LONDON (Reuters) - Britain does not plan to hold any auctions of European carbon permits in the first quarter of 2019, while uncertainty remains around the country’s exit from the European Union in March, the government said in an email reviewed by Reuters.
Britain is the second-largest emitter of greenhouse gases in Europe and its utilities and industry are among the largest buyers of permits under the EU Emissions Trading System (ETS), which charges power plants and factories for every tonne of carbon dioxide (CO2) they emit.
As part of efforts to limit disruption to the scheme should Britain leave the EU with no deal, the European Commission has said it would from Jan. 1 suspend Britain’s access to the registry which allows it to auction and allocate carbon permits.
“As this issue has yet to be resolved, the Government does not intend to auction allowances in January, February and March 2019,” the Department for Business, Energy and Industrial Strategy’s (BEIS) Emissions Trading & Industrial Decarbonisation team said in the email sent to stakeholders.
If Britain secures a deal and remains in the EU ETS the auction volumes would be spread across auctions held over the rest of the calendar year, it said.
Allowances issued by Britain in 2018 will be valid for EU ETS compliance and indistinguishable from allowances issued by other EU member states.
Britain has laid out four longer-term options for carbon pricing once it leaves the EU; remaining in the EU ETS, launching a UK ETS, which links to the EU scheme, setting up a standalone UK ETS, or reverting to a carbon tax.
In the short term, under a no deal scenario the government said in October it would introduce a further emissions tax set at 16 pounds a tonne, payable by stationary installations currently in the EU ETS, from April 1, 2019.
This tax, would not apply in Q1 2019, BEIS confirmed on Wednesday.
Britain’s total carbon price is now made up of two levies, a carbon price support tax of 18 pounds per tonne paid by electricity generators on top of obligations under the EU ETS.
EU carbon permit prices CFI2Zc1 have trebled this year to almost 25 euros a tonne, making the total carbon price for British power generators around 40 pounds a tonne.
Reporting by Susanna Twidale and Nina Chestney, editing by Louise Heavens and David Evans