UK ETS

The UK Emissions Trading Scheme (UK ETS), launched on January 1, 2021, as a successor to the EU ETS for the UK (excluding Northern Ireland’s electricity generators), is overseen by the UK ETS Authority. Comprising the UK, Scottish, Welsh Governments, and Northern Ireland’s Department of Agriculture, Environment, and Rural Affairs, this initiative is designed to advance the UK’s climate goals through carbon pricing while safeguarding the competitiveness of British businesses. Covering approximately 1,000 entities across energy, manufacturing, and aviation sectors, with allowances primarily distributed through auctions, the UK ETS aims to reduce emissions significantly. It has set an ambitious net-zero emissions target, proposing a cap reduction of around 30% for Phase I (2021-2030), with a cap reset at 936 million allowances to align with this goal. The scheme is subject to continuous assessments and enhancements, including the exploration of strategies to mitigate carbon leakage risks, such as product standards and a carbon border adjustment mechanism (CBAM).