UK carbon tax to be scrapped

The UK is to remove the carbon tax on electricity generation from April 2028 as part of moves aimed at reducing electricity prices for businesses and households.

The Carbon Price Support mechanism was introduced in 2013 to penalise fossil fuel power production such as coal by making it more expensive. The tax is currently set at £18 per metric ton of carbon dioxide until April 2028.

Dan Tomlinson, exchequer secretary to the treasury, said the mechanism had “done its job and is no longer fit for purpose”.

"With our Clean ⁠Power 2030 mission, we are already reducing our electricity system’s reliance on volatile fossil fuels and we no longer need this additional tax to provide incentives in the system to decarbonise our grid," Tomlinson added.

Analysts at Bernstein have estimated the carbon tax adds around ⁠£7 per megawatt hour to wholesale electricity prices.