The United Kingdom's Emissions Trading Scheme (ETS) has generated over £20 billion for the Treasury since its introduction in 2021. However, businesses operating in energy-intensive sectors argue that they have received only a minimal portion of these funds to support their transition toward meeting the government's net-zero targets.
Last year alone, companies paid £2.7 billion into the ETS. The scheme, overseen by the Department for Energy Security and Net Zero, directs all revenue to the Treasury without a dedicated fund for business decarbonization. This has placed a significant financial burden on industries such as metal production, chemicals, glass, and ceramics, which have already faced challenges due to rising energy prices.
The ETS, established post-Brexit to replace the European Union's predecessor scheme, does not mandate ring-fencing of funds for industry support, unlike its EU counterpart. Steve Elliott, head of the Chemical Industries Association, noted that the support allocated to sectors like chemicals and ceramics is a small fraction of the total collected. While acknowledging the allocated funds as a start, he stated that significantly more is required.
Additional funding has been directed towards specific initiatives, including £120 million for the Grangemouth oil refinery in Scotland and the restart of the Ensus bioethanol plant on Teesside to ensure domestic carbon dioxide supply. The UK chemical sector has seen a 60% reduction in emissions over the past five years, largely attributed to the closure of 26 sites and the loss of 8,000 jobs. This decline has impacted the nation's capacity to produce essential chemicals for clean energy, defense, advanced manufacturing, and life sciences.
Industry groups like UK Steel are advocating for a review of green taxes on imports. They propose that foreign producers selling goods in Britain should face comparable charges to domestic firms subject to the ETS. Meanwhile, the ceramics sector reports investing £750 million in decarbonization efforts over the last decade.
A government spokesperson stated that the UK ETS drives green investment as part of a broader industrial strategy aimed at creating jobs and boosting the economy.