Warning over plans to scrap carbon tax

Removing carbon pricing would hit British exporters and fail to achieve its aims of cutting costs, according to energy industry leaders.

Energy UK said any bill savings from scrapping carbon pricing – which both the Conservatives and Reform UK have proposed - would be more than wiped out by increasing the cost of gas for electricity generation, industrial use, and domestic heating, alongside increased CfD top-up payments.  

It warned the move would also hit companies with billions of pounds of extra taxes and lock them out of key overseas markets.

Domestic carbon pricing includes the UK Emissions Trading System (ETS) – which requires sectors like power generation, heavy industry, and shipping to purchase allowances for every tonne of C0₂ they emit – and the Carbon Price Support (CPS), which is a carbon tax levied only on fossil fuel generation.  

Adam Berman, Energy UK’s Director of Policy and Advocacy said: “It is an illusion that cutting carbon pricing would have any enduring benefit for UK competitiveness. Energy UK analysis highlights that scrapping carbon pricing would drive up gas prices in the UK, increasing energy bills, and exposing British exporters to billions in new taxes. “