Huw Irranca-Davies MS, Cabinet Secretary for Climate Change and Rural Affairs
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 published two Authority Responses to ETS consultations and one further consultation. On 25 November 2025, the Authority published an Authority Response to the UK Emissions Trading Scheme Scope Expansion: Maritime consultation, which relates only to the inclusion of emissions from domestic maritime. Alongside this response, the Authority also published a consultation on including emissions from international maritime within the scope of the UK ETS. This was followed on 26th November 2025 by the publication of a response to the UK Emissions Trading Scheme: Free Allocation Review consultation. Additionally, The Greenhouse Gas Emissions Trading Scheme (Amendment) Order 2026 (“the Order”) has today been laid in the Senedd.
In November 2024, the Authority published a consultation that sought views on the details of including the domestic maritime sector in the scheme. Today’s response confirms that the scheme will apply to vessels of 5000 Gross Tonnage (GT) and above with no de minimis threshold, with a review point for this threshold in 2028. It explains there will be a delay in the inclusion of offshore vessels until January 2027 and that the inclusion will include a 50% reduction in the UK ETS surrender obligation on routes between Northern Ireland and Great Britain. It will provide an exemption for ferries serving the Scottish islands and peninsulas, and for fishing vessels, both of which are to be reviewed in 2028. The overall cap on UK ETS allowances will increase in line with the projected increase in emissions from the introduction of the Maritime sector into the UK ETS.
The consultation on international maritime proposes that an international journey would capture any voyage which either starts or ends in a UK port and seeks views on including or excluding emissions from voyages to and from Crown Dependencies and Overseas Territories. It proposes that participants would monitor and report 100% of their greenhouse gas emissions on a voyage between a UK port and a port outside of the UK. However, operators would only be required to surrender allowances to cover 50% of their emissions. This would mirror the EU’s current approach to international maritime emissions in the EU ETS. It also proposes that offshore vessels are included and required to meet the Monitoring, Reporting and Verification (MRV) and surrender obligations in the UK ETS. Lastly, it proposes adjusting the cap to account for international maritime emissions using the latest UK net zero consistent trajectory as set out in the Maritime Decarbonisation Strategy.
The Authority Response to the Free Allocation Review consultation follows proposals to reform free allocation policy and adjust it for Carbon Border Adjustment Mechanism (CBAM) sectors, following the UK Government’s announcement that a CBAM will be introduced in 2027. Free allocations of UK ETS allowances (known as free allowances, “FA”) is the only policy currently in place to mitigate carbon leakage. Carbon leakage is the displacement of greenhouse gas emissions due to the movement of production to other countries with weaker climate change mitigation policies. FA policy protects UK ETS participants from the full carbon price by providing an amount of allowances to participants for free. This is particularly important for Welsh participants who receive high levels of FA.
The rule changes on activity data, benchmarks, and phasing out FA for sectors covered by the UK CBAM require changes to the legislation. Today, the Order has been laid in the Senedd, which will allow for these changes.
The publication of these responses marks a vital next step in developing effective proposals for expansion of the UK ETS, increasing the level of emissions that will come under the scheme and helping to shape the future of the UK ETS in a way that supports Wales’ long-term net zero ambitions and broader decarbonisation strategy.
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 these consultations.