Greenhouse Gas Emissions Trading Scheme Order 2020 - UK Emissions Trading System

The UK ETS started operating on January 1, 2021, as the UK officially departed from the EU and 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 has a tighter emissions cap (5% lower than the EU ETS cap), which will be annually reduced by 4.2Mt. The UK plans to revise its cap no later than 2024 in line with a net zero-consistent target trajectory. 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. The ETS will be reviewed in 2023 and 2028, and the UK government has also indicated its openness to linking to other schemes internationally in the future.

Source: World Bank, Carbon Pricing Dashboard

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