UK launches carbon market – without link to Europe

(EurActiv, 18 May 2021) Britain will start its own market for trading fossil fuel emission permits this week, but with no sign of a link to the European Union’s market, prices could end up being more volatile than the EU’s.

The UK emissions trading system (ETS), which charges power plants and other industrial entities for each tonne of carbon dioxide they emit, is part of Britain’s plan to reach net zero greenhouse gas emissions by 2050.

When Britain left Europe at the end of 2020, it also quit the EU’s carbon market. The two sides agreed in a post-Brexit trade deal to give “serious consideration” to linking their carbon markets, allowing permits to be traded between them to create one shared carbon price.

But with the British ETS about to launch, there is no sign of negotiations starting on a link – stoking fears among emitters that separate schemes could put British and EU firms on an uneven footing.

The German power producer RWE, which has ETS compliance obligations in both Britain and the EU, said a standalone British ETS would be less effective than the EU’s.

“The main issue is the additional risk posed by the less liquid market in the UK,” a spokeswoman said.

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EurActiv, 18 May 2021: UK launches carbon market – without link to Europe