The United Kingdom's Power Sector
The UK’s carbon pricing: a key lever behind the transition
The UK has used carbon pricing as a central lever of its power sector transition, deploying two complementary instruments over the past two decades: the UK Emissions Trading Scheme (UK ETS) and Carbon Price Support (CPS).
The UK's carbon pricing journey began under the EU Emissions Trading System (EU ETS), which launched in 2005 and covered major emitters across more than 30 European countries. However, through much of the 2010s, the carbon price under the EU ETS was too low to meaningfully shift investment decisions away from coal.
To address this, the UK government introduced the CPS in 2013. Acting as a price floor, the CPS topped up the then-weak ETS carbon price to ensure that climate damaging effects of polluting energy sources – above all, coal – are meaningfully reflected in their price. The CPS provided electricity generating companies with greater certainty on the level of carbon price and incentivised investments in low carbon electricity sources.
Following Brexit, the UK launched its own ETS in 2021, maintaining coverage of the power sector alongside industry, aviation, and maritime. By 2025, the average UK ETS carbon price had matured to approximately £50 per tonne– a strong price signal to drive further decarbonisation.
With coal now gone from the grid and the UK ETS providing a robust price signal, in April 2026, HM Treasury announced the CPS will be discontinued from April 2028. Following this, the UK's carbon pricing architecture will be streamlined to comprise a single instrument: the UK ETS.
CPS has done its job and is no longer fit for purpose. Coal has been driven off the grid and the ETS has matured, with a tighter cap to drive the signal for electricity generators to decarbonise, so now is the right time to simplify the tax and carbon pricing system.
Dan Tomlinson MP, Exchequer Secretary to the Treasury
The transition by numbers
The driving force behind this shift was a rapid rise in renewables.
Economic Co-Benefits
The UK's power sector transition has delivered returns that extend well beyond reduced emissions — generating jobs,
lowering energy costs, and strengthening the country's energy independence.
A growing clean energy workforce
Between 2015 and 2024, direct employment in the Low Carbon and Renewable Energy Economy (LCREE) sector grew by over 50%, reaching more than 300,000 full-time positions across the UK in 2024. The Department for Energy Security and Net Zero (DESNZ) projects this figure to continue growing at an average of around 10% per year between 2023 and 2030, as the UK presses ahead with its clean energy targets.
Financial gains for consumers
The transition has also delivered tangible savings for UK households and businesses. Between 2010 and 2023, wind power alone generated a net benefit of £104.3 billion to UK consumers. Even after accounting for wind energy subsidies, the sector continues to deliver net financial gains by lowering electricity prices and reducing the UK’s dependency on expensive natural gas imports.
A more secure energy supply
Renewables have also fundamentally changed the UK's exposure to global energy markets. The output from fuel-free sources – wind, solar and hydro – has reduced the share of electricity fuel imports to its lowest level in 20 years, at just 46% in 2025. Without domestic renewable generation, up to 73% of the primary energy used to supply UK electricity would have been imported that year, leaving the country significantly more vulnerable to the price shocks that have destabilised energy markets across Europe in recent years.
The UK power sector's transformation further illustrates that emissions and economic growth can be decisively decoupled. Since 1990, the UK economy has grown by 84% while greenhouse gas emissions have fallen by 54% — a trajectory that dismantles the long-held assumption that prosperity requires pollution. The power sector has led this decoupling.