Last updated: 08/2024
The Climate Change Act
When the UK’s parliament passed the Climate Change Act 2008, it became the first country to set legally binding targets for emissions reductions, and a roadmap to achieve it. The Act set an initial target of reducing emissions by 80% by 2050, later updated to our current Net Zero 2050 goal.
It also established the independent Committee on Climate Change, which produces everything from Climate Change Risk Assessments to mitigation and adaption strategies, to 5-yearly, legally binding ‘carbon budgets’ which determine the necessary emissions reductions until the next budget.
The Act also requires the Government to assess and adapt to the opportunities and risks posed by climate change for the UK.
UK emissions over time
The UK has reduced its emissions drastically over the last couple of decades, with emissions now at less than half the levels they were in 1990. This is largely due to the rise in renewables and phasing out of coal-fired power plants.
Unfortunately, a 2024 announcement by the Climate Change Committee also found that ‘only a third of the emissions reductions required to achieve the country’s 2030 target (cutting carbon emissions by 45%) are currently covered by credible plans.’
To get us on track, the Committee has written a priority list of recommendations, one of which is to ramp up rates of tree planting and peatland restoration.
“Tree planting must be scaled up in the 2020s for abatement to be sufficient for later carbon budgets and Net Zero. There must be no more delays to addressing the barriers to delivery.”
Mandatory carbon pricing in the UK
The UK has carbon pricing in place for certain larger emitters, namely the power sector, energy-intensive industries and aviation. These are covered by the UK’s Emissions Trading Scheme (ETS) which replaced the EU ETS in 2021.
The ‘cap and trade’ scheme incentivises decarbonisation by putting a cost (which, in theory, rises over time) on emissions. The idea is that it will gradually become more cost-effective to decarbonise than continue emitting. In the meantime, finance is channelled into projects removing emissions (as well as other co-benefits) elsewhere.
Sectors are allotted a certain number of ‘allowances’ (emissions) which they cannot exceed. At the end of the year, allowances must be retired to cover an organisation’s emissions. Leftovers can be carried forward into the next year, or sold to others under the scheme.
The scheme has mechanisms in place to regulate the cost of allowances; the Auction Reserve Price (ARP) sets the minimum an allowance can be sold for, and the Cost Containment Mechanism (CCM) mitigates sustained high prices.
Some allowances are awarded for free, typically to those with international competition that aren’t levied equally by their home countries. To address this, there are plans to introduce a carbon levy on imports in 2027.
In 2021, this scheme covered about a quarter of the UK’s emissions.
The voluntary carbon market
In the UK, we also have a voluntary carbon market. As you might have guessed, this is not a government-mandated scheme but a market that organisations (from multi-national companies to SMEs) and individuals choose to engage with.
This market is governed and regulated by specific organisations and standards, rather than governments.
For more information on voluntary carbon markets, jump to ‘Making sense of carbon markets’. To first understand what a carbon credit is and how it is legitimised, head to ‘Carbon credits and offsetting’.
