Britain’s energy industry is keen to link up with the European carbon market

Great Britain risks losing up to £8 billion ($10.2 billion) in revenue over the next five years (from 2025 to 2030) if it remains outside the EU carbon market. This is stated in a study supported by some key players in the energy market, reports Bloomberg.

The corresponding report was prepared by the Frontier Economics consulting company at the request of the country’s energy market participants (Centrica, Drax, Equinor, National Grid, SSE and Uniper).

Combining the two allowance trading systems would raise the price of UK carbon allowances, raising government revenue, but it could also lead to higher electricity prices for UK consumers and revenues for generating companies, the study says.

This issue is also important for traders. British quotas are currently trading at a 36 percent discount to the EU. So their prices will most likely increase if the government makes it clear that the systems will be merged.

British industry operated under the EU’s emissions trading system until the country left the bloc and created its own separate system. Companies are pushing the idea of ​​reintegration as the new Labor government is seen as more EU-friendly and currently sets the agenda.

Companies are also eager to see changes by the time some EU innovations come into force, including the European CBAM from 2026.

As Frontier Economics noted, the union could support efficient trade between the UK and the EU and reduce the costs for both sides to achieve their decarbonisation goals. It will also facilitate effective financial risk management for participants on both sides, supporting industrial competitiveness by creating a combined carbon market that is deeper than individual ones.

As GMK Center reported earlier, before the general elections in Great Britain, which took place at the beginning of July this year, the country discussed the possibility of harmonizing the carbon market with EU mechanisms. British exporters have warned that they could pay hundreds of millions of pounds more under Europe’s Carbon Border Adjustment Mechanism (CBAM) in future because the country’s carbon price is currently lower than in the bloc.