The Committee on Climate Change (CCC) has written to the government stating that, while carbon pricing is “essential”, it has to be used as part of a suite of policy instruments.
The advice on 7 August was in response to a request from the government on the future of carbon pricing, especially regarding a successor for the EU Emissions Trading System (ETS). The CCC explained that effective carbon pricing is key to completing the coal phase-out and creating changes in short-term behaviour and long-term investment decisions – such as incentivising greenhouse gas removal technologies and promoting energy efficiency.
However, it warned that carbon pricing alone will not achieve full decarbonisation. Supplementary policies are necessary to overcome barriers, address preferences driven by factors other than price and to tackle pricing uncertainty.
The CCC made several recommendations, including that the cap of a UK ETS be based on the cost-effective path to the UK’s net-zero target. It said it will provide further advice when advising on the sixth carbon budget, due 2020. It also stated it agreed with the government preference of a linked UK-EU ETS, should the country leave the European Union.
Such an approach would maintain the key benefits of an EU system, including access to a wider market and addressing competitiveness issues in a level playing field across the EU.