‘Difficult to see’ UK remaining in EU ETS

Decisions on carbon pricing likely to get caught up in Article 50 "fiasco"

The UK is unlikely to remain part of the EU emissions trading system (ETS) following Brexit, an academic from the Institute for European Environmental Policy has told Utility Week.

The issue of Britain’s future involvement in the cap and trade scheme is likely to get caught up in the wider article 50 “fiasco”, according to the researcher.

“I think all the signs are that it’s unlikely that the UK is going to be realistic enough in its negotiating position to reach an agreement across the board on the Article 50 negotiations and that has implications for the ETS,” said senior research fellow and head of the institute’s climate and environmental governance programme, Martin Nesbit.

“Although both sides might want continued UK participation in the EU ETS, I find it difficult to see how you get a deal on that in place in time, de-linked from the rest of the article 50 fiasco.”

Managing director of environmental think tank Sandbag, Rachel Solomon-Williams, agreed it would be challenging for Britain to remain part of the mechanism, saying it would “interesting” to see how questions over trade barriers and tariffs get “tangled up with decisions on emissions trading”. Britain’s departure from the EU means the issue of trade “floats to the top of the pile of problems and suddenly makes participation in the EU ETS much more complicated.”

She added that continued involvement “doesn’t seem very consistent with a ministerial appetite for independence” and that “any option in which we remain in the EU emissions trading system but lose our vote on how it is designed, would be completely unpalatable to anybody.”

Last week EU member states voted to approve a package of reforms to the mechanism to tackle a long-running oversupply of allowances, which has left the European carbon price too low to drive investment decisions. Solomon-Williams said the mechanism “isn’t working at the moment” and that the vote will make “no difference at all”.

“If the UK government wants to stay in the EU ETS they would need to be fundamental reform for that to be worth doing,” she added.

Despite this, both Nesbit and Solomon-Williams agreed there is no clear “right answer” for carbon pricing in the UK post-Brexit and that there would be a trade-off between independence and international influence. “It depends a lot on what the UK’s vision is for decarbonisation,” said Nesbit.

Prime minister Theresa May has said she plans to trigger article 50 and begin the process of negotiating Britain’s departure from the EU by the end of March. She has also said that remaining under the jurisdiction of the European Court of Justice is not acceptable, appearing to rule out full involvement in the EU ETS.