Laura Woolsey Analyst at Cornwall Insight commented on the UK emissions trading scheme UK ETS in Ends report. Laura discussed the concerns that the cost of the UK’s carbon emissions trading allowances could increase dramatically when auctions begin and possibly requiring government intervention.
The UK has initially set its emissions cap 5% lower than the previous cap it had under the EU ETS, which logically could push prices higher. However, the Climate Change Committee note that real emissions for 2021 are likely to be significantly lower than this cap which could help balance the price, Laura explained.
A tighter, net zero aligned emissions cap is therefore likely to increase the cost of carbon over time. This price increase could be balanced to some extent by the planned phase-out of the CPS.Laura Woolsey