Knowledge Centre

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 2028-2032 and an 81% reduction for 2035. While the UK has adopted a wide range of policies to drive decarbonisation, the independent Climate Change Committee has warned the UK is not on track to meet its emissions targets, in particular the 2030 target of a 68% cut.

2030

Capture 20-30 MtCO₂ including 6 MtCO₂ of industrial emissions per year

2030

Deploy at least 5 MtCO₂ per year of engineered greenhouse gas removals

2030

Establish CCUS in 2 industrial clusters by late 2020s and aim for 4 clusters by 2030

2045

Net zero emissions for Scotland

2050

Net zero emissions for UK

Further information: Net Zero Strategy: Build Back Greener;
Industrial Decarbonisation Strategy; Integrated National Energy and Climate Plan; CCUS Vision

Key climate policies

Energy Act (2023)

Energy Act 2023 created the legal basis for the UK's support for the CCUS projects, including:

Financial assistance: Providing the Secretary of State with UK-wide powers to incur expenditure and provide long-term financial assistance to support the establishment of CCUS and low-carbon H₂production.
Counterparty: Providing the Secretary of State with powers to designate and direct a counterparty for contracts.
Competitive Allocation: Creating a legal framework for competitively allocated carbon contracts for difference.
CO₂ Transport and Storage (T&S) licensing framework: Establishing an economic regulation model for CO₂ T&S, with statutory objectives and legal powers for Ofgem as the economic regulator of CO₂ T&S.

Further information: Energy Act 2023

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 expected to align 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 continue 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 have to undertake emissions reduction measures.

Further information: UK ETS and UK Gov

The UK has committed to supporting both electrolytic and CCUS-enabled hydrogen production.

The UK has set a new Low Carbon Hydrogen Standard, which will support the UK in playing an active role in the international hydrogen market.

Further information: Hydrogen Investor Roadmap; UK Hydrogen Strategy

10GW

Hydrogen production capacity by 2030

20GW

Potential hydrogen projects in pipeline by 2037

£240m

The Net Zero Hydrogen Fund (NZHF)

The Net Zero Hydrogen Fund (NZHF) which is worth up to £240 million, funds the development and deployment of new low-carbon hydrogen production.

Other policies

Carbon Border Adjustment Mechanism

The UK Government plans to introduce a Carbon Border Adjustment Mechanism. 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 is intended to apply from 2027.

Further information: UK carbon border adjustment mechanism

Carbon Contracts for Difference

Contracts for difference for captured CO₂, effectively guaranteeing a minimum price, will be set via competitive allocation rounds, targeted to start in 2027.

Non-Pipeline Transport

The UK Government is currently consulting the industry regarding how to incorporate non-pipeline transport of CO₂ into business models.

Further information: Consultation on NPT

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. Since then, the first CO₂storage project, the Northern Endurance Partnership, has reached financial close, as has a proposed CCS power plant which will connect to it, Net Zero Teesside.

Further information: Allocation of £21.7bn

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.