UK carbon permit prices are on course to plunge almost 50% amid the government’s “lack of political ambition” to reform the country’s emissions trading system, according to analysts at Citigroup Inc.
(Bloomberg) — UK carbon permit prices are on course to plunge almost 50% amid the government’s “lack of political ambition” to reform the country’s emissions trading system, according to analysts at Citigroup Inc.
The allowances may gravitate toward £22 ($28) a metric ton, the auction reserve price for Britain’s carbon market, Citigroup analysts wrote in a note Wednesday. The pollution rights have already plunged 42% this year to £40.50, which is almost half the level of similar contracts in the European Union market.
Read more: UK Carbon Hits Two-Year Low as Britain Wavers on Green Policy
The decline in carbon permits has accelerated since early July, when the government unveiled its plans for reforming the country’s emissions market. While the proposals tighten the cap on the rights through 2030 by about 30%, it comes with the release of about 54 million allowances from 2024 to 2027 to ease the pace of the supply cut and effectively make it cheaper for industry to emit CO2.
The legislative proposal “seems to fall short of market expectations as it avoids an ambitious stance, reflecting politics’ new, more cautious approach on energy transition policies,” the analysts wrote. “Without additional measures, the UK ETS is set to remain plagued by a structural overhang of allowances, weighing on UKA prices.”
Read more: UK Energy Firms Meet Shapps to Discuss Security and Net Zero
Meanwhile, leaders from Shell Plc, BP Plc, SSE Plc, Electricite de France SA and National Grid Plc, met with Energy Security Secretary Grant Shapps on Wednesday to discuss energy security and accelerating investments into low and zero carbon projects including renewables, nuclear power, and North Sea oil and gas.
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