Wednesday 2 August 2023

UK carbon prices: Government makes pollution easier for businesses?

UK carbon prices: Government makes pollution easier for businesses?

The government's decision to reduce the "cap" in the UK Emission Trading Scheme (UK ETS) has drawn criticism from experts who said that the move makes it cheaper for businesses to pollute.

The UK ETS replaced the UK’s participation in the EU ETS on 1st January 2021.

Participating in the scheme, companies, including airlinesenergy companies and heavy industries have to purchase one allowance per tone of carbon dioxide emitted.

The scheme puts a limit on overall carbon production and provides allowances to industries to emit a specific amount of carbon.

Companies that reduce their emissions can sell their allowances to others, making a profit.

Over time, the government reduces the emission limit ("cap") to encourage further reductions.

In contrast to the EU's stable carbon prices due to strict regulations, the UK's post-Brexit climate policies have led to a drop in the cost of carbon emissions for industries.

Analysts have criticised the most recent UK ETS change, as reported by the Financial Times.

A Department for Energy Security and Net Zero spokesperson told Energy Live News: "This government is committed to getting to net zero in a way that grows the economy and protects people’s livelihoods.

"We’ve taken significant steps to improve the ambition of the UK ETS and recently announced a reduction in the cap of 30% - to bring the scheme in line with our net zero goals.

"We want to ensure a smooth transition to the net zero cap allowing the market and participants time to adapt while ensuring the strength of overall ambition is not affected."

Written by

Bruna Pinhoni

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