UK ETS Could Absorb Carbon Removals to Extend Scheme's Relevance, Official Says
An official speaking at London Climate Action Week 2026 on Monday (2026-06-22) said integrating carbon dioxide removals into the UK emissions trading system was a way of "future-proofing" the scheme, according to Carbon Pulse.6
The framing carries weight for traders watching UK carbon allowances drift at a persistent discount to the EU ETS. UK carbon allowances were quoted at $57.69 on Tuesday (2026-06-23), against the EU ETS benchmark at roughly €80 per tonne — a gap that partly reflects unresolved questions about the UK scheme's long-term ambition and the credibility of its price signal.5
The policy case for removals rests on a structural problem in net-zero accounting. The Paris Agreement defines the goal not as zero emissions but as a balance between anthropogenic emissions and removals, meaning residual emissions from hard-to-abate sectors — aviation, heavy industry, agriculture — must eventually be offset by physically withdrawing carbon from the atmosphere.4 Studies from the Intergovernmental Panel on Climate Change suggest that staying within a 2°C warming pathway would require removing an additional 5 billion tonnes of CO2 from the atmosphere each year.4 At that scale, compliance market demand is one of the few credible channels for financing removal technology at the required speed.3
The UK ETS has faced scrutiny over whether its pricing sends a sufficient investment signal. An independent watchdog raised concerns last year that low carbon pricing was undermining the scheme's future credibility, casting doubt on whether the market would sustain the directional signals needed for long-term infrastructure decisions.5
Removals integration would in theory provide a new class of compliance credit — allowing regulated emitters to purchase verified units from direct air capture, bioenergy with carbon capture and storage, or enhanced weathering, rather than relying solely on buying down their own emissions or acquiring allowances from capped installations. Proponents argue this would expand liquidity and make the scheme less vulnerable to political interference with the cap itself.
The timing aligns with moves on the continent. The European Commission confirmed in May (2026-05-21) that it plans to propose "targeted improvements" to the EU ETS in July while maintaining "stable long-term signals," Montel reported, citing EU climate commissioner Wopke Hoekstra.2 Brussels has been deliberate about not reopening the core cap-and-trade mechanics while leaving room for adjustments at the margins — a template the UK may be examining.
Within the UK market, the removals debate runs alongside a long-running dispute over biomass accounting. Drax, the country's largest single-site power station by emissions, received a record £1 billion in government subsidies in 2025, costing each UK household £13 per annum, according to an Ember report published in May (2026-05-21).1 The subsidy eligibility relied on zero-rating biomass combustion in carbon accounting — the same accounting convention that a removals framework would need to grapple with, given that bioenergy with carbon capture is among the removal technologies most likely to be proposed for ETS inclusion.1 Drax's subsidy payments rose 15% in 2025 compared with 2024.1
That contrast sharpens the political complexity of any removals framework. Broad inclusion could entrench accounting structures that critics argue are being exploited; narrow inclusion — limited to engineered, geological-storage removals — would effectively exclude incumbent biomass operators and concentrate the new credit market in nascent, expensive technologies. Setting the bar for permanence and additionality will determine whether the market treats new removals credits as equivalent to allowances or as a junior instrument trading at a discount.
Traders are watching whether the LCAW26 remarks translate into a formal UK government consultation. Any concrete proposal would need to address verification standards and the treatment of reversal risk before influencing allowance supply or demand dynamics. Until there is a credible policy timeline, the bearish consensus on UKA Dec-rolling has little near-term reason to shift.6