Emissions trading to now include transport and shipping

By Finance News On Nov 30, 2024

The government has announced it’s stepping up efforts to cut emissions by expanding the UK Emissions Trading Scheme (ETS), to include the maritime sector and new rules for carbon transport.

Under the proposals, businesses operating ships on domestic voyages will need to obtain allowances for every tonne of carbon they emit. By bringing maritime into the ETS, the cost of fuels used in the sector will reflect their environmental impact.

The expansion aligns the UK more closely with similar EU rules, ensuring a consistent approach across borders.

The consultation announced by DESNZ, also proposes recognising non-pipeline transport methods for carbon capture and storage (CCS). Companies using road, rail or ship to move captured CO2 to geological storage will be able to deduct the stored amount from their reportable emissions.

This offers crucial support to industries like steel and cement that lack direct pipeline connections.

Another key change is a crackdown on free allocation rules.

Companies that permanently shut down operations will no longer benefit from surplus free allowances. The remaining allocation will now match their activity levels in their final year, ensuring fairness.

Launched in 2021, the UK ETS caps emissions in aviation, power and industry by requiring businesses to trade allowances, creating a financial incentive to cut emissions.

Expanding the scheme to maritime and carbon transport ensures sectors crucial to the UK’s economy are accountable for their emissions.

Post consultation, the reforms are set to come into force in 2026.