Inclusion of technological removals in the UK ETS – A Reality from 2029?
This is the second part of a two-part series summarising the UK Government’s UK ETS reform announcements of 21 July 2025.
Read Part 1 here, a summary on the inclusion of Shipping and Waste Sectors in the UK ETS.
ETS Background
The UK ETS Authority first committed to integrating engineered Greenhouse Gas Removal Technologies (GGRs) into the UK ETS in June 2023. This was followed by a May 2024 consultation outlining technical elements for an integration from 2028 earliest. Now the Government has announced a rough timeline: A legislated framework by end 2028 and actual integration of GGRs into the UK ETS by end 2029.
The consultation response sets out the proposed timeline for implementation. For a brief summary, refer to the table below. This commentary first examines the Government’s rationale for pursuing this approach, followed by an overview of what the inclusion of GGRs could mean for the UK ETS. Feel free to skip ahead to the relevant sections:
Global ETS context
To understand this direction, it is helpful to zoom out. The UK’s statutory climate targets require emissions reductions of 68% by 2030, 87% by 2040, and net zero by 2050. The Government assumes that even by those dates, residual emissions from the manufacturing, aviation, and maritime sectors will still amount to 74.7 MtCO₂, 46.1 MtCO₂, and 26.8 MtCO₂, respectively. These “hard-to-abate” emissions must be counterbalanced by removals.
Given the UK ETS’s role as a long-term instrument to drive emissions reductions, it follows logically that a consistent price signal should apply both to abated and removed emissions. In this view, one tonne of CO₂ penalised is equivalent to one tonne physically removed.
While it is yet some time before all available emissions reduction technologies have been leveraged by relevant sectors, crucial investment is needed to ensure that GGRs are technically and commercially ready when needed at scale.
Technological Removals – from the Paris Agreement to Implementation
Technological GGRs, including Carbon Capture and Storage (CCS) and Carbon Capture and Utilisation (CCU), have gained momentum since being recognised in the Paris Agreement in 2015.
Across jurisdictions, they are now central to net zero strategies. However, commercial viability remains constrained by cost and scalability.
The Authority has made a key decision to support UK GGR operators and found a way to ensure private capital meets GGR development when it is most needed and where it is most needed - at the source of pollution. The GGR developers who ensure they meet the expected standards will be awarded allowances from the UK ETS Authority, which in turn domestic operators have to purchase at the current market price in correspondence to their annual emissions.
GGR developers in the UK could now take necessary steps to meet the governments initial standards in order to qualify for UK ETS auctions.
How will this decision impact the UK ETS?
“The Authority recognises that integrating GGRs is likely to mean significant reform for the UK ETS. However, we have taken a cautious and phased approach, prioritising market stability in the UK ETS and ensuring it continues to fulfil its primary purpose - incentivising cost-effective emissions reductions.” DESNEZ
The UK ETS Cap will not be adjusted to account for GGRs
The gross cap will remain unchanged. Adjustments will only be considered once the GGR market is mature and the UK ETS is largely composed of residual emissions. This is consistent with DESNZ’s view that this structure delivers economically efficient decarbonisation.
Supply and Demand: Transitional Controls
A cap on GGR supply will be introduced to ensure quality standards are met. While specific volumes are not yet defined, the consultation references current planning assumptions of scaling to 5 MtCO₂ per year of removals by 2030, in line with Carbon Budget Delivery Plan targets.
There will be no formal limit on the balance between surrendered UKAs and GGR units.
What this means for UK ETS operators
At this time, the proposed changes have no impact on UK ETS operators, although in the medium-term these scheme reform elements add to measures with a potential bullish price impact on UKAs.
Including expensive GGR technologies will send a price signal for all allowances in the scheme. It also sends a signal to the longevity of the UK ETS as future-proof carbon pricing instrument. Hence, operators are advised to future-proof their ETS exposure with a tailored strategy in place.
Our experience working with industrials since the inception of the UK ETS in 2021, shows that operators who act early to understand the UK carbon market and develop a compliance strategy will be best placed to manage rising carbon cost.
The UK ETS Authority states that the integration is “subject to consideration of appropriate legislative powers, regulatory assessments and further consultation.” We read this as eluding to the potential the EU and UK ETS will be linked. The EU this year also ran a consultation regarding the integration of GGRs into the EU ETS but with no indication of a timeline.
What this means for the Voluntary Carbon Market
From a market design perspective, this is a move from promise to delivery. It’s also the clearest signal yet that removals are not a niche, voluntary-only domain. They're infrastructure, and they’re entering the compliance fold.
For those who’ve worked in project-based carbon development across Singapore’s carbon tax, CORSIA, and the early days of CDM into the EU ETS, this feels like familiar ground but better defined.
The UK is designing around quality from the start, with a dual-credit approach and safeguards to preserve environmental integrity.
There are still details to come, but the sentiment is worth paying attention to. A regulated, high-integrity removals market is no longer a question of if, but how.
Next Steps for ETS...
We expect further consultations on: The development of a GGR standard, a permanence standard, Methodologies for MRV.
These will be key to understanding how removals will be treated in relation to UK ETS obligations over the long term.
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Thank you to Jaclyn Foss for clarifying the implications of this decision package for the Voluntary Carbon Market.
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