The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024
Introduction
On December 19, 2024, the UK government introduced a new amendment to the Greenhouse Gas Emissions Trading Scheme (GHGETS). This amendment, known as the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024, implements several significant changes to the scheme.
Key Changes
The amendment includes the following key changes:
- Expansion of sectors covered: The amended scheme expands the scope of the GHGETS to include additional sectors, such as power generation, heavy industry, and aviation. This broadening of coverage aims to reduce greenhouse gas emissions across a wider range of industries.
- Introduction of a carbon border adjustment mechanism (CBAM): The amendment introduces a CBAM, which imposes a carbon price on certain imported goods from countries with less stringent climate policies. This mechanism is designed to prevent “carbon leakage,” where businesses relocate to countries with weaker emissions regulations to avoid carbon costs.
- Tightening of emissions reduction targets: The amended scheme sets more ambitious greenhouse gas emissions reduction targets compared to the previous version. These targets align with the UK’s goal of achieving net zero emissions by 2050.
- Strengthening of enforcement and penalties: The amendment includes measures to strengthen enforcement of the GHGETS, including increased penalties for non-compliance. This aims to ensure that businesses meet their emissions targets and contribute to collective emission reductions.
Implications
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024 has several implications for businesses and the UK’s climate policy:
- Increased carbon costs: The expansion of the GHGETS and the introduction of a CBAM will lead to increased carbon costs for businesses operating in the covered sectors. Companies will need to invest in emissions reduction measures to comply with the scheme and avoid penalties.
- Accelerated transition to low-carbon economy: The amended GHGETS provides a strong incentive for businesses to adopt low-carbon technologies and practices. This will contribute to the UK’s transition to a net zero carbon economy.
- Enhanced accountability: The strengthened enforcement measures increase the accountability of businesses for their greenhouse gas emissions. Non-compliance can result in significant fines and other penalties.
- International competitiveness impact: The CBAM could affect the competitiveness of UK businesses in global markets, particularly in industries where carbon costs are a significant factor. Companies may need to adjust their operations or production processes to mitigate the impact of the CBAM.
Conclusion
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024 is a significant piece of legislation that aims to accelerate the UK’s efforts to reduce greenhouse gas emissions and transition to a low-carbon economy. The amendment expands the scheme’s coverage, introduces a carbon border adjustment mechanism, strengthens emissions reduction targets, and enhances enforcement. Businesses operating in the affected sectors will need to adapt their operations to comply with the amended scheme and contribute to the UK’s climate policy goals.
The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2024
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