Greenhouse Gas Emissions Trading Scheme Order 2020 - UK Emissions Trading System
The UK Emissions Trading Scheme (UK ETS) began operating in January 2021, following the departure of the UK (excluding power operators located in Northern Ireland) from the EU ETS. The design features of the UK ETS are very similar to those of the EU ETS Phase 4. However, the UK ETS initial set its cap at 5% below the UK’s national share of the EU ETS cap for its fourth phase. In 2024 the UK ETS reset its cap to align with its net zero emissions target, with the phase 1 cap set at 936MT for the 2021-30 phase and the cap declining to 49MT by 2030. The UK ETS design also has a Cost Containment Mechanism, which aims to mitigate against sustained extreme price spikes. The mechanism comes into effect where prices exceed recent historical prices by a set proportion and for a certain duration. A minimum auction reserve price of GBP22/tCO2e is also in effect. Following the announcement on 19 May 2025, the UK and EU are aiming to negotiate a linking agreement. The UK ETS broadly covers power, heavy industry and aviation. Maritime and waste are both being considered for addition to the scheme.
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