Deciphering U.K. Climate Legislation: A Comprehensive Guide

United Kingdom Climate Legislation

The United Kingdom, especially since exiting the European Union, has implemented extensive legislation to maintain their commitment to being net-zero by 2050. Legislation has been enacted to promote the transition to a clean energy future, invest extensively in climate change mitigation programs, and provide economic incentives and regulations for corporations to minimize their emissions. The UK perceives the fight to mitigate the climate crisis as an opportunity for economic growth and prioritizes economic prosperity in their legislation.

Here’s what you need to know about UK climate legislation:

UK Emissions Trading Scheme (1)

The UK ETS was created to replace UK’s participation in the EU ETS after they left the EU, maintaining the typical cap-and-trade system. This scheme works through the government setting a cap on the total amount of certain greenhouse gasses that can be emitted by sectors subject to this scheme. Participants receive free allowances or buy emission allowances at auction/on the secondary market, which they can trade with other participants. Their allowances are used to cover their reportable emissions, effectively minimizing the amount of emissions a sector or corporation can emit. 

What’s the Legislation Timeline?

  • Enacted in January of 2021

What Companies are Affected?

  • Applicable to energy intensive industries, the power generation sector, and aviation

Financial Penalties for Non-Compliance?

  • Companies that fail to comply with their greenhouse gas emitter permits or obligations face civil penalties, likely fines 

UK Green Finance Strategy

The United Kingdom is striving to be the first net-zero aligned financial center in the world, with the Green Finance Strategy designed to propel that goal (2). This legislation requires the largest companies and financial firms to make public how they are responding to financial risks and opportunities from climate change (3). To further promote investment in climate change mitigation, this legislation established the UK Infrastructure Bank with £22 billion of capital to decarbonize the economy.

What’s the Strategy Timeline?

  • Most recent strategy report published in 2023
  • Starting in 2022, required listed companies with over 500 employees and private companies and Limited Liability Partnerships (LLPs) with more than 500 employees and a turnover of over £500 million, to disclose their governance, strategy, risk management and use of metrics and targets regarding climate risks and opportunities, within their annual Strategic Report
  • Expectation was set that all large companies would disclose their emissions by 2022, but mandatory disclosure requirements will be introduced by 2025 to improve the quantity, quality, and consistency of reporting

What Companies are Affected?

  • Listed companies, as well as large asset owners and managers (4)

Financial Penalties for Non-Compliance?

  • The UK government is still exploring enforcement mechanisms for emissions disclosure

The UK government is setting the precedent that corporations will be required to disclose their greenhouse gas emissions and many corporations will be subject to restrictions on their emissions or face financial penalties. At DitchCarbon, we provide you with a comprehensive view of your suppliers carbon emissions as well as tailored recommendations on how each of your suppliers can minimize their carbon footprint. We help you understand and reduce your carbon footprint to maintain accordance with UK legislation.

  1. https://www.gov.uk/government/publications/participating-in-the-uk-ets/participating-in-the-uk-ets
  2. https://www.gov.uk/government/publications/green-finance-strategy
  3. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1149690/mobilising-green-investment-2023-green-finance-strategy.pdf
  4. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1149690/mobilising-green-investment-2023-green-finance-strategy.pdf

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