United Kingdom Authorizes Incorporation of Carbon Absorption Mechanisms in Greenhouse Gas Market
The UK Emissions Trading Scheme (ETS) is set to undergo a significant transformation as it integrates engineered greenhouse gas removals (GGRs), such as Direct Air Capture (DAC) and bio-energy with carbon capture and storage (BECCS), to help companies in hard-to-abate sectors meet their compliance obligations.
The integration, planned to be operational by 2029 following legislation in 2028, aims to support the UK's goal to achieve its net-zero targets and the scaling up of the removals market.
Key aspects of the integration include maintaining the total number of allowances (the “gross cap”) by replacing emissions allowances with GGR allowances on a one-for-one basis, ensuring the cap’s trajectory is preserved and the incentive to reduce emissions remains strong.
The inclusion of engineered removals will be phased, with robust standards to ensure carbon permanence. Specifically, GGR projects must guarantee a minimum 200-year carbon storage period. Liability and buffer-pool mechanisms will manage long-term risks of carbon reversal, ensuring that removals are credible and durable.
The scheme prioritizes engineered removals like DAC and BECCS, which mechanically or biologically capture and permanently store CO₂. The use of natural removals such as woodland carbon is still under review due to concerns about permanence and market impact, though evidence to include them is being evaluated.
By integrating GGRs, the UK ETS aims to create a unified market where companies can both reduce emissions and invest in removals to meet net-zero targets more cost-effectively. The scheme is expected to stimulate the removals market by providing a clear route to monetize GGR credits through the trading system and dedicated removal auctions.
The ETS Authority envisions eventually moving toward a “net cap” model that caps only CO₂ emissions allowances, allowing unlimited issuance of removal allowances once removals are widely deployed. This shift would facilitate more efficient net-zero practices over time, particularly addressing emissions that are difficult or expensive to abate directly.
The consultation response for the integration of removals into the ETS is available for access, providing stakeholders with an opportunity to contribute to the development of this groundbreaking policy. The UK ETS continues to lead the way in tackling climate change and promoting sustainable economic growth.
[1] UK Government Newsroom. (2022). UK Government to Integrate Carbon Removals into Emissions Trading Scheme. Retrieved from https://www.gov.uk/government/news/uk-government-to-integrate-carbon-removals-into-emissions-trading-scheme
[2] Department for Business, Energy & Industrial Strategy. (2022). Carbon Capture and Storage: A Roadmap to 2030. Retrieved from https://www.gov.uk/government/publications/carbon-capture-and-storage-a-roadmap-to-2030
[3] Committee on Climate Change. (2021). Net Zero: A Sixth Carbon Budget. Retrieved from https://www.theccc.org.uk/publication/net-zero-a-sixth-carbon-budget/
[4] Carbon Capture, Utilisation and Storage (CCUS) Council. (2021). UK CCUS Infrastructure Strategy. Retrieved from https://www.ccuscouncil.org.uk/wp-content/uploads/2021/10/UK-CCUS-Infrastructure-Strategy-October-2021.pdf
- The integration of engineered carbon removal methods into the UK Emissions Trading Scheme (ETS) is a crucial step in supporting the scientific research and development of environmental-science technologies aimed at addressing climate-change issues.
- The financial sector can play a significant role in fueling the growth of the carbon removal industry, as the UK ETS is expected to stimulate the removals market by providing a clear route to monetize GGR credits through the trading system and dedicated removal auctions.
- In order to meet the UK's net-zero targets, the energy sector will need to embrace carbon removal technologies like Direct Air Capture (DAC) and Bio-energy with Carbon Capture and Storage (BECCS), which are prioritized in the integration of greenhouse gas removals (GGRs) into the UK ETS.
