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UK Government to launch emissions trading scheme in May

4 March 2021

The UK Government to launch emissions trading scheme in May and to introduce an environmental watchdog in July.

The UK Government has recently announced the date for the introduction of England’s post-Brexit environmental watchdog, which will be implemented on an interim basis in July.

The initial date for the watchdog was meant to be by the end of January 2021, where it would be fully operational. However, the launch of the body has been delayed due to the environment bill needing to pass, and because of Covid-19 related delays the progression of the bill has been put under constraint. Which influenced the decision in January to roll the bill over to the upcoming Parliamentary session.

The watchdog, which will be known as the Office for Environmental Protection (OEP), is being created to tackle any issues in relation to the UK’s long-term green policy agreement, ensuring that all businesses’ and local authorities are complying with the policies requirements.

However, the launch of the body will be on an interim level, because of the Department for Food, the Environment and Rural Affairs all moving to launch the OEP in July. This means that the body will be implemented in a non-statutory form, as it cannot become a stand-alone legal entity until the Environmental Bill secures Royal Assent.

As an interim body, the OEP will have the power to independently assess progress on the 25-Year Environment Plan. Complaints from members of the public regarding non-compliance with environmental law will also be dealt with by the interim OEP, as well as these main functions, employees will be allocated the responsibility of developing the body’s long-term strategy, enforcement policy and voice.

Emissions Trading Scheme

In other related news, following the UK’s exit from the EU’s ETS, the UK Government has confirmed the domestic emissions trading scheme (ETS) will be set to launch in May later this year.

The FTSE500 firm that operates the EU ETS, Intercontinental Exchange (ICE), has been put in charge of overseeing the UK’s new post-Brexit carbon market, ICE published the auction calendar for carbon allowances for the year on Friday. The calendar includes the initial auction date, which will be taking place on the 19th of May.

ICE claims that the approach they have adopted is in sync with the UK’s 2050 net-zero goal, as well as the ways in which carbon is elucidated for under the Climate Change Act. The carbon market, which will control emissions from heavy industry and considerable energy emitters in the UK, will facilitate firms to buy and trade carbon ‘allowances’ between them for their differing emissions outputs against a depreciating overall cap.

By adding a price per tonne on CO2, certain markets aim to assist carbon-intensive firms to switch to greener alternatives and gradually shift the economy onto a cleaner footing, due to the cost of polluting becoming more economically prohibitive.

Energy Minister Anne-Marie Trevelyan confirmed that the UK’s ETS will begin to operate during mid-May. She believes that the UK’s ETS will be “even more ambitious” than the EU’s ETS.

Also stating the ETS within the UK, “will give businesses and operators clarity over this year’s supply of emissions allowances, enabling them to plan ahead, build back greener and prepare for the transition to a low-carbon economy.”

The UK Government is now faced with rising pressures to firm up its long-term approach to the pricing of carbon, a move that businesses have insisted will help assure investor confidence for low-carbon sectors and projects.

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