Integrating Greenhouse Gas Removals Into The UK ETS

Greenhouse gas removals (GGRs) refer to technologies or techniques that remove greenhouse gases from the atmosphere and capture these on a long-term basis. It is expected that GGRs will be required for the UK to meet its net zero target, particularly for residual emissions from hard-to-abate sectors. The integration of GGRs into the UK ETS could therefore help the UK meet climate goals, whilst combining emissions reduction and carbon removals in one efficient market.

Following its commitment to integrate GGRs into the UK ETS in July 2023, the UK ETS Authority (the Authority) launched a consultation in May 2024 which generated substantial interest – the Authority received circa 160 responses. Respondents broadly supported the proposed integration.

The Authority published its response in July 2025 (the Response) which confirms its position on several key aspects of the integration, including:

1. the aim is for legislation to be implemented by the end of 2028, with integration being operational by the end of 2029;
2. the gross cap will be maintained – emissions allowances will be replaced by GGR allowances on a one-for-one basis;
3. the intention is to align standards and methodologies for MRV for GGR operators with the GGR Standard, which is currently being developed by DESNZ and the British Standards Institution;
4. allowances for removals will be awarded ex-post (ie, once carbon has been sequestered and this has been verified);
5. there will be certain eligibility requirements, including that projects must: (1) be in the UK; and (2) evidence a minimum storage period of 200 years;
6. buffer pools will be implemented as a fungibility measure; and
7. a permanence framework will be introduced, which will include liability measures.

Certain areas will be subject to further consultation. These are explored further below, but cover removals that would be in scope (such as woodland), as well as technical aspects of the implementation (eg, the buffer pool mechanism).

Gross cap to be maintained

The Authority's proposal to maintain the gross cap on allowances for initial integration was supported by 85% of respondents, including the Climate Change Committee (the CCC). The Authority is of the view that this approach would maintain the incentive to decarbonise, eliminate mitigation deterrence and maintain market stability.

The Authority recognises the potential benefits of moving to a new net cap in the longer term, but the Response indicates that before the cap is amended, significant progress would need to be made on residual emissions and the GGR market would need to mature.

Allowances to be issued ex-post

93% of respondents were in favour of the Authority's proposal to issue allowances ex-post, ie once carbon has been sequestered and verified. This transparent approach could build confidence in the market. Although certain respondents highlighted potential revenue challenges for smaller operators, the Authority noted that such operators would not be prevented from entering into offtake arrangements to mitigate this issue.

The Authority is minded to differentiate between existing UK ETS allowances and GGR allowances, but this is subject to further analysis of the interaction with other policies and regulation.

Eligible GGRs must be in the UK and store carbon for a minimum of 200 years

During the initial implementation, only GGRs in the UK would be eligible to participate in the UK ETS. The Authority is of the view that this would encourage the development of the UK GGR industry and simplify the MRV regime, but it noted that this position may be amended in the future.

The Authority has indicated that it will continue to take into consideration the needs and views of GGR buyers, including the aviation sector. Relevantly, the CCC estimates that by 2050, 60% of GGR demand could be from aviation.

The Authority recognises that the selection of a minimum storage period was complex given the lack of academic or scientific consensus on a definition of permanent storage, and that different technologies have different storage periods. The 200-year minimum was selected on the basis of analysis carried out by the Authority which indicates that the social value of storing carbon for this period is 99% of the value of storing it indefinitely. Social value refers to the value to society of storing a tonne of CO₂ for a given period compared with storing it indefinitely. It is calculated using HM Treasury Green Book carbon appraisal values and social discounting – reflecting both rising carbon values over time (aligned with UK emissions targets) and societal discount rates.

Evidence of the minimum carbon storage period will need to be presented to the Authority; the requirements and mechanism for this will be established through further consultation.

Buffer pools will be implemented

The majority of respondents supported the proposal to implement buffer pools largely because these are considered to be less complex and they already exist (eg, in the Woodland Carbon Code, or the California cap-and-trade system). The buffer pools will act as an insurance mechanism, and will effectively assign a relative value between the risk of reversal posed by each technology type.

Although there is a risk that a buffer pool may increase cost and complexity, the Authority considers this to be necessary to manage the risk of leakage and maintain the integrity of the system.

Authority will continue to engage with stakeholders as to whether UK woodland removals should be included

The CCC has previously raised concerns in relation to permanence, cost and the wider impacts of including UK woodland removals in the UK ETS. However, the Authority has produced and analysed evidence which it believes suggests that there could be a "strong case" for its inclusion. The Authority will engage further with stakeholders and aims to make a decision later in 2025.

A number of key areas remain subject to further consultation

These include:

• requirements and mechanism for evidence that projects can store carbon for at least 200 years;
• the position on liability measures to be included in the permanence framework, including whether different technology types will require different liability measures;
• the development of the buffer pool, including contribution rates for each technology, review periods and mechanisms for updating the buffer pool; and
• auction formats, including whether product mix auctions will be implemented.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.