Background
The Department for Energy Security and Net Zero (DESNZ) sees the UK Emissions Trading Scheme (ETS) as an important tool to reduce carbon emissions and reach net zero by 2050. The UK ETS sets a limit on the total greenhouse gases certain sectors (power, aviation and industry) can release, and companies must buy or trade allowances if they want to emit more. By putting a price on carbon, the UK ETS should incentivise businesses to invest in cleaner technologies and support an economically efficient transition to a low-carbon economy.
The government introduced the UK ETS in 2021 after the UK left the EU ETS. It is jointly run by DESNZ and the devolved administrations of Scotland, Wales, and Northern Ireland. In 2025 DESNZ launched a consultation to extend the UK ETS beyond 2030, while plans are also underway to expand the schemes’ sector coverage.
Scope
This report will cover:
- the purpose and design of the UK ETS
- DESNZ’s approach to understanding the effectiveness of the UK ETS in meeting its key objectives
- how DESNZ, working with the devolved administrations, makes decisions about the UK ETS.
NAO Team
Director: Simon Bittlestone
Audit Manager: Terry Caulfield