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United Kingdom

UK government policies on industrial decarbonisation

Net zero target

In 2019, the UK became the first major economy to adopt a net zero emissions target for 2050. The UK has a set of interim carbon budgets to ensure consistent progress towards this goal, targeting a 52% reduction compared to 1990 levels for 2023-27, a 58% reduction for 2028-32 and a 77% reduction for 2033-37.  The UK Government has also set a target of producing 95% of its power from low carbon sources by 2030. 

UK-2030(3)
2030
Establish CCUS projects in 2 industrial clusters by late 2020s 
Canada-2030(3)
2035

Deploy  21.8 MtCO2 per year of all types of greenhouse gas removals by 2035 

UK-2050
2050
Net zero emissions for UK
Further information:  CCUS Vision Nationally Determined Contribution
Key industrial decarbonisation policies
Cluster sequencing

The UK’s initial approach to developing its carbon capture sector has focused on providing support for the development of the East Coast Cluster and HyNet transport and storage systems; and on supporting a number of industrial emitters which would connect to those systems, selected through a competition. Both T&S systems have reached financial close, and the Government is negotiating revenue support for the selected emitter projects. £21.7bn, over a 25 year period, has been assigned to support the development of these initial clusters. 

Support has also been provided for two additional T&S systems, Acorn in Scotland, and Viking off the east coast, though these are at an earlier stage of development. 

The cluster sequencing programme is not currently open for new applications. 

Further information: Cluster Sequencing programme 

 

 

The CCUS Vision

The CCUS Vision, published in December 2023, detailed the UK’s strategy for growing its CCUS sector up to 2050. It proposes a three phase programme of Market Creation up to 2030, Market Transition to a commercial and competitive market from 2030 to 2035, and the existence of a self-sustaining CCUS market from 2035 onwards. It also announced a number of specific policy actions they will take to this end, detailed separately on this page.

Further information: CCUS Vision

Carbon pricing
UK Emissions Trading Scheme (UK ETS)

The UK ETS opened for trading in May 2021, replacing the country’s participation in the EU ETS on 1 January 2021.

The UK ETS cap is aligned with the UK’s net zero targets from 2024. The total cap for Phase 1 (2021 – 2030) is proposed to be reduced by 30-35% from current levels. Currently, the UK ETS covers: energy-intensive industries, the power generation sector and aviation. The ETS will be expanded to cover domestic maritime from 2026, and the waste sector from 2028.

The price trajectory of allowances is expected to rise and even accelerate as the total number reduces to align the scheme with the UK’s net zero target, in addition to fewer free allowances. It is likely that this will increase the cost base for businesses either through a direct effect where companies are required to purchase allowances at a higher carbon price, or an indirect effect as the higher price is passed along the value chain. As a result, businesses will be incentivised to undertake emissions reduction measures. 

The UK is currently negotiating with the EU on aligning the two ETS systems. Should this reach a successful conclusion, it would likely result in significant changes to the UK ETS. 

Further information: UK ETS and UK Gov

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Other policies
Carbon Border Adjustment Mechanism

The UK Government will introduce a Carbon Border Adjustment Mechanism, starting from 1 January 2027. Under this policy, imported goods in key sectors would be liable for charges depending on the greenhouse gas emissions intensity of the imported good, and the gap between the carbon price applied in the country of origin and the carbon price that would have been applied had the good been produced in the UK. It will apply to aluminium, cement, fertiliser, hydrogen and iron & steel products in the first instance. 

Should the UK and EU successfully conclude negotiations on ETS alignment goods moving between the two markets will be automatically exempt from the CBAM in the other market – so UK goods will be exempt from EU CBAM and vice versa.  

Further information: UK carbon border adjustment mechanism 

Carbon Contracts for Difference

The Government has developed Industrial Carbon Capture Business Models to provide support for future carbon capture projects. These are based on carbon contracts for difference for captured CO2, effectively guaranteeing a minimum price, and are the basis of the contracts being negotiated through the cluster sequencing programme. 

 

Further information: Industrial Carbon Capture business models 

Funding
£21.7bn for CCUS and hydrogen confirmed

In October 2024, UK government confirmed the allocation of £21.7 billion of funding, over 25 years, to support the development of CCUS and hydrogen in industrial clusters off Merseyside and Teesside. In the 2025 Comprehensive Spending Review £9.4bn was assigned for CCUS up to 2030. 

Further information: Allocation of £21.7bn

East Coast Cluster: Teesside selection process

A new selection process to identify additional capture projects for support in Teesside has been announced. The formal selection process is expected to start in Q1 2026. The total budget and terms of the competition are to be confirmed. 

Further information: CCUS East Coast Cluster: Teesside selection process 

Decarbonisation policies

Governments worldwide are introducing policies and regulations to deliver industrial decarbonisation, including the deployment of CCUS. Discover more on specific government action, via the links below.
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United States
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Canada
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EU/EEA

Disclaimer

The information contained in these pages is, as of the date of its inclusion in these pages, believed to be accurate and free from error, but the author(s) provide no warranty to this effect, nor will the author(s) be liable for any party for the consequence(s) of any reliance placed thereon by such party.

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