The past few weeks saw a number of developments in relation to the UK Emissions Trading Scheme (UK ETS), which came into force on 1 January 2021. This short blogpost summarises the key aspects of what is changing.

Consultation on compensation to energy intensive industries for UK ETS is now open

The UK ETS poses increased indirect costs for some energy intensive industries in the short to medium term. Recognising this issue, the Department for Business, Energy and Industrial Strategy (BEIS) published a consultation on compensation to industries deemed to be exposed to a significant risk of carbon leakage due to these costs.
The consultation aims to gather views on:

  1. The risk of carbon leakage due to indirect costs related to the UK ETS; and
    Which sectors are most exposed to such risk.
  2. The consultation is available here. It is open until 9 August.

CCC’s updated advice on the UK ETS cap and its interaction with CORSIA

At the end of June, the sixth UK carbon budget (for 2033-2037) came into force. It aims to cut greenhouse gas (GHG) emissions by 78% by 2030 (compared to 1990 levels); thus being the world’s most ambitious climate change target.

Reflecting on the updated budget, the Climate Change Committee (CCC) updated its advice on the level of the cap on the UK ETS and on its interaction with the CORSIA. While previously the CCC advised carbon emissions reductions to 61 megatonnes of carbon dioxide (CO2) per year by 2030, the new advice entails more ambitious targets. CCC advises that GHG emissions for currently traded UK ETS sectors should be reduced by 53% by 2030 compared to 2019 levels (i.e. to 59 megatonnes of CO2 per year). If emissions removals are included, the number is 54 megatonnes of CO2 per year (i.e. by 57%) by 2030.

These targets reflect the exclusions of Northern Irish emissions from the UK ETS (under the Northern Ireland Protocol, such emissions are still included in the EU ETS).

The full advice is available here.

Please do not hesitate to contact any member of the Reed Smith EHS team if you would like more detailed information on this topic.