Expanding the scope of the UK ETS: Focus on GGRs, waste and maritime

All information is accurate as of 5th August 2025

Authors: Sawal Bacha and Michael Testa

On 21^st July 2025, the UK Emissions Trading Scheme (ETS) Authority published its response to three consultations. This included a full response to the consultation on integrating Greenhouse Gas Removals (GGRs) into the UK ETS, along with two interim responses concerning the inclusion of emissions from the maritime and waste sectors.

Integration of GGRs

The UK ETS Authority has confirmed that engineered removals will become a tool to balance residual emissions from hard-to-abate sectors under the UK ETS. According to the Authority’s roadmap, enabling legislation for the inclusion of carbon removals in the UK ETS is expected to be introduced by the end of 2028, with operational implementation targeted by the end of 2029.

• Operational framework: Only removals that have taken place in the UK will be eligible to receive UK ETS allowances for initial integration, with allowances issued to GGR developers only after the removal has taken place and has been verified. The Authority also confirmed that it intends to provide auctions to facilitate a route to market for GGR operators. Although the response to the consultation only mentions Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Carbon Capture and Storage (DACCS), further clarity on other methodologies for engineered removals is expected in upcoming consultations. Following the release of the response to the consultation, the British Standards Institution (BSI) published draft standards for BECCS and DACCS, which are open for feedback until 30^th September 2025.

• Cap: A central design feature of this integration is the Authority’s decision to maintain the overall cap on emissions under the UK ETS. GGR allowances will be introduced on a one-for-one basis, displacing an equivalent volume of UKAs. This means that for every GGR unit introduced into the system, one UKA will be removed from auctioning. This mechanism prevents oversupply, addressing concerns that the inclusion of removals might dilute the scheme’s stringency. In the long-term, the Authority is considering a shift towards capping only emissions allowances, while allowing removals to operate outside the ever-tightening cap, effectively increasing overall supply.

• Differentiation of allowances: The Authority is also minded to differentiate between UK allowances (UKAs) and GGR units under the UK ETS. It argues that such separation improves transparency and enables more precise price discovery for removals.

• Nature-based GGRs: The Authority has defined a strict threshold for permanence: only projects that can demonstrate a minimum carbon storage of 200 years will be eligible. Nature-based removals, which often involve greater uncertainty around permanence, are currently under review. The Authority is still considering whether to include high-quality Woodland Carbon Code credits within the UK ETS but has already excluded peatland restoration from future inclusion in the scheme.

Expansion to maritime and waste 

The UK ETS Authority has also provided interim responses to consultations on the scope expansion to maritime and waste.

• Maritime: The UK ETS will be extended to cover maritime emissions starting from 1^st July 2026. From this date, all compliance obligations will apply, with the first compliance year running until 31^st December 2026. From 2027 onwards, compliance cycle years will follow the calendar year (1^st January to 31^st December). Emissions in scope include those from domestic voyages (meaning any journeys between UK ports, including round trips that start and end at the same port) as well as emissions generated within UK ports, hence including emissions at berth.

• Waste: The UK Government intends to include emissions from the waste sector into the UK ETS on 1^st January 2028. A voluntary period focused on monitoring, reporting and verification (MRV) will begin on 1^st January 2026, supported by regulatory guidance. The Authority is likely to use data gathered during the MRV-only period to refine its approach to determining which waste facilities will be brought under the UK ETS. At this stage, it plans to include Energy-from-Waste (EfW) and waste incineration within the scheme, while emissions from landfill sites will remain outside its scope. The government plans to set MRV thresholds at three tonnes per hour for non-hazardous waste and 10 tonnes per day for hazardous waste, with clinical waste also falling within scope.   

Cap adjustments to accommodate the new sectors

UKA supply will increase to accommodate the inclusion of two new sectors. For waste, the Authority has given some indicative cap adjustment figures, starting with 7.9Mt in 2028 followed by 7.2Mt in 2029 and 6.8Mt in 2030. For maritime, while the interim response did not provide details, the original consultation outlined the sector’s integration from 2026, with a cap adjustment of around 2.4 Mt each year from 2026 through 2030.

The impact on UKA price of the new sectors is difficult to predict as it will depend on the final inclusion thresholds which will impact the verified emissions of the newly included sectors. However, previous experience suggests that the new sectors will create a net-draw on the UK ETS inventory, further reinforcing the bullish outlook for UKAs. In addition, forward hedging by participants in the newly added sectors may add to UKA demand ahead of the inclusion dates.

Next steps

The response to the consultation on the integration of GGRs in the UK ETS brought a degree of clarity to the market, particularly around timing, permanence thresholds and credit differentiation. However, the market is still awaiting further clarity on several key issues, including the inclusion of nature-based removals and the methodologies for engineered GGRs. Questions also remain around whether removal allowances will be auctioned separately, if and how allowances will be differentiated, and when the proposed limits on their use for compliance will be lifted.

The interim responses for both the waste and maritime sectors confirmed their inclusion timelines but also left key issues unresolved. The overall emissions cap adjustments remain indicative and will impact the price outlook for all UK ETS participants. For waste specifically, the MRV methodologies still need to be finalised along with the approach for small-scale facilities as well as the potential future inclusion of landfill emissions. For maritime, the authority has defined initial MRV requirements, exemptions and the definition of a domestic journey but will nonetheless provide further clarity on these areas ahead of implementation.

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