PROLONGED uncertainty regarding the UK’s carbon pricing future as it exits
the EU has been voiced in a joined letter by SSE, Drax, Orsted and NGO Sandbag to the UK government.
The letter outlines a need for stability and calls on the Treasury to ensure efforts to reach net zero aren’t undermined by any reduction to the carbon pricing level in GB, currently made up of the EU Emissions Trading System (ETS) and the Carbon Price Support (CPS).
The letter also states that in addition to the considerations on the CPS, the Carbon Emissions Tax (CET) – that will replace the EU ETS in the event that the UK leaves the EU without a deal – will need to be set out for 2020 as soon as possible.
To minimise the potential divergence between the CET and the EU ETS over 2020 it is ‘vital that the CET is set a level for 2020 that is comparable with recent EU ETS pricing.’
SSE states that the current uncertainty over carbon pricing is already impacting on the forward pricing in electricity markets.
Any reduction to current carbon pricing levels would send negative signals to low-carbon investors, at a time when the market is keen for low carbon investment opportunities.
For further information, see our interview with Simon Watson, a senior consultant with Redshaw Advisors, about whether organisations face ETS compliance obligations for 2019 if a deal is not agreed.