Carbon pricing aims to cut emissions

The British government has unveiled plans to use carbon pricing to encourage more industries to slash their emissions output as part of its aim to decarbonize the economy by 2050.

In its Industrial Decarbonisation Strategy paper, the government said it wanted to "use carbon pricing as a tool to send a clear market signal".

The report, released on Wednesday, sets out how the United Kingdom can develop "a thriving industrial sector aligned with a net-zero emissions target", using its "carbon cap and trade" emissions trade system, created to promote cost-effective decarbonization.

The Daily Telegraph said the proposals mean more sectors, "beyond aviation, power generation and other heavy energy users", will be forced to pay for their carbon emissions, and understands the emissions trading program could eventually cover farming, which it said "along with land use, accounts for about 12 percent of the UK's annual emissions".

Introduced post-Brexit, the UK's emissions trading program allows businesses covered by it to emit a fixed amount. They must have permits to cover those emissions, and they can trade these permits with others.

The Department for Business, Energy and Industrial Strategy, or BEIS, said it would use carbon pricing to encourage investors and consumers to choose low-carbon options.

"Throughout the next decade, government will need to help overcome a number of different market failures and barriers to entry that prevent industry from securing investment needed to start the low-carbon transition," BEIS said in the strategy paper.

"This will include consulting on a net zero consistent emissions cap; reviewing the long-term role of free allowances; exploring expanding the scope of the scheme to cover more sectors of the economy and linking with other schemes internationally.

"In the long run, markets will be best placed to determine the most cost-effective pathways to decarbonization," the report said.

Energy minister Anne-Marie Trevelyan said: "The work we do in the next decade will be essential to ensure industry can flourish during its transition to net zero, without moving emissions and businesses abroad."

The Telegraph said the new proposals mean companies may be forced to "swap natural gas for hydrogen and install carbon capture systems", changes that the government concedes may make production processes "more expensive".

"Industry is really willing to play its part but in terms of the additional costs that are incurred there needs to be a policy framework that allows them to remain competitive," Ana Musat, head of policy at the business coalition Aldersgate Group, told the Telegraph.

"It's not necessarily about the costs themselves but it's about how they remain competitive, and making sure they are not undermined by high-carbon, cheaper products coming in from abroad, and that they are still able to export. A lot of heavy industry players are not able to pass on the costs to consumers directly."

The decarbonization strategy builds on the government's 10-point plan for a Green Industrial Revolution and its Energy White Paper, both released late last year.

To meet targets, industry needs to cut emissions by at least two-thirds by 2035 and by 90 percent by 2050 compared with 2018 levels, according to the government.