UK Emissions Trading Scheme – Scope Expansion to Domestic Maritime - Island Communities Impact Assessment (ICIA)

3. Evidence and Consultation

3.1 Evidence

Scottish island and peninsula communities each have distinct geographic contexts and populations ranging from fewer than 10 to just over 21,000 inhabitants. They rely on maritime links for essential connectivity, as most lack alternative modes of transport options like road or rail. Therefore, these communities depend on ferry routes for both daily life and economic activity.^[5] With expansion of the UK ETS into the domestic maritime sector, 17 current and future vessels serving these communities would fall within scope (5000GT and above) as listed in Table 1.

Of the 17 vessels listed in Table 1, 12 are currently in service and five are expected to enter service during the scheme period, including four preliminary-design vessels and the Glen Rosa.

The Scottish Islands Data Overview (2025)^[6] found that transport costs for Scottish island residents are notably higher than those in urban areas across the UK.

If ferries serving Scottish island and peninsula communities were included in the UK ETS, operators of these vessels would face new costs from purchasing allowances, which could impact ticket fares or service provision.

Scottish Government analysis suggested that, if costs are passed directly to passengers, ticket prices could increase by 14–42%, based on a central carbon price of £80 per tonne of CO₂e. The analysis also found that if the carbon price rises above £120 per tonne of CO₂e, it would no longer be possible to fully recover ETS costs through fare increases alone for the current fleet. In that case, operators might need to reduce service levels to offset the additional costs.

However, most island ferry services in Scotland are provided under public service contracts, where affordable fares and adequate service levels are only possible due to substantial financial support from the Scottish Government and local authorities. One example of support was the freezing of fare levels on the Northern Isles and the Clyde and Hebrides ferry networks in 2023-24 - supported directly by Scottish Ministers. On an ongoing basis, our Road Equivalent Tariff policy provides more affordable fares for users of the Clyde and Hebrides ferry network services.

3.2 Consultation

The Authority delivered the public consultation "UK Emissions Trading Scheme Scope Expansion: Maritime" between 28 November 2024 and 23 January 2025. The consultation included high-level summaries and topic-specific workshops, covering proposals such as an exemption for Scottish ferries. Within the consultation, the Authority proposed a minded-to position to exempt ferry services serving Scottish islands and asked whether this should extend to Scottish peninsula communities.

UK-wide engagement sessions were held with ETS participants, ports, ferry and shipping industries, fishing and energy sectors, alternative fuel providers, trade associations, local authorities (including those representing Scottish islands), academics, and environmental NGOs, ensuring a broad range of views were captured. Approximately 205 stakeholders attended these sessions, including Scottish participants.

Two island-specific engagement sessions were also held, including one focused on the Scottish islands, chaired by the Scottish Government and attended by six representatives from island communities. This session began with an overview of the expansion, followed by a detailed discussion on potential impacts to Scottish ferries.

A total of 102 stakeholders responded to the consultation. Policy teams across the Scottish Government identified 53 of these as particularly relevant to Scotland, including three representing island communities, either via local authorities or through the Scottish Islands Federation.

In their responses, Scottish island representatives emphasised the critical importance of ferry services in their provision of essential connectivity to island and peninsula communities, given their lack of road or rail connections. They strongly supported an exemption from the UK ETS for these services, noting that the additional costs of allowances would otherwise have been passed onto passengers or required higher government subsidies. They highlighted that these costs could have disproportionately impacted island and peninsula communities, risking service reductions and increased fares.

The Authority has produced and published both an interim and a main Authority response to the consultation.