UK Greenhouse Gas Emissions Trading Status - 2020s

UK Greenhouse Gas Emissions Trading Status - 2020s

The UK's greenhouse gas emissions trading in the 2020s is operating as the UK Emissions Trading Scheme (UK ETS), a unique system after leaving the EU. It is designed to replace the EU ETS, starting in 2021. This new scheme covers the entire UK (England, Scotland, Wales, and Northern Ireland) and sets higher reduction targets.

Current Targets and Structure
The UK ETS sets a target of reducing greenhouse gas emissions by 68% by 2030 compared to 1990 levels. Large emitters in the power, industrial, and aviation sectors are targeted to achieve this goal, and carbon pricing plays a key role: as of 2023, the price of a ton of CO2 emission credits averaged £65, which is close to the EU ETS price (about €85).

Regional and Industrial Impacts
In urban areas, including the City of London, the adoption of renewable energy is accelerating, especially in the power industry, as exemplified by the large wind farm installed in the Windar Forest. At the same time, investment in emission-reducing technologies is a challenge in areas of Northern England where manufacturing is concentrated. For example, BAE Systems, a heavy industrial company based in Newcastle, has installed carbon capture technology to reduce its annual emissions by 10% by 2022.

Reductions by Substance
In the United Kingdom, coal use is approaching zero, and natural gas is the predominant source of energy. In addition, the share of renewable energy exceeded 40% of total electricity supply in 2023. On the other hand, CO2 emissions remain high in the industrial sector, and reduction efforts are required in the steel and cement industries.

Challenges and Prospects
One challenge for the UK ETS is the impact of carbon price fluctuations on companies' long-term investment plans. In Scotland in particular, there is concern about the impact of increased emissions costs on the local economy in the fishing and food processing industries. In response, the government intends to introduce a carbon price stabilization mechanism to limit excessive price volatility.

In addition, the UK government is stepping up its support for startups through the Net Zero Innovation Program. For example, ClimeWorks UK, a London-based start-up company, has developed Direct Air Capture (DAC) technology that has improved CO2 capture efficiency by 20%.

Conclusion.
UK emissions trading in the 2020s continues to have advanced reduction targets, while being unique compared to the EU ETS. The use of a carbon price to reduce emissions, while taking into account geographic and industrial diversity, is a model that can be used as a reference for other countries.