In issue 225 of the ‘Chart of the week’, we considered the potential scenarios for UK carbon prices as we transitioned to the new UK Emissions Trading System (ETS), noting the role of market tools, policy, and recent EU ETS pricing trends in determining UK prices. Following the launch of the first UK Allowance (UKA) auction this week, we take a look at the initial carbon prices reported.
The first auction for the UK Emissions Trading Scheme (UK ETS) was held on 19 May 2021, between 12:00-14:00, hosted by the Intercontinental Exchange (ICE). The minimum overall price for total UK carbon that could be attained yesterday was £40/t. This price being made up of the Carbon Price Support (UK CPS), set at £18/t, combined with the Auction Reserve Price (ARP) of £22/t set by the government to provide a floor for allowance prices in the transition from EU ETS.