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Energy UK responds to UK Government’s ETS proposal

In response to the Government’s proposal for a new UK Emissions Trading System, Energy UK’s interim chief executive, Audrey Gallacher said:

We strongly support Government establishing a UK ETS linked to the EU ETS and back its efforts to agree this approach with the EU. This is the best long-term carbon pricing mechanism to continue driving decarbonisation at the lowest cost to consumers, which will allow us to benefit from the liquidity of the world’s largest carbon market and help us meet our net zero target by 2050.

In the event that a linking agreement cannot be secured in time for 1 January 2021, we welcome Government’s decision to introduce stability measures such as an Auction Reserve Price (ARP) to protect a newly-established stand-alone UK ETS from market shocks and volatility due to its smaller size. It is positive to have clarity on the level of the ARP (£15), however, we urgently need clarity from the Treasury of the level of the Carbon Emission Tax (CET) or at least the methodology in July. This will ensure that power operators have full visibility of the total carbon price, whether via a standalone UK ETS or CET fallback, in January 2021.