The British government said on Monday that it plans a consultation on how to further develop the UK's emissions trading scheme after it comes into effect on Jan. 1, including tightening its cap and expanding to more sectors.
Setting out its longer-term energy strategy in a white paper released on Monday, the government also confirmed the introduction of a national emissions trading scheme (UK ETS) from Jan. 1 to replace the EU system.
The UK system would from the outset lower by 5% the current EU cap on greenhouse gases that businesses can emit.
"Following the introduction of the UK ETS, we will consult in due course on how to align the cap with an appropriate net zero trajectory, meaning the system will significantly contribute to ensuring the UK meets our commitment to net zero emissions by 2050," the government said in the white paper.
The cap would provide certainty about the decarbonisation trajectory over the long term and deliver a "robust carbon price signal" to spur investment into carbon abatement by businesses.
The UK ETS would initially apply to energy-intensive industries, electricity generation and aviation but carbon pricing could be expanded across the economy, the paper showed.
Britain is aiming for net-zero carbon emissions by 2050 and recently increased its emissions reduction ambition for 2030 to 68% from 57% previously.
"The announcement of a new UK ETS is a bold step in the right direction," said Adam Berman, EU Policy Director, Director at the International Emissions Trading Association (IETA), but added changes were needed quickly.
"I think we would like to see both the cap tightened but also a commitment to introducing that mechanism to deal with surplus allowances in the system should oversupply occur," he added.
The latter should be an equivalent to the EU ETS's market stability reserve, which allows to adjust the amount of allowances in circulation.
(Reporting by Nora Buli; Editing by Susan Fenton)
