Britain aims to avoid EU carbon tax - Failure to reach a deal could cost it $1 billion
The UK will struggle to link its carbon market to the EU's in just seven months to avoid UK companies facing the bloc's border tariff of around $1 billion from next year.
Billed as part of a "reset" in relations following Britain's exit from the European Union in 2016, the two sides announced last month they would link their carbon emissions trading systems. But they have not given a deadline, so they must do so by the end of the year to avoid a border tax.
"It will probably take many years before the bond comes into effect. The earliest case is 2028, but it is more likely to be realized in 2029 or 2030," said an emissions analyst.
The UK government has stressed that one positive aspect of joining the EU’s carbon market, or emissions trading system, is that it will avoid businesses being hit by the bloc’s border tariffs. Starting next year, the EU will impose taxes on CO2 emissions linked to imports of steel, cement and other goods. The UK government has said that avoiding these costs would save 800 million pounds a year, or $1 billion.
But EU officials say that to be exempt from the border tax, Britain would have to have linked its carbon market to the bloc's.
A British government spokesman said it would seek agreement on a carbon market link as soon as possible. To make a link possible, the UK would need to adapt its national rules for issuing carbon trading permits, bring the auctioning of emissions permits into line with EU rules and change the national cap on the amount of carbon that companies can emit.
The EU and UK schemes are also not yet harmonised in terms of the number of free carbon dioxide allowances they give to industries. The bloc’s market has a special “reserve” that adds or removes allowances to help stabilise prices. The UK scheme currently lacks such a “reserve”, although it does have a mechanism that could act as a cap on prices, something the EU scheme does not include.
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