The UK has called for views on changes to its emissions trading system (ETS) that could see the shipping sector join its carbon market from 2026. Britain’s ETS is part of its wider efforts to meet climate targets and was launched in 2021 to replace its participation in the European Union’s ETS after it left the bloc.

Under the ETS, the government sets a gradually decreasing cap on the amount of emissions that a sector, or group of sectors, can produce. It creates carbon permits for those emissions and companies must buy one for each tonne of carbon dioxide (CO2) they emit.

The UK ETS helps the UK to decarbonise across aviation, power and industry – representing around a third of Britain’s emissions – by setting a limit on emissions, with allowances that can be traded, creating a carbon price that incentivises businesses to reduce their emissions.

By expanding the scheme to include the maritime sector, businesses with ships operating domestic voyages would need to obtain allowances for every tonne of carbon they emit. This will ensure that the price of fuels used by the sector better reflects their environmental impacts.

Proposals for maritime to be incorporated in the ETS

The purpose of the consultation is to provide more detail and consult on the implementation of how maritime will be incorporated in the scheme from 2026 and to propose and consult on potential future expansion of the UK ETS to additional maritime emissions. In particular, it seeks views on:

• The scope of the scheme (definition of a domestic voyage, thresholds for inclusion, the inclusion of methane and nitrous oxide emissions and exemptions from the scheme).
• Details around how to adjust the UK ETS cap to include emissions from the maritime sector .
• Participating in the scheme (regulatory regime and operator requirements, monitoring, reporting and verification, point of obligation and guidance) .
• Impacts of the scheme (decarbonisation impacts, potential distributional impacts and carbon leakage risk; equality considerations).
• Potential future expansion of the UK ETS to additional maritime emissions, with a future review of the threshold and coverage of international routes.

Transition to a greener future

In a joint statement, UK Emissions Trading Scheme Authority ministers Sarah Jones MP, Huw Irranca-Davies MS, Gillian Martin MSP, Andrew Muir MLA, James Murray MP and Mike Kane MP said: “[these] publications are about engaging and providing clarity for business, and incentivising them to lower emissions as we transition to a greener future.

Expanding the UK ETS to include maritime and recognising non-pipeline transport for carbon capture and storage will encourage investment into clean technologies, a vital growth industry in the UK.”

The consultation closes on 23 January 2025.