Phased Integration with Safeguards: The UK ETS will include engineered greenhouse gas removals (GGRs) from 2029, replacing emissions allowances on a one-for-one basis while maintaining the existing cap to preserve market stability.
Robust Standards and Permanence Framework: GGR projects must meet a 200-year minimum storage requirement, with liability and buffer-pool mechanisms in place to ensure long-term carbon permanence.
Woodland Still Under Review: The Authority has not yet decided whether to include woodland-based removals, citing permanence and market impact concerns but acknowledging new evidence supporting their potential inclusion.
The UK Government and devolved administrations have confirmed a major expansion of the UK Emissions Trading Scheme (ETS) to include engineered greenhouse gas removals (GGRs), targeting operational integration by end-2029 following legislation by 2028. This strategic move, detailed in the Main Government Response to its 2024 consultation, aims to support the country’s net zero commitments by enabling hard-to-abate sectors to balance residual emissions within a robust compliance framework.
“The integration of removals into the UK ETS represents a significant opportunity to advance towards our climate goals,” the Authority said. “The UK ETS could drive both emission reductions and carbon removal in one efficient market.”
Cautious and Controlled Integration
To maintain environmental integrity and market confidence, the Authority will preserve the gross cap during initial integration. For every GGR allowance added, one emissions allowance (UKA) will be removed—ensuring the overall supply remains unchanged and continues to incentivize decarbonisation. A shift to a net cap, allowing unlimited removals above a tightened emissions cap, may be considered in the long term once the GGR market is more mature and residual emissions are well defined.
“This approach to the cap will maintain the incentive to decarbonise and eliminate mitigation deterrence,” the Authority stated. “Alternative options risk market instability and undermining environmental goals.”
Rigorous Standards and Permanence
The ETS will align with the UK GGR Standard under development and require all allowances to be issued ex-post, only after verified carbon sequestration. A strict 200-year minimum storage period is mandated, alongside liability measures (holding operators responsible for carbon reversal) and buffer pools to insure against loss of stored carbon.
“Issuing allowances ex-post ensures all removal allowances represent genuine and verified carbon removal,” the report notes.
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Only UK-based GGRs will be eligible initially, with the Authority citing benefits for domestic accountability, investment, and MRV simplicity. Future consideration may be given to removals from other jurisdictions.
Differentiated Allowances and Market Access
The Authority supports the differentiation of GGR allowances from emissions allowances (UKAs), though technical implementation details are under review. Differentiation—particularly at a generic level—could enhance price discovery, increase transparency, and attract voluntary demand from non-compliance entities seeking high-integrity credits.
To support market access, the Authority intends to facilitate auctions for GGR allowances. Options include combined or separate auctions, and innovative models like Product Mix Auctions are being explored to manage potential liquidity challenges.
Woodland Inclusion Still Under Consultation
While there is strong interest in including UK woodland-based removals, no decision has yet been made. Stakeholders expressed concern over permanence, price impacts, and unintended land-use consequences. However, the Authority acknowledged new evidence suggesting a strong case for woodland integration, especially under the Woodland Carbon Code, and has published this evidence in a separate annex.
“The evidence suggests there is a strong case for woodland inclusion… once carefully designed safeguards are in place,” the Authority wrote.
The Authority will continue stakeholder engagement before reaching a final decision.
What’s Next
The next phase involves a technical consultation to refine implementation details such as buffer pool contribution rates, auction structures, and differentiated allowance rules. These inputs will shape the path to integration while safeguarding the UK ETS’s market integrity and environmental ambition.
Read the Emissions Trading Scheme here.
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