Aviation and shipping emissions included in UK Carbon Budgets

Government adds aviation and shipping to UK carbon targets

The UK government has committed to including international aviation and shipping emissions in statutory carbon budgets from 2033 onwards. Climate Minister Katie White confirmed the decision in a letter to Parliament’s Environmental Audit Committee on 22 April. The change will affect the Sixth Carbon Budget covering 2033 to 2037, all later budgets, and the UK’s 2050 net zero target.

This marks a significant shift in how the UK measures progress toward net zero. For the first time, emissions from flights departing UK airports to international destinations and ships travelling between UK and foreign ports will count toward national carbon limits. Previously, these sectors operated outside the formal carbon budget system.

The decision follows recommendations from the independent Climate Change Committee. In April 2021, the committee advised incorporating these emissions to align with the net zero goal. Aviation and shipping together accounted for over 10% of UK territorial emissions in 2023, nearly all of it carbon dioxide.

Carbon budgets set legally binding five-year caps on greenhouse gas emissions under the Climate Change Act 2008. They create a pathway to net zero by limiting how much the UK can emit during each period. However, international aviation and shipping have historically sat outside this framework, despite their substantial contribution to UK emissions.

Aviation emissions projected to become largest sector by 2040

Aviation currently represents 8% of UK emissions at 35.4 million tonnes of carbon dioxide equivalent in 2023. Therefore, projections show this will rise dramatically to 27% by 2040, making it the single largest emitting sector. The Climate Change Committee expects aviation emissions to reach 29.5 million tonnes by 2040 before falling to 22.7 million tonnes by 2050.

This increase reflects slower decarbonisation in aviation compared to other sectors. Consequently, as electricity generation, heating, and transport shift away from fossil fuels, aviation will represent a growing share of remaining emissions. The sector experienced sharp drops during the Covid-19 pandemic, particularly in 2020 and 2021, but has since recovered to near pre-pandemic levels.

Shipping faces similar challenges but different timelines. The Climate Change Committee projects shipping could reduce emissions by 62% by 2040 through adoption of green fuels and operational improvements. Nevertheless, both sectors remain heavily dependent on liquid fuels due to energy density requirements and existing infrastructure.

The Seventh Carbon Budget covering 2038 to 2042 will need to accommodate these aviation projections. The Climate Change Committee recommends a total budget of 535 million tonnes of carbon dioxide equivalent for that period, representing an 87% reduction below 1990 levels. Aviation alone would consume a substantial portion of this allowance.

UK becomes first major economy to include international transport in carbon targets

The UK is the first major economy to formally integrate international aviation and shipping into national carbon budgets. This puts the country ahead of the European Union and other developed nations in accounting for these emissions. Ruth Cadbury, Chair of Parliament’s Transport Committee, described the move as a significant step in improving transparency and accountability for transport emissions.

Minister Katie White emphasized the change would ensure a whole-economy approach to net zero between 2033 and 2050. However, the UK has not yet included these emissions in its Nationally Determined Contribution under the Paris Agreement. This represents a gap between domestic accounting and international climate commitments.

The decision closes a longstanding loophole in UK climate policy. Previously, aviation and shipping could expand without directly affecting progress toward carbon budgets. Notably, this created misaligned incentives around airport expansions and port developments. The new framework will require these sectors to compete for carbon space alongside other parts of the economy.

A statutory instrument to implement the change is expected to pass Parliament by June. The Sixth Carbon Budget level itself remains unchanged from previously legislated amounts. Instead, the modification adjusts which emissions count toward that total, creating new constraints on previously unregulated sectors.

Sustainable fuel mandates and emissions trading to support decarbonisation

Several policy measures will support emissions reductions in aviation and shipping. The Sustainable Aviation Fuel mandate begins at 2% of jet fuel in 2025, rising to 10% by 2030 and 22% by 2040. Meanwhile, the UK Emissions Trading Scheme will extend to cover domestic shipping from 2026 and domestic aviation routes.

Sustainable aviation fuel reduces lifecycle carbon emissions compared to conventional kerosene, though it remains significantly more expensive. The mandate creates guaranteed demand to stimulate production investment. Similarly, including shipping and aviation in emissions trading puts a price on their carbon output, creating financial incentives for efficiency improvements and fuel switching.

These measures alone will not deliver the emissions reductions needed to meet carbon budgets. Additional action will be required, including improvements in aircraft and engine efficiency, operational changes, and potentially demand management. For shipping, green hydrogen, ammonia, and methanol represent longer-term fuel alternatives.

The scale of investment required is substantial. Building sustainable fuel production facilities, developing new propulsion technologies, and upgrading port infrastructure all require significant capital. Furthermore, international coordination remains essential, as both sectors operate across borders and compete globally.

