UK carbon pricing after Brexit

The priority for international action on climate change is to remain within the EU Emissions Trading System. If that is not possible, the UK should not attempt to set up the proposed standalone UK ETS, and should instead consider a carbon tax.

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1. Carbon pricing is not a panacea.

Whether in or out of the ETS, taking the UK to net zero emissions will require direct regulation and significant public funding. A carbon price can help steer clean investment, but it alone will not solve climate change.

2. The UK should aim to remain a part of the EU Emissions Trading System, retaining a shared Europe-wide approach to pricing carbon emissions.

Within this system, the UK should argue for an EU-wide auction reserve price to reduce market volatility.

3. The UK should not attempt to set up the proposed standalone UK ETS.

There is a significant risk that this market would not be functional, condemned to high volatility, and plagued by speculators. The UK has declared a climate emergency – we cannot afford a decade of weak green investment due to low or highly volatile carbon prices.

4. If the type of Brexit pursued causes the UK to leave the EU ETS, the UK should pursue a linked system or attempt to rejoin.

Whilst these negotiations take place, a carbon tax should be implemented on power, industry and aviation – with a floor set at least at the average EU ETS carbon price of the preceding year.

The UK’s top twenty emitting industrial sites (2018)

Annual emissions in UK sectors covered by the EU ETS (2018)

Supporting materials

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This document is a response to the joint consultation of the UK Government, the Scottish Government, the Welsh Government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland.