Britain again refrains from carbon market intervention to curb high prices

LONDON (Reuters): Britain’s Emissions Trading System (ETS) Authority has again decided it will not intervene in the country’s carbon market, even though prices were high enough to trigger a so-called cost containment mechanism (CCM) in January, it said late on Tuesday.

Under Britain’s ETS the authority can intervene in the market if average prices remain above a certain level for three consecutive months.

Monthly average UK ETS carbon prices  in October, November and December were all above the January trigger price of 56.58 pounds ($76.96) per tonne.

“While UK ETS prices have remained elevated and triggered the CCM again, after careful consideration, the Authority judged that, on balance, prices were responding to fundamental market drivers and therefore concluded that intervention was not warranted on this occasion,” the government said in a statement.

This marks the same approach as in December, when the mechanism was also triggered but no action was taken.

“This decision, like that in December, is aimed at upholding the objectives of the UK ETS as a market-based approach to reducing emissions and incentivising participants to find the most cost-effective solutions to decarbonise,” the government added.

It will continue to monitor the market closely and consider the most appropriate course of action should the mechanism be triggered again, it added.

Britain began trading carbon permits under its new domestic ETS on May 19, having left the European Union’s ETS upon leaving the single market at the beginning of 2021.

The scheme includes intervention options, such as a redistribution of allowances offered at auction, or increasing auction volumes for a calendar year.

The benchmark UK carbon contract traded up by 1.22 pounds at 74.59 pounds a tonne by 0715 GMT.

($1 = 0.7352 pounds)