(Bloomberg) -- The U.K. signaled it would continue to support higher carbon prices after Brexit than those in mainland Europe.
The nation said it planned to draw up a law to create a U.K. carbon market once it leaves the European Union emissions trading system at the end of this year, according to budget documents. It's seeking to link that program to the existing EU market and it also plans to extend its own policy to support even higher carbon prices, into 2022.
The nation is “basically reiterating its preference of having an U.K. emissions trading system that could be linked back to the continental market,” said Bo Qin, an analyst in London for BloombergNEF.
The extension of the support, which means the nation's power industry faces carbon prices that are about 90% higher than those across the English channel, indicates it's still ambitious on tackling climate change, she said. Britain has a target to reduce emissions to “net zero” by the middle of the century.
U.K. power generators need to pay for EU emission permits and the floor support, which means prices of about 45 euros a ton of carbon dioxide versus 24 euros in the EU. Those measures together basically are pricing coal off the grid, ensuring the most polluting plants will retire by the middle of this decade.
The U.K. will stay in the EU market under a transition deal through the end of this year, as the future relationship between Britain and the EU is fleshed out. As an alternative, the country's also planning to draw up law for a carbon tax.
READ MORE:
- Britain's Post-Brexit Carbon Market Looks Just Like Europe's
- Carbon Traders Weigh Brexit Impact on Pollution Costs in Europe
- U.K. Doesn't Expect EU Carbon Permits Without Brexit Deal
To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net;Jonathan Tirone at jtirone@bloomberg.net
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