The United Kingdom is set to impose a £16 per ton tax on carbon if it leaves the European Union without a deal on October 31, according to government plans.
If the UK leaves the EU without a deal, it will also leave the EU’s Emissions Trade System (ETS), the centrepiece of the bloc’s efforts to meet European countries’ emissions reduction obligations. The cap-and-trade system requires power plants and industries to purchase permits to emit more carbon than they are allocated for free in the system.
In the event of no-deal, the UK would replace the ETS with a carbon tax “to help meet the UK's legally binding greenhouse gas reduction commitments under the Climate Change Act,” the governments no-deal preparedness guide states. “The tax would apply from November 4 2019 to all stationary installations currently participating in the EU ETS”.
The tax would differ from the EU’s cap and trade system because it would be a set amount rather than creating a market for buying and selling permits to emit. A flat rate of £16 would be applied to each ton of carbon dioxide emitted over and above the free allowance the installation would have received under the EU ETS.
But while a tax might sound more onerous than a market, analysts say that this tax approach will mean an easier ride for companies in the UK than in the EU - potentially distorting the European carbon market and putting the UK at risk of failing to meet its emissions reductions targets.
The price of carbon in the EU ETS is currently around £26 per ton. The UK’s rate would be £10 cheaper.
British Prime Minister Boris Johnson has denied accusations that the intention behind Brexit is to have a “bonfire of regulations” and make the UK a place where it will be easy to pollute and enjoy loose labour and health standards. Johnson has insisted that an independent Britain would have even more stringent climate change legislation than the EU. Politicians within Johnson’s conservative party have said that having more lax environmental and labour standards could lure businesses from Europe to Britain after Brexit.
To demonstrate his commitment to the climate change cause, Johnson’s government is bidding to host the UN climate summit next year.
The government of previous prime minister Theresa May had been preparing a UK-only carbon market that would link up with the EU’s system, envisioned to start after the transition period ended in 2021. However with little time before the UK may crash out of the EU with no deal at the end of October, the hastily-arranged tax may be the only option for a temporary solution.
