UK proposes own carbon market, remains coy on link with EU ETS

The UK's own carbon market might be linked to the EU's. [Photo: Shutterstock]

The United Kingdom has put forward its own new UK-wide Emissions Trading System (ETS) to replace the European Union’s system for trading carbon emissions, which Britain will leave at the end of this year as the Brexit transition period ends.

The UK-wide ETS, which will put a cost on carbon pollution to encourage polluters to reduce the greenhouse gases they emit, includes plans to cut the present emissions cap by 5%, Britain’s Department for Business, Energy and Industrial Strategy said in a statement.

“We have procured a supplier who is building the registry – the main IT system for the UK ETS,” the statement added.

The United Kingdom has a target for net zero carbon emissions by 2050.

Emissions trading systems work by setting a cap on the total amount of greenhouse gases that can be emitted from certain sectors, with the cap being reduced over time so that total emissions fall.

“After each year, every covered company must surrender enough carbon allowances – each representing tonnes of carbon dioxide – to cover all its emissions, or additional fines of up to £100 per allowance are imposed,” the department said.

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About one-third of UK emissions and nearly 1,000 UK factories and plants are currently covered by the EU ETS and will continue to be covered by the UK system, according to the statement.

The British government said on Monday it would be open to considering a link between a UK ETS and the EU ETS “if it suits both sides’ interests”.

“This is subject to the ongoing trade negotiations between the UK and EU,” the government said.

According to the government’s draft plans, a minimum auction price would apply during the first phase of the new system, in order to reduce the chances of discrepancies between the new market and the EU ETS.

European lawmakers have suggested that if the UK fails to sing from the same hymn-sheet on carbon pricing, Brussels would consider resorting to a still-pending carbon border tax to prevent carbon leakage of industries from the mainland to Britain.

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The EU could deploy a carbon border tax against the UK after Brexit, according to the head of the European Parliament’s environment committee, if Westminster diverges from bloc rules on issues like carbon markets.

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