The UK Government has published its response to chapters one, two and three of the future of UK carbon pricing consultation. The response sets out the proposals for the main design features of an Emissions Trading System (ETS) for the UK,
Broadly, the Government intends to establish a UK ETS with phase 1 running from 2021 to 2030. The UK would be open to linking with the EU ETS, but this is subject to the UK-EU future relationship negotiations. It is envisaged that a linking agreement could:
- provide for mutual recognition of allowances, enabling use in either system;
- establish processes through which relevant information will be exchanged; and
- set out essential criteria that will ensure that each trading system is suitably compatible with the other to enable the link to operate.
The response document sets out decisions on design of a UK ETS. The Government will also consult on the design of a carbon emission tax as an alternative, to ensure that a carbon price remains in place. The system is seen as an important step towards achieving the UK’s target for net zero carbon emissions by 2050 and so the Government‘s response includes plans to reduce the existing emissions cap by five per cent below the UK’s notional share of the EU ETS cap for phase IV. A further consultation is planned on the appropriate trajectory following publication of advice by the Committee on Climate Change on the Sixth Carbon Budget under the Climate Change Act 2008. International credits will not be permitted in the UK ETS at this time. Further details are available here.