The UK’s Minister for Energy, Claire Perry, has said the UK will implement a domestic carbon emissions trading programme once it leaves the EU.
With 28 days until Brexit absent an extension to Article 50, the minister has told the House of Lords that the UK intends to remain a part of the EU’s emissions trading system (ETS) until the end of 2020, by which time the country hopes to have established its own carbon trading scheme ready to come into effect in 2021. It is expected the UK’s system will link to the EU’s ETS as long as it leaves the EU with some kind of withdrawal agreement in place, although formal negotiations on this front have not yet begun.
Perry said she was “confident” the UK and EU could come to an arrangement on linking the two ETS schemes by 2021, adding: “The EU wants us to be included in this as we are a big provider of liquidity.” The ETS allows companies in participating Member States to purchase limited allowances for emissions, which they can then trade with each other where necessary. As the second largest producer of greenhouse gases in the EU, the UK purchases a significant number of emissions permits annually.
Charging companies for the harmful emissions they produce forms part of the UK government’s drive towards mitigating climate change, having committed to a legally binding target of cutting emissions by 80 per cent from 1990 levels by 2050.
Perry said the government plans to launch a consultation on its proposed national carbon trading scheme in April, once the UK has left the EU. In the event of a no-deal Brexit, the UK plans to implement an additional tax on emissions to be replaced eventually by a national emissions trading programme; although Perry acknowledged that if the UK leaves the EU without a deal it will be unlikely its future emissions trading scheme will be able to link with the EU’s.
The EU can easily find fungibility. UK’s liquidity is a good thing for the ETS and the EU should look to keep this. However if UK does GITA (go it alone to use the old Labour Party expression about being in the old Common Market in the first place), then maybe they should try using a carbon tax as a floor price and sector-based emissions targets for industry to avoid a the pitfalls and disincentives of a low carbon price. IETA likely will tell me it’s ugly but…..