Brussels negotiators are seeking to lock Britain into European Union rules on climate change as tensions rise over a future trade deal.
The bloc wants Britain to set up an independent watchdog to ensure it sticks to green commitments and it called on the UK to remain as part of its carbon trading market.
Boris Johnson has repeatedly rejected demands to follow EU regulations as part of a deal, but Michel Barnier has said that so-called level playing field guarantees are “inextricably linked” to striking an agreement.
The UK’s Committee on Climate Change already monitors progress in reducing emissions and reaching targets. The Government would be expected to report such data to Brussels after Brexit, according to the EU’s negotiating mandate.
If targets accepted when the UK was a member state or future agreed goals are not reached, Britain could face punitive measures from the EU – including fines or even the temporary suspension of market access.
The EU wants Britain to consider becoming an associate member of its Emissions Trading System (ETS).
The ETS, the world’s largest carbon market, works by setting a cap on emissions and requiring industry to hold a permit for each tonne of carbon dioxide emitted.
Unused permits can be traded for cash on the market. Member countries are given carbon allowances, which provide revenue when sold to polluting companies.
But membership requires an acceptance of the EU’s rules and close ties to EU climate policy after Brexit.
The Government has not yet decided on a course of action, and a carbon pricing consultation is set to be published in due course.
Other options could be to set up a UK-only carbon market, join another carbon market such as California’s, or introduce a carbon tax.
Before the withdrawal agreement was ratified, Britain made no-deal Brexit plans to replace ETS membership with a carbon tax. Campaigners described the proposals as “woefully inadequate”.
The proposed tax was a flat rate of £16 per tonne of carbon dioxide for 2019. This would have reduced the incentive for polluting companies to switch to greener technologies compared with the higher ETS rate, which is currently £19.66 per tonne and can fluctuate.
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