BP backs 12-year extension of UK ETS in consultation response

BP has endorsed an extension of the UK Emissions Trading System beyond 2030, urging the incorporation of carbon removals into the country's compliance carbon market while also advocating for the establishment of links with the EU ETS.

In its response to a UK ETS Authority consultation published on May 12, the oil and gas major said a 12-year phase length, extending from 2031 to 2042, is the most suitable option for Phase II of the UK ETS.

The current phase of the country's cap-and-trade system runs from 2021 to the end of 2030, in line with the 2020 greenhouse gas emissions trading scheme order. A second phase of the ETS would require legislation to continue operating.

The extension will "help ensure continued trading of emissions allowances and preserve the incentive for covered sectors to invest in lower carbon technologies" while providing participants with long-term regulatory certainty, it added.

BP also said it would like to see certain elements included in Phase II to "enhance the scheme's effectiveness and alignment with broader UK goals, such as inclusion of removals, UK-EU linkage and flexibility to recognize global schemes."

UK carbon values rise

This comes as the UK government has acknowledged that it is proactively looking to align its compliance carbon market with the EU ETS, pushing UK carbon prices to multi-month highs.

Several energy companies and trade associations recently said that the integration of both ETSs would "lower costs of decarbonizing, unlock market confidence and enable acceleration in the delivery of clean energy."

UK and EU carbon prices had diverged significantly in 2023 and 2024, with UK Allowances trading at a significant discount to EU Allowances.

But prices for UK Allowances have climbed sharply on a potential linkage with the EU ETS, with the UKA December 2025 contract hitting a 11-month high in early-May.

Platts, part of S&P Global Energy, last assessed UKAs at GBP51.34/mtCO2e ($67.78/mtCO2e) on May 9 while EUAs were assessed at Eur70.32/mtCO2e ($78.22/mtCO2e) on the same day.

The issue of permitting the banking of allowances between the current phase of the ETS and post-2030 is also part of the consultation, and BP said it is for this policy.

Banking refers to the practice of purchasing a UK Allowance in a given year for surrender in subsequent years and is permitted within Phase I of the UK ETS.