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UK ETS launches with UKA Futures opening at £50

Image: Getty.

Image: Getty.

The UK’s Emissions Trading Scheme (ETS) has opened for trading for the first time, with the carbon price coming in at £50.23.

According to Intercontinental Exchange (ICE) - which was chosen by the government to host auctions and launch UK Allowance (UKA) Futures contracts - on Twitter, the price for UKA Futures has since dropped to £47.11.

As of 11:30, 52 lots have traded so far in the December 2021 UKA Contract.

Both the UKA Futures contracts and UKA auction are going live today, with the latter to take place between 12.00 and 14.00, while UKA Daily Futures is set to go live on 21 May. UKA auctions will take place every two weeks.

The UK ETS has replaced the EU Emissions Trading System following the UK leaving the European Union. It sets a cost for emissions over a designated cap, with large industries such as the power sector then having to pay for any emissions produced above this. Gradually the cost of these emissions will be increased, encouraging a reduction in emissions.

Details of the ETS were first outlined in June 2020, outlining how the cap will initially be set at 5% lower than the EU ETS cap in recognition of the country’s net zero emission ambitions. This was then reaffirmed in the energy white paper published at the end of 2020.

Commenting on the launch, Louis Burford, head of solution sales and optimisation at Centrica Business Solutions, said that it marks an “important step" in the journey to net zero but "for many firms it’s going to take a big leap of faith".

"Businesses will be debating how much of their requirement they should buy now and how much they should defer to a later date. One thing that’s clear is that carbon prices are growing, and it’s a cost that impacts almost all businesses.

"For those looking to reduce their carbon emissions or become net zero, there are technologies and services that can help. By taking the cost of carbon off the books altogether, firms can avoid the market and hedging bets on how high carbon prices will go.”

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