Britain recently launched its own carbon trading market, more than five months after Brexit, as the government targets lower emissions before this year’s vital UN climate change summit.
The UK’s Emissions Trading Scheme went live two weeks ago, replacing the country’s involvement in the European Union’s system after it left the bloc at the start of the year.
Carbon trading, a key way to prevent climate change, involves companies buying the right to pollute from others who have a lower carbon footprint.
The UK scheme’s initial price of about £50 (58 euros, $71) per tonne of carbon dioxide (C02) was slightly higher than the European price.
By contrast, the average selling price was around $20 (16.4 euros, £14) per tonne in the Californian market, the world’s third largest.
– ‘On front foot’ –
The higher prices in Britain and Europe show they are “on the front foot when it comes to climate action”, said Adam Berman, European Policy Director at the International Emissions Trading Association.
“If you look at the EU and the UK, the emissions trading scheme — in both cases — is the single most important mechanism” to cut carbon, he told AFP.
The UK carbon trading market is however just a tenth of the size of the EU-wide equivalent.
Britain, which also hosts the G7 summit this month, is urging the world’s richest nations to nurture a green and global economic recovery from the pandemic.
Prime Minister Boris Johnson’s administration, which targets zero net carbon emissions by 2050 to help meet commitments under the Paris accord, will also host the next climate summit, COP26 in Glasgow in November.
The government has stated that the new carbon trading scheme will make a “significant contribution” to meeting the 2050 goal.
In Britain, the supply of available carbon credits is diminishing to meet state policy targets; prices are therefore set to grow.
Johnson also plans to reduce polluting emissions by 78 percent from 1990 levels by 2035.
– ‘Important tool’ –
Carbon trading is one of the cornerstones of policy on climate change, according to Tim Atkinson, director of sales and brokerage at CF Partners.
“It is the most important tool to cut emissions in power and heavy industries” as well as in aviation, Atkinson told AFP.
For example, the UK has almost ditched dirty coal, largely due to CO2 quotas making it too expensive to generate electricity this way, he said.
Other tools such as subsidies have fuelled the boom in wind farms.
“The only way to fix the problem of climate change is to harness the capitalist system that got us in this situation,” added Louis Redshaw, director of Redshaw Advisors, which advises companies on carbon markets.
For the British authorities, leaving the European carbon trading market also makes it easier to monitor companies and their activities.
That compares to the vast European market with 27 states, which fell victim to massive VAT fraud in its early days.
However the launch of a separate British market makes things more complicated for companies operating in both zones due to increased costs.
In addition, the slightly higher UK price puts UK companies at a disadvantage to EU counterparts.
Companies also suffer because most other countries lack carbon markets — and therefore have no carbon price costs for their own regions.
These include the largest global polluters: the United States, which has no federal carbon pricing, and China.
China is however setting up its own carbon trading scheme, initially for coal and gas-fired power stations, in a major move for the world’s most polluting country.