UK Emissions Trading Scheme ruled lawful

30th July 2021

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Chris Westcott

In Elliott-Smith v Secretary of State for Business, Energy and Industrial Strategy, the claimant applied for judicial review of the legality of the defendants’ joint decision to create the UK Emissions Trading Scheme (UK ETS) as a substitute for UK participation in the EU Emissions Trading Scheme (EU ETS).

The aim of both schemes is to motivate the reduction of greenhouse gas (GHG) emissions. Each operates under a ‘cap and trade’ system. A cap is set on the amount of certain GHGs that can be emitted by sectors of the economy in a given period. The cap is divided into allowances, which are either given to those required to participate in the scheme, or must be purchased to cover emissions generated. The cap is reduced over time to cause a steady fall in emissions.

The claimant brought the application for judicial review on the grounds that the Paris Agreement required urgent action to limit GHGs. In approving the UK ETS with the cap and auction reserve price proposed, the claimant argued that this criteria was not fulfilled.

The court concluded it was not for the court to decide on an international treaty, but it could assess whether the defendants’ view of the Paris Agreement was tenable. The judge stated: “adopting this tenable view approach, I am entirely satisfied that the approach to the Paris Agreement... is one which is tenable and entirely appropriate”.

The claimant also argued that under the Climate Change Act 2008, “limiting or encouraging the limitation of activities” must be interpreted to mean a reduction in GHG emissions, which was not satisfied by the UK ETS.

The court considered the definition of a trading scheme in the Climate Change Act 2008, the long title of the Act, and the Explanatory Memorandum. Justice Dove concluded that a trading scheme under the Act “does not necessarily have to achieve a reduction in the activities consisting of GHG emissions or causing or contributing such emissions: it is sufficient that the design of the scheme limits or encourages the limitation of those activities”.

The application was refused.

Image credit: GettyImages

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