UK carbon price plunge raises risk of green levies on exports to EU

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🗞️ Driving the news: The UK's falling carbon market prices pose a risk for industries such as steel, aluminium and cement, as their exports to the European Union (EU) might face additional CO2 levies unless London aligns its carbon policies with the EU's
• The UK carbon price has dropped by nearly half since April, making it around 40% below the EU's

🔭 The context: The UK has its own emissions trading scheme (ETS) that had initially seemed likely to meet the EU's standards 
• However, policy changes by the UK government have led to a decrease in British CO2 prices

🌎 Why it matters for the planet: The European Union's carbon border levy, kicking in from 2026, is designed to impose fees on imports of emission-intensive goods unless the exporting country has equivalent CO2 pricing policies
• As the UK's carbon price drops, it increases the likelihood that UK's goods will be hit with this levy, indicating a need for robust CO2 pricing policies

⏭️ What’s next: Without a market link, UK carbon prices are expected to trade below EU CO2 prices until the late 2020s, making UK firms susceptible to the EU's border levy
• The UK government is considering policies to support British industries as they transition to a lower-carbon economy, including a potential UK carbon border levy

💬 One quote: "If the government doesn’t do anything…. 75% of our trade would be at risk of facing a financial trade barrier and administrative trade barrier when exporting to the EU" (Frank Aaskov, energy and climate change policy manager at industry group UK Steel)

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