The price of carbon emission rights collapses in the UK compared to the EU. Big boon for British industries
The British government is bringing its environmental policies closer to common sense, and this is greatly benefiting its companies because it has literally made the cost of CO2 emissions plummet compared to what happens in the EU.
Industrial companies now face less severe pollution burdens after the government "watered down" reforms compared to those set by the EU, the Financial Times reported last week. This guarantees greater benefits for energy-intensive companies.
As a result of changes to the UK's carbon trading scheme, carbon prices are significantly lower than in Europe. Of course the green side says carbon-reduction reforms are now in jeopardy, but meanwhile UK companies have an edge
James Huckstepp, an analyst at BNP Paribas, told the FT: "Changes to the carbon market have gone largely unnoticed in the UK, but will have the biggest impact of any policy on the UK's emissions path."
The UK's Emissions Trading Scheme sets a price for one tonne of CO2 emission, similar to the EU's current scheme. Some companies, such as electricity producers, get allowances to cover some of their necessary emissions.
Over time, quotas are reduced, thus providing incentives for companies to pollute less – or to be forced to pay. But this year the UK government said it would distribute another 53.5 tonnes of allowances between 2024 and 2027.
Since the announcement, carbon prices in the UK have come at a steep discount to European prices. The carbon price in the UK is £47 a tonne, compared to €88.50 (£75.86) in the EU. Previously, the two prices were close to parity.
Adam Berman, deputy director of Energy UK, commented: "A robust carbon price is key to attracting clean energy investments that can drive down prices, reduce emissions and strengthen our energy security."
Trading lower prices in the long run for a short run of low prices today is the definition of a 'penny-wise, pound-foolish' approach,” he added, saying the carbon market is the “cornerstone of the decarbonization strategy of the United Kingdom".
“While there are short-term benefits for energy-intensive industries, the discount that has emerged vis-à-vis the EU will make it much harder for the UK to meet its climate goals, by disincentivising wind farms and encouraging energy producers to burn more gas,” concluded BNP's Huckstepp.
The problem is that the world is made up not only of the UK and the EU, but of many other entities that do not apply the carbon price or apply it in a very limited way. With these lower prices London holds a more balanced position compared to the rest of the world, trying to defend its industry.
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The article The price of carbon emission rights collapses in the UK compared to the EU. Big boon for UK industries comes from Economic Scenarios .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-prezzo-dei-diritti-di-emissione-di-carbonio-crolla-in-uk-rispetto-alla-ue-grosso-vantaggio-per-le-industrie-britanniche/ on Mon, 07 Aug 2023 06:00:31 +0000.