Collapse in EU:ETS price is not good for UK industry

The decision by Conservative and UKIP MEP’s to vote down the backloading initiative of the European carbon emissions trading scheme proposal was perverse, according to Andrew Warren.

In his latest column for Energy in Buildings and Industry (EIBI) Magazine, Warren considers how the recent vote, which would have removed 900 million allowances from the auction schedule over the next three years, weakens the carbon emissions trading scheme (EU:ETS).  EUA trading prices are now forecast to stay at or around the present spot price of €3.40 per tonne for the rest of the decade given the level of oversupply which the backloading initiative would have to some degree mitigated.

Warren points out that for British manufacturers the effective trading price is £16 per tonne this year, increasing each year subsequently.  This is because our Chancellor has unilaterally introduced a floor price for carbon paid in Britain regardless of the trading price on the Continent.

Despite rock bottom trading prices, the European Parliament is determined to make a go of the carbon emissions trading scheme, despite less than wholehearted support from the UK.

As the only country in the EU with such a high price, the question is how long the Chancellor will be able to stick to a carbon price floor.  It would be great if he does but no doubt British Industry will tell him it will make them uncompetitive.

Read the full Warren Report here.

As well as columnist for EIBI, Andrew Warren is director of the Association for the Conservation of Energy, ACE.