UK carbon pricing scheme ‘inconsistent with UK’s net zero ambitions’ warns climate watchdog

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The UK government has published details on the design of a new UK Emissions Trading System, following a consultation on the UK carbon pricing scheme

UK carbon pricing scheme ‘inconsistent with UK’s net zero ambitions’ warns climate watchdog

The UK government has published details on the design of a new UK Emissions Trading System, following a consultation on the future of carbon pricing post Brexit

The system, which applies to energy intensive industries, the power generation and aviation sectors is due to launch in January 2021, after the UK leaves the EU Emissions Trading System (EU ETS). It will be able to operate as a standalone system, or link with other trading systems “if it suited both sides’ interests.”

An initial temporary stage will cut the cap by 5% compared to the notional cap the UK would have had if it remained in the EU ETS. A second stage will be implemented by January 2024, and commits the government to a more ambitious, net zero consistent trajectory, in line with the Committee on Climate Change (CCC)’s anticipated advice on the Sixth Carbon Budget.

However, the CCC has published concerns that the interim stage of the scheme is not ambitious enough.

In a letter to BEIS Minister Kwasi Kwarteng MP (written in March and published on 1st June), CCC Chairman Lord Deben said, “the interim proposals for the scheme… are inconsistent with the UK’s Net Zero ambitions in some respects, primarily relating to the relatively high level of allowed emissions under the proposed cap. In a year when the UK needs to be seen as a climate leader, adopting the proposed trading scheme risks sending a damaging signal internationally ahead of the UN climate talks in Glasgow in November. It also risks undermining the scheme as a trading system, since if the cap is set too high the floor price in the scheme will set the price and become a de facto tax.”

A response letter from the UK government and devolved administrations said that the interim phase would “minimise the risks associated with transition from the EU ETS,” and “provides a balance between a tightening of the cap on emissions and stability and competitiveness for business.”

As a fallback option, the government will also be consulting later in the year on the design of a Carbon Emission Tax, as an alternative to a UK ETS, to ensure a carbon price remains in place in all scenarios.

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