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Letter: The future of carbon pricing

1. Outline

This is a letter from CCC Chairman, Lord Deben, to Rt Hon. Kwasi Kwarteng MP, Roseanna Cunningham MSP, Lesley Griffiths AM and Dr. Denis McMahon about the future of carbon pricing. It was sent in response to a request from the UK Government, Scottish Government and Welsh Government of May 2nd to the Committee on Climate Change on the future of carbon pricing in the UK, specifically in relation to the successor to the EU Emissions Trading System after EU exit. In the absence of a Minister, senior Northern Ireland Officials have indicated their support for advice being sought.

2. Key recommendations

In summary, our recommendations are:

  1. The Government should not rely on carbon pricing alone. Whilst carbon pricing is essential it needs to be used as part of a suite of policy instruments, as confirmed by real-world experience internationally.
  2. We agree with the Government’s preference for a linked UK-EU ETS in the case of EU exit. Should a linked scheme prove not to be possible, we will offer further recommendations.
  3. We recommend that the cap of the linked UK ETS be set based on the cost-effective path to the UK’s new net-zero target. We will provide that trajectory in our advice on the sixth carbon budget (covering 2033-2037), which is due in 2020.