Thursday 20 May 2021

UK’s Emissions Trading System sees carbon trade at £50 per tonne

The UK has launched its first Emissions Trading System (UK ETS) in a bid to curb emissions and reach its 2050 net zero target.

The ETS is a method of charging power plants for each tonne of carbon dioxide they emit - in the first auction held, the UK carbon price traded at £50 per tonne, making the cost of polluting in Britain higher than in the EU.

The introduction of the scheme aims to guarantee consistent emissions trading for UK businesses after Brexit.

But what does the industry think?

Decarbonisation agenda will benefit 

Responding to the launch, Energy UK's Chief Executive Emma Pinchbeck said: “The first auction of the UK ETS and the return of a carbon price signal in the UK is welcome news.

"It may be some time before this new system finds its feet but the launch of the UK carbon market brings us closer to the next logical step of exploring future, possible linkage with the EU ETS.

"A larger and integrated carbon market will benefit both the participants and the wider decarbonisation agenda ahead of COP26."

Sign of relief

Dr Jonathan Marshall, Head of Analysis at the Energy and Climate Intelligence Unit, said: “The first UK emissions auction clearing close to EU prices will bring a sigh of relief for industry and for policymakers.

"A smaller market and uncertainty about interventions to curb price spikes brought pre-auction worry that the permit prices would soar above those on the mainland and be volatile, potentially damaging the efficacy of carbon trading as a means of cutting carbon.

“Clearing this first hurdle means attention can be turned to the future, taking decisive action to end free permits that undermine the whole purpose of carbon pricing, setting a net zero-aligned trajectory and thoroughly assessing a link with the EU scheme.

"The government has made it clear that it wants carbon pricing to be part of the journey to net zero, this is the opportunity to make that happen.”

A big leap of faith 

Louis Burford, Head of Solution Sales and Optimisation at Centrica Business Solutions, said: “Today’s launch of the UK ETS market marks an important step in the UK’s net-zero journey, but for many firms, it’s going to take a big leap of faith.

"Businesses will be debating how much of their requirement they should buy now and how much they should defer to a later date. One thing that’s clear is that carbon prices are growing, and it’s a cost that impacts almost all businesses."