UK ETS carbon pricing in the United Kingdom 2022-2025
The cost of UK ETS carbon permits (UKAs) hit highs of almost 100 GBP in August 2022, but have fallen considerably since then. The lowest price recorded so far for UKAs was on January 29, 2024, at just 31.48 GBP. Formerly part of the EU ETS, the UK launched its own cap-and-trade system in 2021 following Brexit.
Why has the UK’s carbon price fallen?
Several factors have contributed to falling UK carbon prices, including mild winter weather and reduced power demand, as well as a surplus of carbon allowances on the market. While prices have recovered marginally from the record lows, they remain markedly below carbon prices on the EU ETS. The low cost of UK carbon permits has raised concerns that it could deter investment in renewable energy.
Future of UK ETS
The UK ETS covers emissions from domestic aviation and the industry and power sectors, amounting to some 30 percent of the country’s annual GHG emissions. There are plans to expand the system over the coming years to cover CO₂ venting by the upstream oil and gas sector, domestic maritime emissions, and energy from waste and waste incineration. The UK is also looking to introduce a carbon border adjustment mechanism, which would place a carbon price on certain emissions-intensive industrial goods imported to the UK.