European Union lawmakers plan to guard carbon market from hard Brexit

This week, European lawmakers will vote on a proposal to protect the carbon market against a collapse of Brexit negotiations, which they worry would crash the price of tradeable emissions permits.

The bill was provoked by increasing concerns that Britain could fail to finalise a transitional trade agreement with the European Union before its scheduled withdrawal from the bloc less than two years from now.

In Europe, Britain is the second-largest emitter of greenhouse gases, and its utilities are amongst the largest buyers of permits in the European Union’s Emission Trading System (ETS), which charges factories and power plants for every tonne of carbon dioxide (CO2) they emit.

The biggest political group in the  European Parliament announced that it proposed an amendment to prevent British business from a mass sell-off of allowance from emissions if they are not part of the market anymore.

“It cannot be excluded that many of the responsible people in the U.K. government obviously have unrealistic assumptions,” Peter Liese, European People’s Party (EPP) spokesman, said in a comment. “That’s why we have to prepare for a hard Brexit.”

On Wednesday, EU lawmakers will vote on the amendment, which aims to cancel all permits on emissions provided by a country leaving the 28-nation bloc from January 2018 onward. Any revisions would also have to be accepted by member states of the European Union and the European Commission.

“The amendment is important to make sure that, in the case of a hard Brexit, neither the UK will have any advantages nor the European Union will suffer from any disadvantages,” said the EPP.

The European Union is in the middle of working on carbon market reforms,

The EU is in the midst of work on carbon market reforms, advocated by Britain, to decrease the share of free permits distributed after 2020 and shore up prices.

Having had a say in how the system is being developed, most analysts believe that Britain will continue to be part of the system, following a comparable path to Norway, which has companies that participate in the system despite the country not being a European Union member.

Slow progress in Brexit talks, however, has aroused fears of a messy break-up that could leave British businesses with limited legal clarity on emissions.

A British government spokesperson revealed that the United Kingdom is weighing all possible options for its participation in the ETS in the future.

“To avoid any cliff-edge as we move from our current relationship to that future partnership, people and businesses in both the UK and the EU would benefit from an implementation period to adjust in a smooth and orderly way to new arrangements,” said Liese.

“We recognise that to plan effectively, scheme participants will want an early understanding of the terms of the future UK-EU partnership and how it might affect the ETS.”