UK Emissions Trading Scheme: Common Framework

The Climate Change, Environment and Rural Affairs Committee undertook work on the proposed UK Emissions Trading Scheme (UKETS), including associated legislation and non-legislative framework.

The UK currently participates in the EU Emissions Trading Scheme (EU ETS), which is the world’s largest trading system for greenhouse gas emissions. Emissions trading schemes work on a ‘cap and trade’ principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by participating installations and aircraft. Participants receive or buy allowances equivalent to their own emissions, which they can trade with one another as needed. Over time, the cap is reduced so that total emissions fall.

At the end of the transition period (on 31 December 2020), the UK will leave the EU ETS. A replacement ‘carbon pricing’ policy is therefore required to support emissions reduction from those UK emitters currently participating in the EU ETS.

The UK Government and devolved administrations (including the Welsh Government) have agreed to establish a single, UK-wide ETS with a common set of rules for participants. Any proposals for policy divergence between administrations will be considered by the four administrations, using an agreed governance process, to be set out in the UK ETS Framework Outline Agreement (FOA) and concordat.

On 27 July 2020 the Chair wrote (PDF 221KB) to the Minister for Environment, Energy and Rural Affairs with a number of questions in relation to the development of a Common Framework to replace the EU Emissions Trading System (EU ETS). The Minister responded (PDF 390KB) on 16 September 2020.

On 1 October 2020 the Committee held evidence sessions with The Rt Hon Lord Deben, Chair of UK Committee on Climate Change, and Hannah Dillon from the Zero Carbon Campaign to help inform its work.

On 8 October 2020, the Committee held a scrutiny session with the Minister for Environment, Energy and Rural Affairs. Following the meeting, the Chair wrote (PDF 179KB ) to the Minister to request further information on some of the issues raised during the session. The Minister responded (PDF 584KB) on 2 November 2020.

The Committee received written evidence from stakeholders and these have been published on this page.