Energy Systems Catapult welcomes the opportunity to respond to this UK ETS Authority Consultation: Extending the UK ETS Cap Beyond 2030.

Key points:

• Support for extension and broader coverage
  • The Catapult strongly supports extending the UK ETS into Phase II to continue providing cost‐efficient decarbonisation incentives and recommends expanding the scheme’s sectoral coverage (e.g. waste, greenhouse gas removals, maritime, and non-pipeline CO₂ transport) to drive broader decarbonisation across the economy.
• Phase length preference
  • The Catapult favours a seven-year post-2030 phase rather than a 12-year one. A seven-year phase is aligned with the UK’s Carbon Budgets, providing sufficient flexibility and responsiveness to technological, climatic, and policy changes, despite offering less long-term certainty.
• Future planning and review mechanisms
  • The response suggests establishing clear timelines for subsequent phases (up to at least 2050) to bolster long-term policy certainty. After Phase II (ending in 2037 if seven years is chosen), the Catapult proposes transitioning to 10-year phases, with major reviews every five years to align with the Carbon Budgets.
• Interphase banking of allowances
  • The Catapult supports allowing the banking of Phase I allowances into Phase II, provided that such allowances have a restricted time window for use. This measure is aimed at avoiding price shocks and ensuring that market participants remain incentivised to decarbonise rather than overly relying on banked allowances.