Critical facts about the carbon budget changes

• International aviation and shipping emissions will count toward the Sixth Carbon Budget covering 2033 to 2037 and all subsequent budgets.
• Aviation emissions are projected to rise from 8% of UK emissions in 2023 to 27% by 2040, becoming the largest emitting sector.
• The Sustainable Aviation Fuel mandate starts at 2% in 2025, increasing to 10% by 2030 and 22% by 2040.
• The UK Emissions Trading Scheme will cover domestic shipping from 2026 and extend to domestic aviation routes.
• The Climate Change Committee recommends a Seventh Carbon Budget of 535 million tonnes of carbon dioxide equivalent for 2038 to 2042, representing an 87% reduction below 1990 levels.
• Shipping emissions could fall by 62% by 2040 through adoption of green fuels and operational improvements.
• The UK is the first major economy to integrate international aviation and shipping into national carbon budgets.

Implications for businesses with transport and logistics operations

Companies relying on air freight or international shipping face new constraints on carbon emissions. Supply chains built around aviation or maritime transport will need to account for carbon costs and potential capacity limitations. Moreover, businesses competing for public sector contracts may encounter stricter requirements around transport emissions.

Airport expansions and new aviation infrastructure will face greater scrutiny under the revised carbon budgets. Each additional flight represents carbon that must be accounted for within fixed national limits. In addition, this could affect business travel policies, with companies reassessing the carbon cost of international meetings and site visits.

Manufacturing and retail sectors dependent on imported goods should consider supply chain emissions more carefully. Shipping emissions will factor into overall carbon footprints, particularly for Scope 3 reporting. Consequently, businesses may need to explore alternative transport modes, nearshoring, or supplier consolidation to manage emissions.

The sustainable fuel mandates will likely increase costs for air travel and air freight. Airlines will pass these costs through to customers as fuel represents a major component of operating expenses. However, businesses using air freight regularly should budget for higher rates from 2025 onwards as the mandate takes effect.

Companies in the logistics, freight forwarding, and distribution sectors face direct impacts. Emissions trading costs for domestic shipping and aviation routes will affect operating margins. Therefore, investment in more efficient vessels, route optimisation, and alternative fuels becomes more financially attractive as carbon prices rise.

Larger businesses already reporting Scope 3 emissions will see aviation and shipping become more material to overall footprints. This may affect sustainability ratings, investor expectations, and customer perceptions. Furthermore, businesses may face questions about transport choices in annual reports and sustainability disclosures.

Some sectors could benefit from the policy shift. UK-based sustainable fuel producers, green shipping technology developers, and companies offering emissions reduction services may find new opportunities. However, demand for low-carbon transport solutions is likely to outpace supply in the near term, creating cost pressures.

Planning considerations for affected businesses

Businesses should review their current aviation and shipping emissions as part of overall carbon footprints. Understanding the scale and sources of these emissions provides a baseline for future planning. This matters particularly for companies with significant international operations or supply chains.

Supply chain mapping becomes more important under the new framework. Identifying which goods arrive by air versus sea, which routes carry the most emissions, and where alternatives exist helps prioritize reduction efforts. Additionally, engaging suppliers early about their own decarbonisation plans can reveal opportunities for collaboration.

Companies may want to explore carbon reporting and measurement support to establish robust baselines for transport emissions. Accurate measurement enables better decision-making about where reductions are feasible and cost-effective. It also supports compliance with emerging disclosure requirements.

Business travel policies warrant review in light of the carbon budget changes. Video conferencing technology has improved significantly, making some international trips avoidable. However, where travel remains necessary, companies can consider rail alternatives for European destinations or carbon offsetting arrangements.

Procurement teams should begin conversations with freight providers about decarbonisation plans and sustainable fuel access. Understanding which carriers are investing in cleaner technologies or alternative fuels helps inform supplier selection. Furthermore, building these considerations into tender processes aligns purchasing with carbon reduction goals.

Scenario planning helps businesses prepare for different policy trajectories. If carbon prices rise faster than expected or if additional measures constrain aviation capacity, having contingency plans reduces disruption. Similarly, if sustainable fuel costs fall more slowly than hoped, businesses need strategies to manage higher transport expenses.

Training and capability building matter as these issues become more prominent in business operations. Supply chain managers, procurement teams, and finance functions all need to understand the implications of carbon budgets for their work. Learning resources on carbon reduction and reporting can help build this knowledge across organizations.

Official guidance and policy sources

The Department for Energy Security and Net Zero oversees carbon budgets and the UK’s path to net zero. Their website provides detailed information about carbon budget levels, timelines, and the legislative framework. Businesses can access official policy documents and updates from the department.

The Climate Change Committee publishes independent advice on carbon budgets, sector pathways, and progress toward net zero. Their reports include detailed analysis of aviation and shipping emissions, technology options, and policy recommendations. The committee’s assessments and advice inform government policy and provide valuable context for business planning.

The UK Emissions Trading Scheme has specific guidance for operators in covered sectors. As the scheme extends to domestic aviation and shipping, affected businesses should review the reporting and compliance requirements. The UK ETS guidance for participants explains obligations for different sector types.

Information about the Sustainable Aviation Fuel mandate, including compliance requirements and approved fuel types, is available through the Department for Transport. Businesses in aviation or using air freight should monitor developments as implementation details emerge. The SAF mandate documentation sets out the policy framework and timelines.