Carbon and Energy Newsletter (UK) - April 2025

Post Date: 24 April 2025
Read Time: 10 minutes

Spring has sprung, welcome to the April 2025 edition of your Carbon and Energy Newsletter!

The start of 2025 has hit with a bang with plenty of incoming data requests from various compliance obligations and updates to disclosure platforms. In this edition of the newsletter we will review the latest news, starting with Climate Change Agreements (CCAs) as the reporting period comes to an end and a focus is placed on target negotiations for the new scheme. The UK Emissions Trading Scheme (UK ETS) has started its baseline data collection process, with new templates and guidance documents hot off the press, plus a look into what the future of the scheme might look like for Phase 2 and a potential alignment with EU ETS. There are also many industry updates coming from: Science Based Targets initiative (SBTi) with a new net zero standard on the horizon, the Energy Savings Opportunity Scheme (ESOS) reviewing their planned updates for Phase 4, CDP delaying their reporting window with new key dates and the Greenhouse Gas Protocol (GHG Protocol) postponing the publishing of their Land Sector and Removals Standard.

Insight of the month

Official figures released by the Department for Energy Security and Net Zero (DESNZ) indicate that UK carbon emissions fell by 4% in 2024. This is positive news and supports the country’s ambitions towards net zero targets. The reductions primarily came from decreases in gas and coal use in both electricity supply and industry sectors. The largest source of emissions continued to be from the transport sector (30%), followed by buildings and product uses (21%). However, it is anticipated that these sources of emissions will start to decarbonise over the coming years through the electrification of fuels such as diesel and natural gas along with investing in more renewable electricity sources. [1]

Climate Change Agreements (CCA)

It’s been a busy start to the year for CCA reporting with participants in the scheme receiving a tidal wave of data requests for TP6 reporting and engaging with target negotiations for the new scheme. I’m sure that we’re all tired of receiving the dreary Excel forms and information requests, but the end is in sight!

Participants in each of the sector schemes should have now provided their 2024 data which evaluates the year-on-year energy and production performance against the sector targets, to determine whether a buy-out is required. In many cases the buy-out is a drop in the ocean compared to the Climate Change Levy (CCL) relief and following a payment in June 2025, will allow participants to continue receiving the relief until June 2027. An indication of the estimated benefit from the CCL relief and buy out cost (if applicable) can be found in each of the Target Unit data collection forms under the ‘Performance’ tab.

A new requirement for TP6 reporting has been introduced this year in the format of a Performance Assessment Template (PAT). This requires participants to provide a breakdown of the energy efficiency measures that they’ve taken at their facilities which can explain the TP6 performance – this will also be an ongoing reporting requirement every two years. As the purpose of the CCA scheme is to support with implementing energy efficiency measures and contribute towards the UK net zero goals, it is important to regularly review available opportunities and keep track of what has been implemented. This has proved to be a challenge for many in the scheme this year and it is worthwhile highlighting that SLR has a broad suite of capabilities to support on this, from identifying measures to calculating their impact and supporting with their implementation. [2]

This also feeds into the support with target negotiations for the future scheme under the Savings Assessment Template (SAT). Those who have been proactive with reviewing their site energy performance and identifying a list of energy saving opportunities, with an action plan to improve performance, have been able to complete this form with greater ease.

Please feel free to get in contact with SLR if you have any questions or require support with CCAs and decarbonisation plans.

Get in touch

UK Emission Trading Scheme (UK ETS)

Ultra-small emitter (USE) applications

The response to 2024’s technical consultation was released in January confirming the dates for applying to ultra-small emitter (USE) status during the 2026 - 2030 period. Current legislation mandates that a regulated activity must have started at an installation on or before 1 January 2021, however the latest consultation has proposed an amendment (with strong agreement) for allowing operator applications that began operations between 2 January 2021 and 1 January 2024. Data submission requirements would then relate to the date of first operation. The window of applications for USE status during the 2026 - 2030 period will continue to be from 1 April to 30 June 2025. [3]

Baseline data collection

Baseline data collection is currently underway (1 April to 30 June 2025). This is a requirement for all installation operators within scope of UK ETS to submit data to their regulator ahead of the next 2026 - 2030 allocation period. It is an essential part of the free allocation application which will result in not receiving free allocation if operators fail to submit their data by the deadline. The data collection period is also an opportunity for applications into the hospital and small emitters (HSE) or ultra-small emitters (USE) opt out lists. Operators should contact their verifiers asap to ensure that this is completed ahead of the deadline. The latest templates and guidance documents were updated on the 1 April 2025. [4]

