News story

Emissions scheme to reduce sale of carbon allowances on path to net zero

Tighter emission limits for industries under the UK Emissions Trading Scheme, as the 2024 carbon allowance auction calendar is published.

  • Power, aviation and energy-intensive industries given incentive to cut emissions
  • Number of allowances to be auctioned next year will fall by 12.4% to their lowest-ever level in line with net zero targets
  • Ambitious approach will support industries to smoothly transition away from using fossil fuels

Energy-intensive industries will be incentivised to reach their lowest-ever level of carbon emissions, under detailed plans published today (Thursday 5 October 2023).   

The 2024 calendar for the UK’s Emissions Trading Scheme will limit the number of carbon allowances for companies to buy in 2024 to 69 million – 12.4% fewer than in 2023, and their lowest-ever level. By 2027, this will fall to around 44 million – a 45% reduction on 2023 - before reaching around 24 million by 2030.    

It puts plans announced earlier this year into action - to reduce the cap on carbon emissions under the Emissions Trading Scheme in line with the UK’s ambitious net zero strategy. 

Through the scheme’s auctions process, companies in industries including manufacturing, power and aviation are required to buy allowances for every unit of carbon they emit. With fewer available to buy, these sectors will need to take further steps to cut their emissions.   

The auction calendar published today by the Intercontinental Exchange (ICE), on behalf of the UK Emissions Trading Scheme Authority, gives businesses certainty over the next 12 months and sets the scheme on a clear path for decarbonisation for the 6 years after that.   

In a joint statement, UK Emissions Trading Scheme Authority ministers, including Lord Callanan, Julie James MS, Màiri McAllan MSP and Exchequer Secretary Gareth Davies MP said: 

We want to give our industries the confidence to decarbonise, by investing in efficiency measures and moving away from fossil fuels to cleaner, more secure energy. 

The UK Emissions Trading Scheme will cut supply of allowances auctioned, with a 45% reduction by 2027, to help us on our path to net zero. 

The auction calendar for 2024 and introduction of the new net zero consistent cap will help provide certainty for businesses, while spurring investment and helping to grow the economy.

To ease the transition to a net zero cap, a proportion of allowances that went unused between 2021 and 2023 are now being allocated to auctions to be held between 2024 and 2027 – helping taper the reductions needed over that time. The number of allowances auctioned will still fall significantly each year over this period. There are also programmes in England, Wales, Scotland and Northern Ireland providing millions of pounds to help businesses make the changes needed.    

As part of wider changes to the scheme, the UK Emissions Trading Scheme Authority has also committed to exploring measures for the future of the carbon allowances market, including examining the merits of a supply adjustment mechanism. This would provide a means of amending the supply of carbon allowances in response to market conditions.   

A copy of the 2024 UK Emissions Trading Scheme auction calendar can be found on the ICE website. ICE run UK Emissions Trading Scheme auctions and secondary markets on behalf of the government.   

The UK Emissions Trading Scheme Authority is the joint body comprising the UK government, Scottish Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland that runs the scheme.   

Notes to editors

The UK Emissions Trading Scheme Authority Ministers quoted are:    

  • Lord Callanan, Minister for Energy Efficiency and Green Finance, Department for Energy Security and Net Zero, UK Government    
  • Julie James MS, Minister for Climate Change, Welsh Government    
  • Màiri McAllan MSP Cabinet Secretary for Transport, Net Zero and Just Transition, Scottish Government    
  • Gareth Davies MP, Exchequer Secretary to the Treasury    

On 3 July, the UK Emissions Trading Scheme Authority announced an ambitious package of reforms to the UK Emissions Trading Scheme. At the heart of this was resetting the scheme’s cap in line with the net zero strategy, reducing it from 1,366 MtCO2e over the phase from 2021 to 2030 to 936 MtCO2e – a 30% reduction. Today’s auction calendar publication is a key step in making this tighter limit a reality. 

In 2024, the total number of carbon allowances available for auction will be 69 million.  The 69 million allowances that will be available in 2024 amounts to a 12.4% reduction year-on-year, compared to nearly 79 million allowances auctioned in 2023.  

Further reductions in auction supply will be made in each subsequent year - by 2027 this will amount to a 45% decrease, before reaching around 24 million by 2030. More information on the carbon allowance cap reduction is available in the UK Emissions Trading Scheme Authority’s consultation response, published in July 2023.    

The UK Emissions Trading Scheme Authority has committed to consult further on wider changes to the UK Emissions Trading Scheme, including the potential merits of a supply adjustment mechanism.

Published 5 October 2023