High Prices Trigger January UK Carbon Market Intervention Threat

UK Carbon Market Intervention Threatened by High Prices

(Reuters) – A mechanism designed to curb costs in Britain’s carbon emissions trading scheme (ETS) has been triggered for January for a second month in a row.

The so-called cost containment mechanism(CCM) was triggered after monthly average UK ETS carbon prices  in October, November and December exceeded the January trigger price of 56.58 pounds ($76.41) per tonne, the scheme’s administrator said late on Friday.

The CCM allows the supply of permits to be increased to help curb high prices and is triggered if average prices remain above a certain level for three consecutive months.

The UK ETS said it will decide on whether to intervene no later than after trade on 18 January.

The mechanism was also triggered for December but led to no action from the authority, which argued the market was functioning effectively.

Intervention options included a redistribution of allowances offered at auction or increasing auction volumes for a calendar year.

Britain began trading carbon permits under its new domestic ETS on May 19, having left the European Union’s ETS since leaving the single market at the beginning of 2021.

The benchmark UK carbon contract hit an all-time high of 79.85 pounds a tonne on Dec. 16 after the previous non-intervention decision.

It closed at 73.80 pounds/tonne on Friday.

($1 = 0.7405 pounds)

(Reporting by Nora Buli in Oslo; editing by Jason Neely)