Government Confirms Next Phase of UK ETS: Maritime, Incineration, and Carbon Removal to Join by 2029

The UK’s Emissions Trading Scheme (ETS) is undergoing a significant transformation. From July 2026, domestic shipping will be brought into the fold. By January 2028, energy-from-waste and incineration facilities will also come under the regime. By 2029, greenhouse gas removals (GGRs) will be integrated into the ETS, a step aimed at striking a balance between innovation and integrity.

Since leaving the EU in 2021, the UK has operated its own standalone ETS. This ‘cap and trade’ system sets strict limits on emissions for carbon-intensive industries. If a business exceeds its cap, it must buy allowances, either via government auctions or from peers. If it emits less? It can sell its surplus. This market-driven approach incentivises decarbonisation while imposing a cost on pollution.

Until now, the UK ETS has covered aviation, power, and heavy industry. But after rounds of consultation and increasing pressure to broaden climate accountability, the government has confirmed its next frontier: maritime, waste, and eventually, carbon removals.

From 1 July 2026, all commercial domestic shipping will be subject to the ETS. This includes emissions at berth, no exceptions for methane, nitrous oxide, or any other greenhouse gases. Of the 64 stakeholders consulted, a substantial majority backed this timeline and scope.

But don’t expect international shipping to follow suit. Instead, the UK is aligning with the International Maritime Organisation (IMO), which is rolling out a global emissions levy. This approach aims to avoid duplication and prevent "perverse incentives" across overlapping systems.

Under the IMO’s plan, set to be adopted in October 2025 and enforced from 2028, large vessels must reduce emissions intensity by 30% by 2035, and 65% by 2040, compared to 2008 levels. Failure to comply will cost carriers dearly: fines start at $100 per tonne of excess CO₂ and may climb to $380 for major violations.

Energy-from-waste and incineration operations are subsequent. Although formal ETS inclusion won’t occur until 2028, the sector will enter a transitional phase on 1 January 2026 through a voluntary monitoring, reporting, and verification (MRV) scheme. This will cover both combustion and process-related emissions.

More than 200 organisations responded to the consultation. While 60% supported the inclusion of the waste sector, many local councils voiced concerns about cost pressures, especially as budgets tighten and infrastructure demands increase.

There’s a clear rationale behind the move: waste incineration emissions have ballooned in recent years. From just 2 million tonnes of CO₂e in 2012, emissions surged to 7 million tonnes by 2021, and they continue to rise. The ETS seeks to reverse this trajectory by incentivising cleaner waste management practices.

“As a result of diverting residual waste away from landfill, emissions from waste incineration increased from two million to seven million tonnes of CO2e over 2012-20221 and are continuing to increase,” the consultation response states.

The third major expansion targets a different kind of emissions source, or rather, emissions sink. From January 2029, greenhouse gas removals will be eligible under the UK ETS. But with a crucial caveat: they must substitute, not supplement, existing allowances.

Put, for every tonne of GGR added to the ETS, a tonne of emissions must be removed from the system. The overall cap will not budge.

Not all removals will qualify. To be counted, they must be permanent, durable for at least 200 years, and fully verified, after the sequestration has taken place, with no upfront credit for future promises.

Only UK-based GGR projects will be eligible for this award. Additionally, the ETS Authority plans to create a ‘buffer pool’, a reserve of verified removals that can serve as a safety net if projects underperform or stored carbon is released.

These expansions come as part of a broader recalibration of the UK’s ETS, aligned with its net-zero ambitions. The government aims to cut annual carbon permit allocations by 45% by 2027 (compared to 2023), with even steeper reductions by 2030. The inclusion of new sectors and removal technologies is designed to ensure the ETS remains both robust and relevant.

A complete shift in the landscape is coming. The UK is not just tightening its cap; it’s reshaping the very rules of the carbon economy, trading not only in emissions but in innovation, accountability, and long-term climate stewardship.