Just catching up with @beisgovuk future UK carbon pricing document. A few brief thoughts on an approach which while not quite ground-breaking at this stage, could yet set the gold standard on carbon pricing internationally ahead of #COP26. (1/7)
gov.uk/government/new…
gov.uk/government/new…
The name of the game is getting a scheme up and running as soon as possible. Design is as close to EU ETS as its defendable to ensure transition is smooth for businesses. Will be unpopular with some who see it as a missed opportunity. (2/7)
Still significant implementation challenges in getting the scheme going by end of year, meaning the option of a carbon tax is left open. But language is now clearly in favour of UK ETS, with tax as last resort. Good news. (3/7)
Potential link to EU ETS is still an option, but language on that is now much cooler, more of a nice to have. Implies concerns over ECJ jurisdiction have won out and its a UK ETS or bust. (4/7)
Tighter cap means allowance prices could be higher under a UK only ETS, raising questions over carbon leakage. Plan is to go further and link to a net zero trajectory by 2024. Great news, but will be difficult to do in a standalone scheme given liquidity challenges. (5/7)
Lots of opportunity to build on a solid grounding. Hint that widening to further sectors in future, as well as inclusion of GGRs. For those unhappy with level of ambition, still plenty of flex for Govt to stretch once scheme in place. Marathon not a sprint. (6/7)
And finally. Interestingly, decision to move away from dedicated funding from auction receipts to support industrial decarbonisation or to put in place a carbon dividend. A win for the Treasury as gives more flexibility on use of revenues (which will be significant!). (7/7)
