Hot Air: The carbon price floor in the UK

Article

The UK government is introducing a floor price for carbon - to be known as carbon price support. It will be levied as an additional tax on the carbon content of fuels used for power generation in the UK, and calibrated to supplement the price of carbon set in the EU Emissions Trading Scheme. However, the particular design of the UK proposal could mean that intended benefits are not captured.

The most comprehensive solution to the problems with the UK proposal is to enact the carbon price floor at a European level, not a national level. This would provide more investor certainty across the continent, allow the quantity of permits to adjust, and prevent unintended consequences. It would accord with the strong finding in the literature that such hybrid regimes are more efficient than a pure cap and trade.

If, however, the UK does implement a unilateral floor price, then setting the level low, to minimise unintended consequences, and introducing a carbon price support guarantee, to secure the benefits of greater certainty, offer the best combination of outcomes.

Related items

  1. Women coworking in office, looking at computer screens displaying code, collaborating on project using multimodal AI chatbot technology in software development

    Locked in: A realist's agenda for digital sovereignty

    Digital sovereignty has never been more urgent.
  2. A man stands on a tram during the day holding his phone and wearing headphones

    Empowering people to hold tech accountable

    We need reform to remove structural barriers to people and civil society taking direct action against tech companies in UK courts – putting more power in the hands of people.
  3. The Home Office building in London

    Earned settlement: Decision time

    The government is imminently due to announce plans for a new model of ‘earned settlement’. These are expected to represent the most significant reforms to indefinite leave to remain in a generation.