The UK Emissions Trading Scheme (UK ETS) Authority has announced reforms to tighten emission limits on industrial, power, and aviation sectors from 2024, as reported by Reuters on July 3. The UK ETS, which replaced the EU Emissions Trading Scheme after Brexit, sets a cap on greenhouse gas emissions for energy-intensive sectors. To facilitate a transition to net zero, the authority has decided to lower the net-zero cap from 1,365 million allowances to 936 million allowances starting in 2024.
Under the UK ETS, industries receive free emission allowances and can trade them through auctions or the secondary market. As the emissions cap decreases, the cost of allowances will gradually increase, creating incentives for emission reductions and investments in cleaner technologies. To facilitate a smooth transition, the UK ETS Authority will release an additional 53.5 million allowances to the market between 2024 and 2027. The reforms also include extending the system to cover domestic maritime transport from 2026 and to waste from 2028. Additionally, the allocations of free allowances for aviation will be phased out by 2026.