The UK government has unveiled plans for a country-wide emissions trading scheme (ETS) to replace the EU ETS, which the UK will leave at the end of the year.
The scheme, designed jointly with the Scottish and Welsh governments and Northern Ireland executive, would increase the country’s emissions cap by 5% than the current EU system.
“The system draws on the best of the current system that the UK helped to develop while ensuring it has greater flexibility to work in the best interests of the UK,” the government said.
Once a new system is up and running the government intends to go even further by amending the cap again in line with its net zero target.
The government said elements of the new ETS will be familiar to operators and is designed to ensure a seamless transition at the end of the year.
About one-third of UK emissions and around 1000 UK factories and plants are currently covered by the EU ETS and will continue to be covered by the UK system.
The UK said it would be open to considering a link between a UK ETS and the EU ETS, if it suits both sides’ interests.
This is subject to the ongoing trade negotiations between the UK and EU.
Energy Minister Kwasi Kwarteng (pictured) said: “The UK is a world-leader in tackling climate change, and thanks to the opportunities arising as we exit the transition period, we are now able 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.”
SSE chief executive Alistair Phillips-Davies said: “The measures outlined by the UK Government today are encouraging.
“A robust carbon price has been the cornerstone of emissions reduction in the power sector so far and will be even more important on the road to reach net zero by 2050.
“Investment in low-carbon infrastructure is a win-win for our economy and climate, and we’re calling on government to go one better by committing to a net zero power sector by 2040, blazing a trail for sectors where progress has been slower like transport, heat and industry.”
Renewable Energy Association chief executive Nina Skorupska said: “This is good news for the industry, introducing a UK ETS scheme and a strong carbon price provides clarity, shows commitment to continuing to work as partners with Europe on carbon prices post Brexit and highlights the government’s commitment to achieving Net Zero.
“Whilst a great first step, we urge the government to go further and faster, expanding the carbon price beyond the power sector into heat and transport as seen in other countries and setting a carbon price in line with net zero by the end of the year to further incentivise a green recovery.”