Oxera has identified a range of potential market design mechanisms that would support the deployment of vital negative emissions technologies in the UK.
- Oxera has developed four policy options for the integration of negative emissions technologies in the UK’s Emissions Trading Scheme.
- Options would support the roll-out of vital negative emissions technologies, supporting global efforts to tackle the climate crisis.
A new report from Oxera, published today and commissioned by renewable energy company Drax, outlines some potential policy mechanisms that could create market support for negative emissions technologies (NETs).
The findings outline four policy options that would allow NETs to be incorporated into the UK’s Emissions Trading Scheme (UK ETS) through the introduction of Greenhouse Gas Removal (GGR) credits. This—in combination with other funding routes—would create a framework and market that supports the roll-out of NETs, which are essential for reducing emissions and permanently removing greenhouse gases from the atmosphere.
To ensure that the UK achieves its net zero ambitions and obligations under the Paris Agreement, every sector will be required to either reduce or offset its emissions. Some sectors, such as heavy industry, agriculture and aviation, will only be able to achieve net zero by utilising GGR credits because it is particularly difficult for them to decarbonise entirely.
Importantly, these removals must be used in addition to a significant abatement of emissions across all sectors, with most sectors needing to reduce emissions to close to zero without offsetting by 2050.
NETs include bioenergy with carbon dioxide capture and storage (BECCS) and direct air carbon capture and storage (DACCS), as well as nature-based solutions—such as afforestation, reforestation, and soil carbon sequestration.
By adopting one of the proposed market design models and supporting NETs in the energy and carbon markets, the framework would encourage the uptake of GGR credits while ensuring that polluters retain incentives to decarbonise.
Oxera Partner Sahar Shamsi says: ‘NETs offer a vital solution to mitigate the climate crisis and help businesses to play an important role in decarbonising to reach net zero. The research that we have completed for Drax has developed practical and efficient market design options for integrating these technologies within the ETS.
Alongside nature-based greenhouse gas removals, the UK Net Zero Strategy reports that by 2050 more than 70 MtCO2 per year of engineering-based GGR credits will be needed. This requires policies to be in place to incentivise investment now, such that necessary technological learning-by-doing and cost reductions can be achieved as part of the decarbonisation pathway.’