🇬🇧📣 The UK is considering integrating carbon dioxide removal (hashtag#CDR) into their emissions trading scheme (hashtag#ETS) as early as 2028 📣🇬🇧

💡 A newly released policy proposal outlines the potential plans alongside alternative options *AND* it is now open for feedback (until August 15th)!

So, how does the UK ETS work?

📜 The UK ETS works on the ‘cap and trade’ principle, where a cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered. As the cap decreases over time it signals to decarbonise at the pace and scale to keep emissions at or below the cap.

How could CDR fit into the UK ETS?

🎯 The proposal lays out three options & states that any approach to the overall supply of allowances, i.e. the UK ETS cap, will need to ensure that CDR act as a complement to emissions reductions from UK ETS sectors to ensure that the scheme continues to deliver net zero goals.

🔍 Option 2 is favoured by the proposal: in summary, it is to maintain the gross cap (i.e. apply the existing cap to CDR) and keep the overall supply of allowances in the market the same. This would mean an emissions allowance (UKA) would be replaced every time an allowance is issued to CDR operators, and subsequently, net emissions under the UK ETS would reduce.

🇬🇧 Only UK-based CDR will be eligible for initial participation in the UK ETS (as early as 2028!), in order to make the administration less complex (particularly in regards to MRV) and contribute to Nationally Determined Contributions. However, there is an outlook for international expansion in the future.

What is feedback open for?

📌 Some of the most important potential measures that they are asking for feedback on are: supply controls, adjustable cap, demand controls, selective participation, and compliance proportion limits.

🔒 A robust framework and widely acceptable definition to assess the permanence of carbon storage is being sought for. The UK ETS Authority proposes options such as: equivalence ratios, buffer pools, and operational mechanisms to address differences in permanence.

One big question mark for me is how the General Election on July 4th will impact this proposal, particularly against the backdrop of a likely labour government.

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