29th October 2025
- Heating season driving prices
- UK-EU ETS linking update
- UK auction summary
- Greenhouse gas removals (GGRs)
Heating season driving prices
UKAs settled at £54.60 last week, a fall of 3.3% from the previous week. The decline has been attributed to warmer, windier weather forecasts, which are expected to boost renewable generation with above average temperatures forecast for early November. The market has remained stable at the start of the week with a modest price rise to £55. The beginning of the heating season across Europe has shifted focus to gas storage levels which remain at 83%, lower than previous years following the EU’s relaxed mandate of 90% full by 1st November. If we see a cold start to winter, then gas prices may rise with carbon following suit.
UK-EU ETS linking update
In general, UK industry is in support of linking, with an emphasis on maintaining control of key policy elements, particularly the allocation of free allowances, to none-CBAM sectors, which may cause issue with the EU. The preferred approach is for a UK exemption from CBAM prior to an ETS linking, with a review of free allocation if CBAM proves ineffective. The UK should retain its specific benchmarks, otherwise UK data should be included in EU benchmarks. Dispute resolution would need to be independent without a role for the European Court of Justice in the UK.
UK auction summary
An updated auction calendar was published by ICE on the 3rd September to account for an underestimation in the free allocation to the aviation sector. As a result 1,000 UKAs have been removed from the last two auctions in 2025. From 2026 onwards, aviation will not receive a free allocation. The total volume of allowances auctioned so far in 2025 is 44,773,000 with five auctions remaining, selling 11,191,500 UKA. The 2026 calendar will be published in November.
Greenhouse gas removals (GGRs)
The UK authority will aim to legislate to integrate UK GGRs in the UK ETS by the end of 2028 to be operational by the end of 2029, with the gross cap of allowances created remaining the same. A UK removal allowance will be awarded to GGR operators once the carbon sequestration has taken place and been verified. The authority is minded to differentiate between GGR and UKAs, with an auction platform provided to facilitate the sale. A minimum storage period of 200 years will need to be demonstrated. The authority has not yet decided on the inclusion of woodland carbon removals into the UK ETS which needs further exploration.
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Disclaimer:
This newsletter is intended solely for the information of professional clients, including large corporates and public sector bodies such as universities and hospitals, and eligible counterparties. It does not constitute advice nor should it be relied upon in making decisions regarding the UK Emissions Trading Scheme (UK ETS). All content within this communication is provided for informational purposes only and has been prepared in accordance with the principle of fair, clear and not misleading information as required by COBS 4.2. Readers should seek their own professional advice when planning to undertake transactions in the UK ETS. No representation or warranty is given as to the accuracy or completeness of the information provided. The publisher accepts no liability for any loss arising from the use of or reliance on the information contained in this newsletter.
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