The Government may intervene to reduce the burden faced by companies covered by the UK Emissions Trading Scheme (ETS) amid continuing high carbon prices.
For the second time in two months, the cost containment mechanism under the scheme has been triggered due to higher than expected prices.
Under the scheme, companies have to purchase allowances for each tonne of CO2 emitted. The mechanism had been triggered in December, as the average price per ETS allowance had exceeded £52.88, but a decision was taken not to intervene on that occasion.
With the mechanism again being activated after monthly average carbon prices in October, November and December were all above the January trigger price of £56.58, the UK ETS Authority is now considering whether to take any “appropriate action” under the mechanism and will announce its decision no later than 18 January to provide certainty to the market. Action could include releasing the additional permits to reduce prices.
The UK ETS was established at the beginning of last year following Brexit.