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Green business group calls for higher carbon price

Published June 22, 2020

Green business group calls for higher carbon price

An influential business group has added its voice to calls for more clarity from the government on the price of carbon and for it to align the future UK Emissions Trading System with its net zero emissions targets.  

The Aldersgate Group, which includes Tesco, Lloyds, Aviva, BT, Orsted, Nestle, and Thames Water, argues that setting a “robust carbon price trajectory” would send “a clear market signal for low carbon innovation” while taking advantage of the drop in oil prices that has followed the coronavirus pandemic.  

The Group warned that low oil prices could mean carbon-intensive business models become artificially cheap, delaying investment in low-carbon solutions and technologies.  

Writing in a briefing on options the government could pursue to stimulate recovery post COVID-19, the Group welcomed the government’s announcement on aligning the future UK Emissions Trading System (ETS) with the net zero emissions target.  

Last week, the government announced the new UK ETS would reduce the existing emissions cap by five percent. The government intends to consult again on the emissions cap in line with its target of net zero emissions by 2050.   

The briefing argues that increasing the price of carbon would have a limited fiscal impact and would boost government income. It suggests an appropriate range would be $40 – $80 per tCO2 for 2020, rising to $50 – $100 per tCO2 for 2030.  

A higher price on carbon could also incentivise the take-up of low-carbon technologies, such as hydrogen, and negative emissions technologies, such as Direct Air Capture.   

The recommendations proposed by the Aldersgate Group are part of a wide-ranging five-point plan to prioritise environmentally positive measures in the recovery from the coronavirus pandemic. The plan includes a number of energy-related measures to increase economic competitiveness and productivity.  

As well as the carbon price, these include the support of trials for low-carbon technologies such as hydrogen and carbon capture, prioritising broadband investment, introducing regulations to drive resource efficient electronic product design, and introducing pricing/tax adjustments measures to help resource efficient products compete on upfront costs.