(Reuters) – Britain’s Emissions Trading System (ETS) Authority has decided not to intervene in the country’s carbon market, even though prices were high enough to trigger a so-called cost containment mechanism in December, it said on Tuesday.
Under Britain’s ETS the authority can intervene in the market if average prices remain above a certain level for three consecutive months.
Monthly average UK ETS carbon prices in September, October and November were all above the December trigger price of 52.88 pounds ($70.45) per tonne.
However, the authority said “not intervening was the right course of action on this occasion to support the continued effective functioning of the UK ETS market”.
“The Authority has confidence that this decision will uphold the objectives of the UK ETS as a market-based approach to reducing emissions and incentivising participants to find the most cost-effective solutions to decarbonise,” it added.
It will continue to monitor the market closely and consider the most appropriate course of action should the mechanism be triggered again, the authority said.
Britain began trading carbon permits under its new domestic ETS on May 19, having left the European Union’s ETS upon leaving the single market at the beginning of 2021.
The scheme includes intervention options, such as a redistribution of allowances offered at auction, or increasing auction volumes for a calendar year.
The benchmark UK carbon contract closed at 72.26 pounds a tonne on Tuesday.
Analysts said the non-intervention by the authorities was bullish for the market.
Carbon prices in Europe hit record highs in December, triggered by a higher burn of coal by power companies, more ambitious climate policies and the upcoming expiry of options contracts.
(Reporting by Brijesh Patel in Bengaluru and Nora Buli in Oslo; Editing by Jan Harvey and Louise Heavens)
