According to the UK’s provisional greenhouse gas emissions data for 2024, the most significant reductions in industrial emissions were the result of blast furnace closures in the iron and steel industry and a sharp reduction in coal use across the sector.

Figure 2: Year-wise emissions across industries since the inception of UK ETS

UK Aviation Emissions Rise Amid Limited SAF Adoption and Increasing Flight Frequency

Figure 3: Average Emissions Per Flight in the UK (2021-2024)

While other sectors covered by the UK ETS saw emissions reductions in 2024, the aviation sector diverged from this trend, recording a 2.13% YoY increase to 8.90 MtCO₂. cCarbon had forecasted the 2024 aviation sector emissions to be 9.15 MtCO2, with a 98.19% accuracy. One of the plausible reasons behind this uptick in emissions was the rise in the number of flights in the UK, which rose by about 4.03% YoY. However, average emissions per flight in the UK recorded a 1.83% YoY decline. Additionally, the use of Sustainable Aviation Fuel (SAF) in the UK’s aviation sector remained limited in 2024, as SAF accounted for less than 1% of total jet fuel consumption in 2024. Despite the recent rise in aviation emissions, the UK government is advancing its decarbonization agenda through initiatives such as the Sustainable Aviation Fuel (SAF) Mandate, which took effect in January 2025. The mandate requires 2% of jet fuel to be SAF, gradually increasing to 10% by 2030.

UK Emissions Outlook and the Role of ETS Linking in Decarbonisation

Looking ahead, cCarbon projects power sector emissions to fall to about 28 MtCO₂ in 2025, driven by continued decarbonization and the expansion of renewables. Industrial sector emissions are projected to increase to approximately 48 MtCO₂, primarily driven by a 57% rise in estimated emissions from the iron & steel sectors. For aviation, cCarbon forecasts a slight rise to 10 MtCO₂ in 2025, with the adoption of Sustainable Aviation Fuel (SAF) remaining limited.

By 2030, cCarbon forecasts that power sector emissions will decrease to approximately 19 MtCO₂, down from the current 30 MtCO₂, driven by the growth of offshore wind and solar energy. Meanwhile, industrial emissions are expected to decline to about 42 MtCO₂, from the current 46 MtCO₂. In contrast, aviation emissions are projected to increase to 14 MtCO₂ by 2030, despite the rise in sustainable aviation fuel (SAF) use, due to continued demand growth. Additionally, the UK and EU are expected to link their Emissions Trading Systems, leading to price convergence. Price convergence resulting from linking the UK and EU Emissions Trading Systems (ETS) would drive decarbonization by ensuring that the most cost-effective emissions reductions are pursued across both markets.