According to reporting from Bloomberg, Citigroup analysts have forecast a significant decline in carbon permit prices in the United Kingdom as a result of the government’s lack of commitment to amend the nation’s emissions trading system.
Citigroup predicts that carbon permit prices may decrease by around 50%, reaching £22 ($28) per metric ton, which is the lowest price for the UK’s carbon market auctions.
This forecasted drop in carbon permit prices reflects concerns over the UK government’s failure to take decisive action to address carbon emissions. This lack of ambition in climate policies may hinder long-term efforts to tackle climate change and meet emissions reduction targets.
The cost of these permits has already suffered a significant decline of 42% this year, now standing at £40.5 ($51.6), which is almost half the price of similar contracts compared to the European Union market.
The price of pollution permits in the UK dropped to the lowest level in two years following the release of the government’s proposed changes to the nation’s emissions trading system.
The suggested measures strengthen the limit on privileges until 2030 by around 30%, but they also involve the allocation of approximately 54 million permissions between 2024 and 2027 to alleviate the speed of reducing supply. This ultimately results in reduced costs for the industry, enabling polluters to continue releasing CO2.
As part of a wider range of budgetary measures aimed at addressing the cost of living crisis and strengthening the country’s finances, in November 2022, the UK government increased the so-called windfall tax rate on profits made by oil and gas producers from 25% to 35%.
This anticipated forecast and the constantly evolving circumstances in the British market as the country strives to comply with more eco-friendly rules present a fluctuating environmental setting that requires monitoring for outcomes.