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IETA Welcomes UK Decision to Launch Emissions Trading System from January 2021

14 Dec 2020 11:21 AM | Anonymous member (Administrator)

LONDON, 14 December - IETA welcomes the announcement by the UK government today that it will launch an emissions trading system (ETS) for domestic industry and power generation from January 1 next year.

“The announcement of a new UK ETS is a bold step in the right direction toward climate neutrality," said Adam Berman, director of EU Policy at IETA.

"Choosing a carbon pricing system that can be truly aligned with net-zero sends a strong message that the UK is serious about action on climate change."

"Emissions trading provides multiple options for strengthening and enhancing price signal. The UK ETS will ensure both flexibility for industry and environmental certainty for policymakers.”

Britain left the European Union at the start of 2020 and will leave the EU Emissions Trading System (EU ETS) in less than three weeks. IETA has been one of many entities calling on the UK to implement its own carbon market mechanism.

"The UK has almost two decades worth of experience in emissions trading," Berman said. In choosing an ETS, the government have shown that the UK is willing to build on that experience and lead by example through a market mechanism that is tried and tested as the best route to economy-wide emissions reductions."

The UK has already issued regulations establishing the structure of the UK ETS, including a cap on emissions each year to 2030, and will complete more preparations in the coming days, according to a government statement.

"The UK ETS will ensure that decarbonisation occurs where it is cheapest and most efficient, providing a clear and predictable low-carbon pathway for business," Berman said.

"It also opens up the possibility of linkage to other jurisdictions, which can move the world one step closer to a global carbon pricing system."

"The Government must now consult on how to increase the ambition of the ETS in line with the UK’s enhanced -68% emissions reductions target for 2030."

This is likely to take the form of strengthening the mechanisms of the ETS, and possibly extending the system to new sectors. Although the Government has designed a strong ETS, one crucial element is missing and will be required to meet the revised 2030 target; a supply adjustment mechanism. 

IETA strongly encourages the Government to consider implementing such a mechanism which can reduce surplus allowances if the market becomes oversupplied. This has been shown to be an effective mechanism in the EU’s Emissions Trading System and will be critical to maintaining a robust price signal in the UK ETS.


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