The government is considering creating a “mirror” scheme linked to the EU Emissions Trading System (ETS) if the UK is forced to leave the mechanism due to a no-deal Brexit.
Speaking before the House of Commons, EU Energy and Climate Change sub-committee, energy and clean growth minister Claire Perry said she was “confident” the UK could work cooperatively with the EU to find a solution to the issue.
“If we have the very unlikely event of a no-deal, we will no longer participate in the EU ETS under the current arrangements,” she told the committee.
Should this happen, Perry said one of the long-term options being considered by the government is setting up a “mirror system that is linked to the ETS with current operators in the UK having the same requirements to monitor, report and verify their emissions as per exit day”.
She emphasised its commitment to “robust carbon pricing” and trading mechanisms and said she did not want the UK’s departure from the EU to undermine the latest reforms to the ETS, which have pushed the price of allowances to levels not seen in almost a decade.
“Having painfully got to a place where the carbon price is starting to send some good signals around Europe, it would be a massively backward step if we did see that price come down,” Perry remarked.
Also appearing before the committee was Jonathan Holyoak, director for EU energy and climate change at the Department for Business, Energy and Industrial Strategy.
Reiterating its position from a recently published technical notice, Holyoak said the government initially planned to implement an increased carbon tax as a stop gap measure if the UK left the ETS. He said details about the tax and who it might affect would be laid out in the upcoming budget on 29 October.
Holyoak accepted that generators face a conundrum over their plans for the first three months of 2019, as they will not require ETS allowances to cover their emissions during the period if the UK drops out on 29 March.
“Industry, rightly, have issue about the first three months of next year and what they should do about it, particularly at the moment where they have to think about both no-deal but also a scenario in which we continue to participate,” he added.
Holyoak said the technical notice had sought to set out the issue clearly for the companies affected.
However, he said the government could offer no further advice and they would need to make their own decisions about how to respond in terms of their trading strategies: “Different companies will need to take different measures. Some who are pan-European will have different options to others and they need to think about what it means for them specifically.”