In this report for the UK Department for Environment, Food and Rural Affairs, NERA Senior Vice President Dr. David Harrison explore the scope for expanding coverage of the EU Emissions Trading Scheme in the UK to cover additional sources of carbon dioxide (CO2) that are not currently covered by the scheme. Specifically, the report provides a preliminary assessment of the opportunities to expand the UK Phase 2 national allocation plan (NAP) to include sources of CO2 not covered in Phase 1.

The authors rate sectors in order of feasibility and desirability of expansion, taking into account a number of factors such as the amount of CO2 emissions from non-covered sources, the feasibility of monitoring, verifying and allocating emissions, the cost of emissions reductions, and implications for industry competitiveness. They find that it would be most feasible to expand the scheme to cover certain minerals sectors, and that other sectors may be good candidates for inclusion, subject to further consultation with stakeholders. However, certain other sectors, including offshore oil and gas and the primary aluminium sector, were found to face significant obstacles to expansion, making their suitability for inclusion in an expanded trading scheme “questionable.”