Last reviewed 3 June 2020

The UK Government has published proposals for an independent Emissions Trading System (ETS) to replace the EU ETS, which will come into effect when the UK leave the EU at the end of the transition period.

The new system, which has been designed by the UK Government jointly with the Scottish Government, Welsh Government and Northern Ireland Executive, will focus on supporting the UK’s target for net zero carbon emissions by 2050.

The Government say the proposals will increase the country’s climate ambitions through showing how a new UK-wide ETS would work — putting a cost on carbon pollution to encourage polluters to reduce the amount of greenhouse gases they emit.

Launching the scheme yesterday, Energy Minister Kwasi Kwarteng, described the UK as “a world-leader in tackling climate change,” and that Brexit creates the opportunity “to go even further, faster”.

“This new scheme will provide a smooth transition for businesses while reducing our contribution to climate change, crucial as we work towards net zero emissions by 2050,” he said.

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.

The Government says the proposals published yesterday will be familiar to all operators currently covered under the EU ETS and are designed to ensure a “smooth transition” at the end of the year.

The UK ETS includes plans to reduce the existing emissions cap by 5%, going further than the current EU system and will apply to energy intensive industries (EIIs), the power generation sector and aviation — covering activities involving combustion of fuels in installations with a total rated thermal input exceeding 20MW (except in installations for the incineration of hazardous or municipal waste) and sectors like refining, heavy industry and manufacturing.

Aviation routes covered in the new ETS will include UK domestic flights, flights between the UK and Gibraltar, flights from the UK to European Economic Area (EEA) states, and flights from the UK to Switzerland once an agreement is reached.

The Government says it is willing to discuss linking the UK ETS with the EU ETS and that this will be subject to the ongoing trade negotiations between the UK and EU, adding that the UK has robust domestic carbon pricing options including its ETS proposals or a Carbon Emissions Tax.