LONDON (Reuters) – The United Kingdom has put forward its own Emissions Trading System (ETS) to replace the European Union’s system for trading carbon emissions, which Britain will leave at the end of this year as the Brexit transition period ends.
FILE PHOTO: Small toy figure is seen in front of UK and European Union displayed flags in this illustration picture, October 17, 2019. REUTERS/Dado Ruvic/Illustration
The UK-wide ETS, which will put a cost on carbon pollution to encourage companies to reduce the greenhouse gases they emit, includes plans to cut the emissions cap by 5%, the government said.
The ETS is part of Britain’s plan to reach a net zero carbon emissions target by 2050.
Unlike the European scheme the British ETS would have a fixed auction reserve price, set at 15 pounds ($18.78) a tonne of carbon dioxide.
The British ETS will also include a cost containment mechanism to prevent price spikes.
“In years one and two of a UK ETS the Cost Containment Mechanism will have lower price and time triggers, providing a mechanism by which the UK Government can decide whether to intervene sooner should very high prices occur,” a government document said.
The benchmark price of carbon permits in the EU ETS is around 21.00 euros ($23.38)a tonne but has traded as high as 25.90 euros and as low as 14.34 euros.
About one-third of UK emissions and nearly 1,000 UK factories and plants are currently covered by the EU ETS and will continue to be covered by the UK system, the document said.
The British government said on Monday it would be open to considering a link between a UK ETS and the EU ETS “if it suits both sides’ interests”.
“This is subject to the ongoing trade negotiations between the UK and EU,” the government said.
Reporting by Susanna Twidale in London and Kanishka Singh in Bengaluru; Editing by Giles Elgood and Louise Heavens