The Treasury backs the UK remaining closely locked into the EU’s emission trading system (ETS) following Brexit, a minister has revealed.
Speaking at fringe event organised by the think tank Policy Exchange at the Conservative party conference in Birmingham last week, junior Treasury minister Robert Jenrick said it is “unlikely” that the UK can remain a member of the EU ETS after it withdraws from the EU.
However the government’s “strong preference” is to be “highly aligned” with the pan-EU carbon trading scheme, he said: “Our objective is to remain as closely aligned as possible and there is every reason to think we can.”
But not being a fully participating member of the EU ETS means that the UK would have no say over how its rules are shaped, Jenrick said: “If we remain highly aligned, we are a rule taker so we need to consider the negative consequences of that in the future.
“That will play into the debate about whether in the long term it would be better to strike out on our own and create a UK carbon tax.”
The EU ETS was launched in 2005 to reduce emissions from industry and requires heavy industrial users of energy and power stations to buy certificates for the carbon they produce.
The third phase of the EU ETS is due to begin in 2020, giving the UK little time to set up alternative arrangements. The Treasury is often seen as favouring revenue raising carbon taxes over the more bureaucratic ETS.
Energy minister Claire Perry told a separate event that she had asked her officials at the Department of Business, Energy and Industrial Strategy to explore whether there is a better alternative to the ETS but they had not found one.
She said: “It’s in no-one’s interest for the UK to drop out of the ETS: rationality is prevailing.
“We will stick with what we’ve got unless there are very strong arguments otherwise, subject to negotiation.”
Perry added that it is in the EU’s collective interest for the UK to remain part of the ETS because Britain has contributed more carbon savings per capita through the scheme than the average achieved by member states.
She said: “We have a lot to offer the EU because we have overachieved relative to our overall contribution.”
Iain Conn, chief executive of Centrica, said that it would be “pretty stupid” to disrupt the current EU ETS arrangements, particularly given the recent increase in carbon prices.
Andy Koss, chief executive of Drax, also backed remaining in the EU ETS.
“The easiest thing would be to preserve the status quo and remain part of the ETS,” he said, adding a “slight concern” about whether a carbon tax would encourage investment.