The UK ETS Authority has determined the carbon price for use in civil penalties during the 2023 reporting year will be £83.03.
What is the carbon price for civil penalties?
Hospitals and small emitters (HSEs) are installations within UK ETS that can chose to opt out of the main scheme as they have a capacity less than 35 MWth and have annual emissions less than 25 000 tCO2. These installations do not need to purchase and surrender allowances but instead are given an annual emissions target, which decreases each year. In lieu of surrendering allowances, these installations must pay a set rate per tonne of CO2 that they emit over their target for that reporting year.
Each year at the end of November, the UK ETS Authority calculates the carbon price that will be used in civil penalties in the following reporting year.
How is the carbon price calculated?
This price is the average daily trading price of a single UK ETS allowance over the previous 12 months. In the case of the 2023 price above, this is the daily average carbon price traded on the carbon exchange between 11th November 2021 and 11th November 2022. The civil penalty rate for HSEs is closely linked to the cost of allowances for full UK ETS participants, although any change to the cost of allowances isn’t reflected in the civil penalty rate until the following reporting year.
What will the carbon price be in future?
The chart below from ember-climate.org shows the daily traded price over the past 18 months, with the peak around £98 per tonne in late August and the current price around £69 per tonne today. Also noted are the civil penalty rates for the first three years of UK ETS, for comparison.
|Year||Civil Penalty Carbon Price|
Despite the price per tonne today being lower than a few months ago, the carbon price generally appears to be on an upward trajectory. Although no-one can predict the market with certainty, the feeling amongst traders is that the allowance price may continue to rise, mainly due to reduced amounts of free allocation as the UK transitions ETS to meet the target of net zero by 2050.
More on HSEs/Opt-Outs:
Applications for the 2021 to 2025 allocation period are closed. Eligible installations will be able to apply to opt out for the 2026 to 2030 allocation period from 1 April 2024.
For more general information on HSEs, please click here to see our article on Opt-out schemes.
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