What steps is the Welsh Government taking to protect Welsh industry from escalating emissions trading scheme compliance costs, which can undermine industry’s competitiveness against global peers?
The UK ETS is a market-based instrument. Therefore, price changes caused by market conditions are an inherent part of the scheme, unlike a carbon tax. This, in part, provides the incentive to decarbonise and help meet Wales’ climate ambitions. It is true that over the past year, carbon prices including those of the EU ETS have been rising globally, due to market factors. The scheme has tools enabling intervention where price fluctuations not corresponding to market fundamentals occur. UK ETS market participants subject to global competition and therefore at risk of ‘carbon leakage’ receive a proportion of allowances for free to manage these risks. In addition, the Welsh Government continues to advocate for greater transparency in the use of revenues generated by the UK ETS to the UK Government. Reinvestment of revenues from the scheme can support the decarbonisation of Welsh industry and ensure it is fit for the future economy.