The UK ETS Authority publishes government’s responses to three consultations 

The UK ETS Authority has published government’s responses to three consultations: the integration of Greenhouse Gas Removals in the UK ETS, the scope expansion to maritime (interim) and waste incinerators (interim). The publications were in line with ClearBlue’s expectations that the UK ETS Authority would proceed with the ongoing consultations while the UK-EU ETS linkage talks take place. Notably:

UKA Dec-2025 prices showed a muted reaction to the publications, holding steady around GBP 49, as the outcomes were largely anticipated and may still be subject to revisions depending on the progress of the linkage negotiations.

Greenhouse Gas Removals (GGRs) integration

Key decisions following the consultation closed in May 2024 on the inclusion of engineered and nature-based removals in the UK ETS are the following:

• Maintaining the Gross Cap: The Authority will do this by reducing the number of auctioned UKAs one-for-one to phase in removal credits into the system. By doing so, the Authority aims to preserve the incentive to decarbonize and market stability. This will allow for full fungibility of GGRs and UKAs.
• Timeline: The technical scheme design is expected throughout 2025-2026 while MRV framework is expected to be finalized in 2027. Afterwards, the UK ETS Authority aims to fully implement this legislation by end-2028 and for it to become operational by 2029
• Eligible GGR credit types: High-integrity engineered removals such as the Direct Air Capture with Storage (DACCS) and Bioenergy with Carbon Capture and Storage (BECCS) and UK-based woodland removals
• Allowance Design: GGRs will generate UK removal units backed by a verified tonne of CO₂ removed. They will have to follow strict MRV standards involving independent verification, transparent registries and meet additionality and permanence requirements.
• Allowance Distribution: Initially, only low volumes of GGRs will be allowed in the UK ETS. However, the government’s response does not yet provide any numbers, only that the supply will be capped.

UK ETS expansion to the maritime sector

• Scope: Domestic voyages and at-berth emissions within the UK ports from ships >5,000 gross tonnage (GT); CO₂, methane (CH₄), and nitrous oxide (N₂O) emissions; offshore vessels and government non-commercial ships will be excluded; Crown Dependencies and Overseas Territories (e.g., Isle of Man) also do not fall into the scope
• Further review: As this is only the interim response, the full response will be published later this year; the 5,000 GT threshold will be reviewed in 2028 when smaller ships or scope expansion might be covered
• MRV and compliance: MRV obligations for the maritime sector will be in line with the UK MRV and the EU ETS maritime MRV; the same compliance cycle as for other UK ETS compliance entities will apply; maritime operator is defined as the registered owner of the ship
• Timeline: The maritime operators will be onboarded to the UK ETS registry throughout 2025-early 2026 with MRV starting in January 2026 and the first compliance period starting on 1 July 2026

Impact on the UK-EU ETS linking talks

Our understanding, confirmed through both UK and EU sources, is that the publication of these consultation responses aligns with the established procedure during the UK–EU ETS linking negotiations. The UK ETS will continue to function as the UK’s domestic carbon pricing mechanism even after it is linked to the EU ETS. As a result, the UK is expected to proceed with developing and strengthening its ETS design in parallel with the linking discussions. We therefore anticipate the UK ETS Authority will continue publishing outstanding consultations - including those on the Free Allocation Review and the Supply Adjustment Mechanism - in parallel with these negotiations.

At the same time, it is notable that some of these responses are explicitly marked as ‘interim’, and the language used indicates scope for future revisions. This flexibility reflects the UK’s intent to adjust ETS design in response to the progress of the linkage talks. This approach is consistent with the principle of Dynamic Alignment outlined in the 19 May Common Understanding and reiterated in the European Commission’s draft negotiation mandate issued on 16 July.

The potential expansion of maritime coverage in the UK ETS to international voyages:

As stated in the Common Understanding, and subject to ongoing negotiations, the UK intends to expand its ETS to cover emissions from international maritime voyages. The government will issue further proposals in due course, including a timeline for expansion, via an official notice to ETS stakeholders.

Regarding GGRs in the UK ETS:

The EU is currently undertaking a new review process and is expected to present legislative proposals on the integration of removals into the EU ETS by summer 2026. While both the EU’s Carbon Removal Certification Framework (CRCF) and the UK’s GGR approach aim to establish removal mechanisms, differences remain between the two. It is therefore uncertain how closely the EU’s final approach will align with the UK’s GGR integration. However, more clarity is expected as linking negotiations progress, and we anticipate both authorities will address GGR alignment as part of their respective mandates.

ClearBlue will closely monitor further developments regarding the outstanding UK ETS consultations and inform their clients accordingly. If you have any questions about our estimates or need any additional market information, please contact us.