Continuing with a unilateral Carbon Price Floor is likely to harm UK business whilst simultaneously have little to no effect on reducing emissions in Europe. This was the message from MPs on The Energy and Climate Change Committee, who released a report on the EU Emissions Trading Scheme (EU ETS) today.
The EU ETS is a cap-and-trade mechanism designed to reduce greenhouse gas emissions and to build a low-carbon economy in Europe. The latest report recognises the benefits of a co-ordinated approach to reducing emissions, but highlights major problems of the UK going it alone.
Tim Yeo MP, Chairman of the Energy and Climate Change Committee said: “Unless the price of carbon is increased at an EU-wide level, taking action on our own will have no overall effect on emissions other than to out-source them.”
The report claims that at present prices, the power sector and industry in the UK would be subject to an “exorbitant” top-up tax of around £10 per tonne in 2013. By 2030, emitters could be facing a top-up tax of £25 per tonne, which could have a devastating effect on UK industry, as many firms could relocate to Europe where they would pay less in tax.
Tim Yeo added: “Instead of going it alone, the Chancellor would be better-off working with other European Governments to make the EU Emissions Trading System more effective as a whole.”
The committee is demanding the Government calls on Brussels to enact an EU-wide system, which could produce real benefits.