UK Emissions Trading Scheme: Business and Regulations Impact Assessment (BRIA)

15. Summary and Recommendation

Changes to the UK ETS will increase costs for participating businesses through the costs associated with investment in decarbonisation technologies and the costs associated with purchasing of allowances. However, these costs are associated with reductions in emissions and will therefore support our ambitious climate targets. The proposed changes presented in the Government Response and resulting costs to businesses are deemed to be proportionate given the importance of our national climate targets.

Summary costs and benefits table

Total benefit per annum: - economic, environmental, social

Reduction in GHG Emissions: The primary benefit of this policy is the incentivisation of firms to decarbonise and reduce their GHG emissions reductions. This will support delivery of our statutory climate change targets.

Improve health outcomes: The movement away from fossil fuels towards clean energy sources can yield improvements to air quality which has a positive impact on health outcomes.

Wider economy spillovers and increased investment in decarbonisation technologies: It is expected that increased investment, development and implementation of decarbonisation technologies will also support jobs and investment within the green economy in Scotland which is key to Scotland’s objectives for a Just Transition to net zero. The UK ETS Impact Assessment suggests that the NPV of the preferred option for the UK as a whole is £10.1bn.

Total cost per annum: - economic, environmental, social - policy and administrative

Investment in decarbonising technologies: The available decarbonisation options and associated costs to business are diverse and are determined on a site specific basis.

Purchasing of allowances: In 2021 Scottish businesses are estimated to have spent in the region of £215m to comply via the primary auctions. The UK ETS Impact Assessment suggests that across the whole of the UK the direct cost to business of the preferred option is £2.4bn which is primarily derived from the purchasing of allowances.

Costs to consumers: Some of the compliance costs could be passed onto consumers in the form of higher prices, although the extent of this is hard to quantify.