UK proposes its own emissions trading system to replace EU's

The ETS is part of Britain’s plan to reach a net zero carbon emissions target by 2050.

The UK government has confirmed its intention to establish an own emissions trading system from 2021, which is to replace the European Union’s system for trading carbon emissions. The government also said it intended to open a consultation on the design of a carbon tax “as an alternative to a UK ETS, to ensure a carbon price remains in place in all scenarios”.

The UK-wide ETS, which is part of Britain’s plan to reach a net zero carbon emissions target by 2050, will put a cost on carbon pollution to encourage companies to reduce the greenhouse gases they emit. This includes plans to cut the emissions cap by 5%, the government said.

Unlike the European scheme the British ETS would have a fixed auction reserve price, set at 15 pounds ($18.78) a tonne of carbon dioxide. The British ETS will also include a cost containment mechanism to prevent price spikes.

“In years one and two of a UK ETS the Cost Containment Mechanism will have lower price and time triggers, providing a mechanism by which the UK Government can decide whether to intervene sooner should very high prices occur,” a government document said.

The benchmark price of carbon permits in the EU ETS is around €21.00 ($23.38)a tonne but has traded as high as 25.90 euros and as low as €14.34.

About one-third of UK emissions and nearly 1,000 UK factories and plants are currently covered by the EU ETS and will continue to be covered by the UK system, the document said.

The British government said on Monday it would be open to considering a link between a UK ETS and the EU ETS “if it suits both sides’ interests”.

“This is subject to the ongoing trade negotiations between the UK and EU,” the government said.

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