- In late 2023, the previous government issued two consultations on UK Emissions Trading Scheme (UK ETS). The first consultation focusses on the development of UK ETS markets policies. The second consultation relates to proposals to alter free allocation methodology for stationary sectors to better target those most at risk of carbon leakage. It was also confirmed that the ETS would run until at least 2050, providing long-term certainty. Both consultations closed on 11 March 2024, and the outcome is expected to be published in the second half of 2024.
- At the Autumn Budget 2024, it was confirmed that the UK CBAM will be introduced from 1 January 2027 and target imports from overseas of carbon intensive products such as iron, steel, aluminium, fertiliser, hydrogen, and cement and will represent the gap between any carbon price applied in the country of origin and the carbon price faced by UK producers. Ceramics and glass will not be part of the products in scope initially. There will be five rates of UK CBAM for each product type. The registration is set at £50,000 per rolling 12-months period (compared to £10,000 in the initial consultation).
- On 28 November 2024, two new consultations were issued on expanding the UK ETS to include the maritime sector in scheme from 2026 and on non-pipeline transportation for carbon capture and storage. On the same day, an initial response to the UK ETS authority’s 2023 free allocation rules for sites that cease activity was published.
- On 30 January 2025, a policy paper was published by the Department for Energy Security and Net Zero further to the consultation that was held on 24 September 2024. The joint response confirmed the publication of registry transaction data, the proposed additional exception to disclosure of UK ETS information by a national authority (notably to HM Treasury and HMRC for the purpose of developing and implementing a UK CBAM), and extend the application to ultra-small emitter status for the period 2026-2030 to operators who began operations between 2 January 2021 and 1 January 2024. Legislation to implement those changes will be laid shortly and it is expected that those changes will come into force on 31 March 2025.
- On 11 February 2025, HM Treasury released the Terms of Reference for the newly created UK CBAM international group which will be used to communicate UK CBAM policy updates and receive feedback on specific UK CBAM policy design from international stakeholders.
- As part of the UK Labour government “EU reset”, proposals for linking the EU and UK ETS are being considered. News on this could emerge later in the Spring at the EU-UK summit.
- Timing: both consultations on UK ETS closed on 11 March 2024, and the outcome is expected to be published in the second half of 2024. The policy design of the new UK CBAM may be subject to future consultation, stakeholder views or industry roundtable.
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