British electricity suppliers are calling for the EU to recognise two separate UK carbon-pricing instruments when determining reductions in CBAM liabilities for electricity exports: the UK Emissions Trading Scheme (UK ETS) and Carbon Price Support (CPS).
Energy UK submitted the request on June 10 in response to the European Commission’s consultation on recognition of carbon prices paid in exporting countries. The submission represents the industry association’s position and does not indicate that the Commission has accepted the proposed treatment.
The industry group argues that UK ETS allowance prices alone do not capture the full carbon costs already imposed on Great Britain’s power generation sector.
UK electricity generators face two carbon charges
Carbon Price Support applies a tax to fossil fuels used for electricity generation in Great Britain. Under HM Revenue and Customs (HMRC) guidance, generators are responsible for accounting for the applicable charge.
The UK ETS operates separately as an emissions-pricing obligation, creating two distinct domestic mechanisms affecting the carbon cost of power generation.
Energy UK wants both instruments considered when determining the carbon price that can qualify for recognition against the EU CBAM charge. The request concerns the treatment of carbon costs already paid in the exporting jurisdiction rather than a change to the electricity volumes subject to the mechanism.
Industry challenges annual pricing methodology
Energy UK also raised concerns about the use of annual carbon-price and exchange-rate averages in calculating the relevant carbon cost.
The association said annual averages can create uncertainty for short-term interconnector electricity trades, because the carbon liability assumed when a transaction is executed may differ from the amount ultimately established for CBAM compliance.
It called for greater alignment between CBAM calculations and electricity-market timeframes, as well as clearer rules around the EU requirement for the importer responsible for the electricity transaction.
The group also asked the EU to consider netting electricity imports against exports, rather than applying the assessment to gross flows without adjustment.
Carbon-price recognition and flow assessment are separate issues
The proposals cover different elements of the CBAM calculation. Recognition of an additional UK carbon charge concerns the cost already paid on emissions, while netting imports against exports would affect the electricity volume used for assessment.
Recognition of both the UK ETS and Carbon Price Support would therefore address only the carbon-cost component of the proposed treatment and would not, by itself, resolve questions concerning the volume or timing of interconnector transactions.
For electricity traded through interconnectors, Energy UK’s submission focuses on establishing a consistent relationship between the carbon cost incurred in Britain and the electricity bought and sold across the border. Recognition of both domestic carbon-pricing instruments would address one element of that calculation, while the remaining CBAM requirements would continue to apply.
