LONDON (Reuters) – Britain will be excluded from the European Union’s Emissions Trading System (ETS), a mechanism for helping to limit the impact of climate change, if the country leaves the bloc in March 2019 without a deal, the government said on Friday.
It published a series of papers setting out the implications of a “no deal” Brexit, a situation it says remains unlikely given the work going on towards securing a negotiated outcome.
In one paper, it said that in a no-deal scenario, the country would next year switch to meeting its carbon pricing commitments via a tax system.
“The UK will be excluded from participating in the (ETS) in a ‘no deal’ scenario,” it said.
“The UK government will publish more details of how it will initially apply a carbon price in a ‘no deal’ scenario at Budget 2018 and legislation will be included in the Finance Bill 2018-19,” it added.
The European ETS charges power plants and factories for every tonne of carbon dioxide they emit.
Britain has said that if there is a Brexit deal, the country plans to remain in the ETS until at least the end of its third trading phase running from 2013-2020.
As the second largest emitters of carbon dioxide in Europe, British utilities are among the largest buyers of carbon permits in the ETS. Carbon analysts have said Britain’s exit from the scheme would likely have a bearish impact on prices.
Reporting by Sarah Young; editing by Stephen Addison