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Coal pollution may rise in UK if Brexit comes without a deal: analysts

London

BRITAIN'S pollution levels would probably rise if the country crashes out of the European Union without a deal, breaching a key pledge Prime Minister Theresa May has made to rein in emissions.

That's the conclusion of Bloomberg NEF, which forecast that burning coal would increase in the UK in the first quarter of next year if a no deal Brexit became likely. Without a deal, Britain would also exit the EU's carbon market on March 29, which the government in London has said it will replace with a tax on emissions.

A loophole in the design of the EU ETS means that UK polluters would have an incentive to sell off their carbon allowances in the three months before Britain leaves the EU. That would cause carbon and power prices to sink, encouraging the burning of coal, according to Jahn Olsen, an analyst at the London-based researcher.

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"The only way the Treasury can fix this problem is to avoid a hard Brexit," Mr Olsen said in an interview.

Mrs May's government has pledged to cut pollution and encourage renewables in its effort to meet targets in the Paris Agreement on climate change. The UK government has said it will introduce a tax on carbon of £16 (S$28) a tonne to replace the ETS in the event of no deal. British polluters also pay £18 a tonne under the UK's carbon floor support programme, which will remain in place regardless of the outcome.

"We are deeply committed to domestic and international efforts to tackle climate change, and this will not change in the event of a No Deal exit from the European Union," a Treasury spokesman said in an e-mail.

Mr Olsen said utilities would burn more coal in the first quarter of 2019 if no deal looked likely. That's the coldest part of the year, when demand for energy peaks. The result would be an additional six million tonnes of carbon emissions. BLOOMBERG