UK exit from EU ETS 'would not have significant impact on surplus CO2 allowances'


* Exit would reduce Phase 4 surplus 1.5%
* Small price, emission impact for EU27
* Opportunity for UK to innovate

The surplus of CO2 allowances in the EU’s Emissions Trading System would not change significantly were the UK to leave it, a new report from climate campaign think-tank Sandbag said Monday.

If the UK does leave the ETS as a result of Brexit, it should do so at the end of Phase 3 (2020) to minimize disruption, the report says.

Thereafter, departure from the ETS would open the way for a range of innovative UK climate policies.

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“The UK Government’s current approach to Brexit makes the possibility of the UK staying in the EU carbon market unlikely in the long term,” report authors say.

This is because of the likely refusal by the UK to accept the European Court of Justice’s jurisdiction, and the ECJ’s governance role in the EU ETS.

If the UK leaves, the size of the persistent ETS surplus would be reduced by 230 million mt, or about 1.5% of the Phase 4 cap. This would likely result in only slightly higher CO2 prices for the remaining EU27, the report says.

“We estimate indicatively a reduction of emissions due to higher prices of less than 100 million mt (0.7% of the total cap) over Phase 4 [2020-2030],” the report says.

Meanwhile the UK’s Carbon Price Support and Climate Change Levy “have established a carbon price in the sectors covered by the EU ETS; these policies would need to be modified and strengthened if the UK leaves the EU ETS,” the report says.

Longer term, the UK could create its own stronger emissions trading system, linked to schemes like the Californian carbon market.

Full linkage to the EU ETS itself would not be beneficial while the EU system remains substantially in surplus, which is likely to be for at least another 10 years, the report says.

“It is essential that reform to the EU ETS continues, whether or not the UK remains a participant,” the report concludes.

–Henry Edwardes-Evans,
–Edited by Maurice Geller,