New Emissions Trading System proposal would see UK aim to go further in tackling climate change

Need for a new system

The new UK system is aiming to replace the current EU system for trading carbon emissions, the UK Government has revealed. The new scheme would replace the EU Emissions Trading System, which the UK will leave at the end of this year as the transition period of leaving the European Union ends.

The proposal

The UK Government is increasing the country’s climate ambitions through new proposals published recently showing how a new UK-wide Emissions Trading System (ETS) would work – putting a cost on carbon pollution to encourage polluters to reduce the number of greenhouse gases they emit. The system designed by the UK Government is aiming towards achieving the UK’s target for net zero carbon emissions by 2050. The system hopes to draw on the best aspects of the current EU system.

Emissions trading systems work by setting a cap on the total amount of greenhouse gases that can be emitted from certain sectors – in the UK’s case by energy-intensive industries such as steel, the power generation sector and aviation. The cap is reduced over time so that total emissions fall.

After each year, every covered company must surrender enough carbon allowances – each representing tonnes of carbon dioxide – to cover all its emissions, or additional fines of up to £100 per allowance are imposed. Carbon allowances can be bought at auction and traded, and these markets determine their cost (the ‘carbon price’).

Around a third of UK emissions and around 1,000 UK factories and plants are currently covered by the EU ETS and will continue to be covered by the UK system.