LONDON (Reuters) - Britain is looking at four options for carbon pricing once it leaves the European Union, including launching its own emissions trading system, a government official said on Wednesday.
Britain could remain in the EU’s Emissions Trading System (ETS); launch a UK ETS which links to the European scheme; set up a stand-alone UK ETS, or revert to a carbon tax, Emily Briggs, deputy head of emissions trading at Britain’s Department for Business, Energy and Industrial Strategy, said.
Which option is chosen will partly depend on whether Britain can secure a divorce deal with the EU on the terms of its exit from the bloc.
The British government has said that if it secures a Brexit deal with the EU, it intends to remain in the ETS until at least the end of the current trading phase running from 2013-2020, but has not said what it plans to do after that.
“We are looking at four options ... whatever we do on carbon pricing will be at least as ambitious as the current scheme,” Briggs said at the Carbon Forward conference in London.
If Britain departs the EU with no divorce deal, it would automatically leave the EU’s Emissions Trading System and its carbon pricing system would default to a tax, the government said in a no-deal Brexit advisory paper issued last week.
Britain is the second-largest emitter of greenhouse gases in Europe and its utilities and industry are among the largest buyers of permits in the ETS, which charges power plants and factories for every tonne of carbon dioxide (CO2) they emit.
Companies from these sectors have urged Britain to stay in the ETS until the end of the current trading phase to avoid disruption, but are divided over Britain’s longer-term participation in the scheme.
Britain’s carbon price is currently made up of two levies, a domestic carbon tax set at 18 pounds ($24) per tonne, paid on top of obligations under the ETS, which forces companies to surrender one carbon permit for every tonne of CO2 they emit.
As Britain is such a big buyer of permits in the ETS, carbon analysts have said Britain’s exit from the scheme would likely have a bearish impact on prices.
Setting a price on carbon dioxide emissions is aimed at curbing pollution and helping Britain meet its target to cut emissions by 80 percent on 1990 levels by 2050.
The UK government will publish more details of how it will initially apply a carbon price in a ‘no deal’ scenario in its annual budget statement on Oct. 29 and legislation will be included in the Finance Bill 2018-19, it said in last week’s no deal paper.
($1 = 0.7607 pounds)
Reporting By Susanna Twidale; Editing by Susan Fenton