Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

Britain will start its own market for trading fossil fuel emission permits this week, but with no sign yet of a link to the European Union’s market, British prices could end up being more volatile than the EU’s.

The emissions trading system (ETS), which charges power plants and other industrial entities for each tonne of carbon dioxide they emit, is part of Britain’s plan to eliminate its net emissions of greenhouse gases by 2050 as part of the global push to slow climate change.

Britain quit the EU’s carbon market at the end of 2020 as part of its departure from the EU. The two sides agreed in a post-Brexit trade deal to give “serious consideration” to linking their carbon markets, allowing permits to be traded between them to create one shared carbon price.

Story continues below advertisement

But with the British ETS about to launch, there is no sign of negotiations starting on a link – stoking fears among emitters that having separate schemes could put British and EU firms on an uneven footing.

The German power producer RWE, which has ETS compliance obligations in both Britain and the EU, said a standalone British ETS would be less effective than the EU’s.

“The main issue is the additional risk posed by the less liquid market in the U.K.,” a spokeswoman said.

Mark Copley, CEO of the European Federation of Energy Traders, said linking the schemes would make it easier for firms to hedge their risk.

The large, liquid EU ETS enables firms to hedge their carbon exposure years in advance.

“The linking would bring back the ability for market participants to hedge U.K. power in a much more fungible market,” Copley said.

COMPETITIVENESS FEAR

With trading only just beginning in the U.K. system, some fear that companies will scramble to snap up the first permits available, limiting the supply on offer for hedging, and potentially leading to higher prices.

Story continues below advertisement

“Even with the recent high prices in the EU, it’s not unlikely they will be even higher in U.K. ETS,” said Frank Aaskov, Energy & Climate Change Policy Manager at industry group Steel U.K.That will make us more uncompetitive here in the U.K..”

Eurogas Secretary General James Watson said his industry group anticipated “competitive distortions” between the EU and Britain if the schemes were not linked.

EU carbon prices last week soared to a record high of above 56 euros per tonne. The price of permits in the U.K. ETS is not yet known, since trading has not begun.

With Brussels policy-makers now focusing on a huge overhaul of the bloc’s climate policies, due in July, and post-Brexit tensions continuing to flare, analysts said political appetite was lacking to establish a link to the British system quickly.

A spokeswoman for the British government said it was “considering a range of options on how the UK’s Emissions Trading Scheme can work best with other carbon markets.”

A European Commission representative pointed to the post-Brexit trade deal’s agreement to consider a link, and said this would need to be negotiated.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies