UK Government proposes new Emissions Trading System to replace EU system

Policymakers say the plan will be even more ambitious than previous versions and will ensure the UK is aligned with its commitment to reach net zero by 2050

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The UK Government has proposed a new Emissions Trading System (ETS) to replace the EU system for trading carbon emissions and help accelerate progress on tackling climate change.

Policymakers suggest the new process of putting a cost on carbon pollution to encourage polluters to reduce the amount of greenhouse gases they emit will be even more ambitious than previous versions and will ensure the UK is aligned with its commitment to reach net zero by 2050.

Emissions trading systems work by capping the total amount of greenhouse gases that can be emitted by certain sectors, such as steel, power and aviation – after each year, companies in these sectors must surrender enough carbon allowances to cover their emissions or face fines.

Carbon allowances can be traded amongst businesses and the overall cap is reduced over time in order to drive decarbonisation.

The new scheme, designed by the UK Government jointly with the Scottish Government, Welsh Government and Northern Ireland Executive, aims to provide a transition for businesses as the UK leaves the EU system after the Transition Period at the end of 2020.

It includes plans to reduce the existing emissions cap by 5% and would offer greater flexibility “to work in the best interests of the UK” – the government notes the cap would be likely to be revised again once the programme is up and running.

Energy Minister Kwasi Kwarteng 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.”

The government notes the UK would be open to considering a link between a UK ETS and the EU ETS, if it suits both sides’ interests.

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