The Commission for Carbon Competitiveness (where John is a Founding Commissioner) wrote a letter warning the PM to put the brakes on negotiations to rejoin Europe’s Emissions Trading SchemeCamilla TurnerSunday Political Editor
Sir Keir Starmer has been warned not to hand Brussels a “blank cheque” over net zero rules which threaten to “undermine” British business.
The Prime Minister is being urged by his own MPs to put the brakes on negotiations with the European Union (EU), which they fear could have a “damaging” impact on energy-intensive industries in the UK.
In a letter to Downing Street, MPs warn British firms will be placed at a “significant disadvantage” if they are forced to pay additional costs on goods sold abroad, which their international competitors are not subjected to.
Last month, Sir Keir claimed that the UK was no longer “the Britain of the Brexit years”, and argued that Britain must align itself more closely to the EU single market.
He used his speech at the Munich Security Conference to say that Britain will look to grow closer to Europe in economic ties as well as national security.
Ministers are currently negotiating with Brussels to rejoin the EU’s Emissions Trading Scheme (ETS) carbon market, which it left when Brexit took effect at the end of 2020.
Since leaving the EU’s ETS scheme, Britain has set up a similar scheme aimed at incentivising companies to pollute less, but its carbon price is much lower than the EU’s.
Both schemes work by capping total emissions that can be released by polluting industries, which receive permits to emit greenhouse gases known as emissions allowances.
Allowances can be bought and sold on the market. The higher the carbon price, the greater the incentive not to pollute and to sell the allowance instead.
Rejoining the EU ETS will increase the UK carbon price, making it more expensive to pollute. This is aimed at incentivising firms to cut emissions further and faster, which will help reach net zero goals but could increase costs for consumers.
Labour MP Henry Tufnell, chairman of the Commission for Carbon Competitiveness and one of the letter’s signatories, said he supports closer cooperation with the EU.
But he added: “We cannot lock ourselves into paths that do not match our industrial realities or decarbonisation timetables, and over which we have no say.
“We must prioritise and protect British industry in negotiating a linkage agreement with the EU. Getting the substance right is essential for both sides, and mustn’t be sacrificed for the sake of finalising a ‘reset’ deal before the next UK-EU summit in May.
“Labour is the party of working people, and this Government has a moral duty to act and relentlessly support British industry.”
Melanie Onn, a Labour MP and another signatory of the letter, said: “The linkage of the UK and EU ETS schemes should be delayed until we know more about precisely what the impact will be on UK businesses.
“Our manufacturing industry already faces a challenging landscape so they need to be able to fully understand the implications of any deal before one is signed.”
The letter, which was signed by leading members of the Commission for Carbon Competitiveness, urged Sir Keir to delay negotiations with the EU until there is clarity on the impact on British businesses.
The letter went on to say: “The industries we speak to have varying attitudes to the principle of linkage; some are opposed whilst others believe it could bring long-term benefits. There is widespread agreement, however, that a rushed timetable to link both schemes is not sensible.
“There is considerable uncertainty around how EU benchmark reforms may change carbon obligations sector by sector. Indeed, the EU is yet to publish its benchmarks for Phase 5, running post-2030, meaning that the UK will be signing up its industry to a scheme without any knowledge of the emissions targets from 2030 onwards. This would essentially be handing the EU ETS a blank cheque.”
Officials said that they will not offer a running commentary while talks with Brussels are ongoing. But they stressed that any deal will provide “clear benefits” for both British industry and consumers.
Ministers argue that by setting a limit on emissions and creating a carbon price for the power sector, heavy industry and aviation, this incentivises investment in the clean technologies that will power and supply the economy of the future.
They believe that signing a deal with Brussels will make the UK and EU energy markets more efficient and effective, which will reduce costs in the longer term, adding that it could add up to £3.8bn a year to the UK’s economy in the long run.
A government spokesperson said: “We are delivering on our commitment to secure a carbon linking agreement with the EU as soon as possible, which will exempt British businesses from EU charges on £7 billion worth of exports. We won’t comment on ongoing negotiations.”
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