Written Statement: Publication of the “Consultation to extend the UK ETS beyond 2030”

The UK Emissions Trading Scheme (UK ETS) Authority (comprising of the Welsh Government, the UK Government, the Scottish Government, and the Northern Ireland Executive), has today published a consultation on extending the UK ETS beyond 2030. 

The UK ETS is designed to operate on a series of phases. A phase is a period of time defined in the legislation, over which the cap on emissions has been set and the overall framework of the Scheme will stay broadly the same. Currently, the Scheme is legislated for Phase I, which runs from 1 January 2021 to 31 December 2030. Without further action, the scheme will come to an end on 31 December 2030. Therefore, to ensure that the UK ETS continues to operate after 2030, a post-2030 Phase II would need to be established in legislation. 

The “Consultation to extend the UK ETS beyond 2030” proposes to extend the UK ETS into a second phase from 1st January 2031. It also seeks views on the proposed length of a second phase. The current phase – Phase I - spans 10 years. When considering phase length options, it is important to balance providing participants with clarity on the UK ETS emissions cap and ensuring reliable emissions trajectories for cap setting. Additionally, it seeks views on whether to allow banking of emissions allowances between Phase I and Phase II. Banking refers to the practice of retaining allowances purchased during one phase of the UK ETS to be used or traded in a later phase.

This consultation represents the first step in the UK ETS Authority’s consideration of extending the Scheme, with the next step involving assessing the number of allowances that would be available Phase II. This will be subject to further consultation, which I will provide an update for in due course.

The UK ETS is a key policy lever, driving decarbonisation across Wales and the UK, encouraging investment, reducing emissions, and helping to secure a resilient, sustainable future for Wales. Extending the scheme will enable it to continue playing a critical role in achieving economically efficient decarbonisation and meeting our legally binding net zero target, interim goals, and future carbon budgets – both within Wales and across the UK.

The consultation will be open for 8 weeks, until 9 April. I expect to write again regarding the outcome of the consultation in the coming months. I have written to the Chairs of the Climate Change, Environment, and Infrastructure Committee and the Legislation, Justice, and Constitution Committee to inform them of this consultation.