The UK government said on Monday it will establish a domestic emissions trading scheme (UK ETS) from 1 January to replace the current European Union regime, as it presented its long-awaited energy white paper.
Britain exits the EU ETS at the end of the Brexit transition period and had previously said it may introduce either a domestic ETS or a carbon tax.
The White Paper on Energy also included £1 billion ($1.3 billion) in funding for carbon capture and storage, and £240 million for a hydrogen fund.
Business & Energy Secretary Alok Sharma said: "Today’s plan establishes a decisive and permanent shift away from our dependence on fossil fuels, towards cleaner energy sources that will put our country at the forefront of the global green industrial revolution.
"Through a major programme of investment and reform, we are determined to both decarbonise our economy in the most cost-effective way, while creating new sunrise industries and revitalising our industrial heartlands that will support new green jobs for generations to come."
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The white paper pledged support for the North Sea industry's transition away from oil and gas and for the "people and communities most affected by the move".
This will ensure that the sector's "expertise can be drawn on" in developing carbon capture and storage and hydrogen production to provide new green jobs, the document said.
Michael Burns, energy partner at law firm Ashurst, said the the White Paper builds on the recent Ten Point Plan unveiled by Prime Minister Boris Johnson.
"One aspect that will be particularly important going forward will be the implementation-link between the National Infrastructure Strategy, released in November, and the Energy White Paper, as the success of each of them is largely dependent on the success of the other," he said.
"What is also interesting is to look back at the Energy White Paper of 2003. Obviously this was under a different government, but the themes of green energy and competitive pricing are very much there to see."
