Since the UK government has refused a link between the UK Emissions Trading System (UK ETS) and the EU Emissions Trading System (EU ETS) after Brexit, British businesses are paying far more for their carbon dioxide production than their EU counterparts.
In the face of skyrocketing energy prices, the discrepancy puts UK industry at a huge competitive disadvantage compared to European competitors.
Companies in the UK pay more than £75 (90 euros) per tonne for carbon emissions, whilst equivalent firms in the EU pay up to 85 euros per tonne. The gap has dropped marginally in recent days, but it was around 8-9 euros per tonne of carbon in the previous month, equating to a premium of around 10% for UK businesses.
The UK launched its own emissions trading scheme in 2021 and held the first permit auctions in May. Compared with EU ETS, which has been in operation since 2005 and covers all the EU’s heavy industries, UK carbon market is substantially smaller and lacks the liquidity. The difference resulted in a higher carbon price in the UK.