Carbon price

A review of the current trends and costs associated with the UK ETS allowance show that prices are tracking at around £42/tonne. This demonstrates a small increase from a downward trend of the carbon price at the start of the new year which was as low as £31/tonne in January. The EU allowance continues to be a different story, fluctuating at a higher rate around €63/tonne. This saw a spike of carbon cost at the start of February which was tracked at €84/tonne. [5]

Linking UK ETS and EU ETS

The UK government has stated recognition for the interest into linking ETS schemes and highlighted that they will be reviewing the case for ETS linking ahead of the UK-EU Summit on the 19 May 2025. Details on what this could look like are currently limited, but it was emphasised that considerations will be made to tackle any unnecessary barriers to trade.[6]

Extending the UK ETS Cap beyond 2030

A consultation was recently undertaken seeking input on proposals for extending the UK ETS beyond the end of Phase 1 (from 31 December 2030). It has requested feedback on proposed options in extending UK ETS into a second phase with a review on the length of a new scheme and whether to allow banking of emissions allowances (UKAs) between Phase I and Phase II.

Three suggested options for the scheme length were as follows [7]:

2031 - 2037, UK-wide Carbon Budgets aligned until end of Carbon Budget 6 (7-year phase)
2031 - 2040, continue with 10-year phases
2031 - 2042, UK-wide Carbon Budgets aligned until end of Carbon Budget 7 (12-year phase)

Science Based Target initiative (SBTi)

The Science Based Targets initiative (SBTi) published an initial draft of its revised Corporate Net-Zero Standard (v2.0) for public consultation on 18 March 2025. This is currently available for public feedback until 1 June 2025 to receive a range of perspectives and ensure that the standard remains fit for purpose. [8]

Some of the key changes to the revision include:

Split of scope 1 and 2 emission targets.
Proposals to commit on moving to low-carbon electricity by no later than 2040.
Proposing that increased flexibility is in place for allowing Scope 3 Net Zero targets on green procurement and revenue generation instead of an emission reduction target.
Requirement to publish a transition plan within 12-months of target validation, and for large companies to obtain third-party (limited) assurance on base year greenhouse gas (GHG) inventory.
Guidelines for recognising removals and investment in Beyond Value Chain Mitigation (BVCM).

CDP

Results from the 2024 questionnaires have been released for reporting companies at the start of the year and we hope that everyone received the scores they hoped for. The next round of reporting is now only around the corner (already!) with the reporting window opening on 16 June 2025. Key dates for this year include:

Week of 31 March - Questionnaire and guidance published in PDF format
Week of 28 April - Scoring methodology published in PDF format
Week of 28 April - Requesters can start to create and submit lists
Week of 9 June - List submission deadline for Requesters
Week of 16 June - The 2025 reporting window opens
Week of 15 September - Scoring deadline
Week of 17 November - Deadline to submit unscored responses and all amendments

Energy Savings Opportunity Scheme (ESOS)

ESOS Phase 3 brought significant changes to its format which has seen it become more than a tick boxing exercise. It is therefore the perfect time to be proactive with preparing for Phase 4 and identifying the benefits that a well-structured decarbonisation plan can have for a business. See our latest article with an in depth perspective from Lee Jukes and how we can support.

ESOS: Insights, lessons learnt, and decarbonisation

Lee Jukes, Energy Savings Opportunity Scheme (ESOS) Lead Assessor at SLR, shares his insights and takeaways from ESOS Phase 3, what we can expect from Phase 4, and how to leverage site energy audit findings to supercharge decarbonisation efforts.

GHG Protocol

The Greenhouse Gas Protocol has undergone a lengthy multi-stakeholder development process since 2020 to produce a Land Sector and Removals Standard, with accompanying guidance. It will be aimed at explaining how companies should account for and report on GHG emissions and removals from: land management, land use change, biogenic products, carbon dioxide removal technologies, and related activities in GHG inventories - building on from the Corporate Standard and Scope 3 Standard. The release of this guidance has undergone some significant delays and indications are that it will now be released in Q4 2025. The draft version for pilot testing and review is currently available – see the References section at the end of this newsletter [9].

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