UK Emissions Trading Scheme (UK ETS)

The UK Emissions Trading Scheme (UK ETS) began operating in January 2021, following the departure of the UK (excluding power operators located in Northern Ireland) from the EU ETS. Verified emissions from stationary UK ETS operators currently cover around a quarter of the UK’s territorial GHG emissions. The first phase of the UK ETS runs until 2030.

The UK ETS covers around 1,000 entities in the power and industrial sectors, as well as aviation within the UK and flights departing the UK to Switzerland and the European Economic Area (EEA). Allowances are primarily allocated through auctioning, with a portion freely allocated to safeguard the competitiveness of emissions-intensive trade-exposed (EITE) sectors and minimize the risk of carbon leakage. The system has both a cost containment mechanism (CCM) and auction reserve price, to support market stability.

The scheme is due to be reviewed in 2023 and 2028, with ongoing reforms and developments of specific elements in the meantime. The UK government remains open to the possibility of linking the UK ETS to other systems, if such a link would be advantageous for both systems.

The scheme covers the following sectors: Domestic Aviation, Industry and Power.

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