Response to UK Government consultation: Integrating Greenhouse Gas Removals in the UK Emissions Trading Scheme

This report consists of a response made on behalf of the Grantham Research Institute on Climate Change and the Environment in August 2024 to the ‘Integrating Greenhouse Gas Removals in the UK Emissions Trading Scheme’ joint consultation of the UK Government, the Scottish Government, the Welsh Government and the Department of Agriculture, Environment and Rural Affairs for Northern Ireland. The consultation document is available at: https://www.gov.uk/government/consultations/integrating-greenhouse-gas-removals-in-the-uk-emissions-trading-scheme.

Key messages

• Integrating Greenhouse Gas Removals (GGR) into the UK Emissions Trading Scheme (ETS) may support the UK’s nascent GGR industry to scale up across engineered and
  nature-based approaches. UK ETS integration, if carefully designed, could provide stable demand for GGR to 2050 if the price signal is strong enough. However, ETS prices are likely to be too low to create demand pull in the short term, and additional business model support will likely still be necessary.
• Careful attention will need to be given to the treatment of GGRs with different durations. Determining what is fungible (interchangeable) in emissions and removal accounting depends on nuanced concepts in climate science, climate economics and real-world market practices. Fungibility should therefore not be cast as technocratic and value-free: it has potentially dramatic environmental and economic implications for society.
• Non-permanent carbon removal methods require a continuous obligation to remove CO₂ after it is re-released into the atmosphere. Such methods are not equivalent to permanent GGR. However, it is critical to create a viable business case based on responsible governance regimes for non-permanent GGR to contribute to a diverse portfolio of GGR.
• Carbon removals from land-based biological sinks, such as through afforestation or reforestation should not be included in the UK ETS. These shorter duration removals should be incentivised using alternative policy instruments such as a short-lived greenhouse gas trading scheme to neutralise methane emissions from agriculture and landfill sites.
• Dynamic assessments of reversal risk should be the norm for calculating contribution rates to buffer pools of GGR allowances. Projects should be rewarded with lower relative contribution rates for taking active steps to mitigate reversal risk.
• Buffer pools are preferable to equivalence ratios due to the complicated normative judgements required to compare relative permanence rates.