The Finance Act 2019 covers the implementation of the Carbon Emissions Tax. This Carbon Emissions Tax section was most recently revised in 2020, and is the most up to date version of the original technical note initially published on 29 October 2018 and further amended on 29 March 2019. It sets out further detail on arrangements for carbon pricing and emissions taxing in the event that the UK leaves the European Union (EU) on 31 October 2019 without a deal. In particular it sets out how a Carbon Emissions Tax would be implemented within the context of the UK.
The UK would be excluded from participating in the EU Emissions Trading System (EU ETS) in a ‘no deal’ scenario. However, emission monitoring and reporting requirements for 2019 and beyond would continue, allowing the UK to monitor progress towards its ambitious 2050 net zero target. In addition, a Carbon Emissions Tax would be introduced on emissions of carbon dioxide and other greenhouse gases on a carbon equivalent basis from UK stationary installations (i.e. not including the aviation sector) from 4 November 2019.
The primary aim of the Carbon Emissions Tax would be to maintain a carbon price for sectors that participate in the ETS (but excluding the aviation sector), supporting the UK’s strong environmental signals and goals and contributing towards the UK meeting its specific climate change goals following the conclusion of the transition period. It would also aim to replace the revenue lost from the auctioning of EU Allowances which would result from the UK leaving the ETS. It would maintain similar arrangements for industrial installations deemed to be exposed to significant risk of carbon leakage, to further support their competitiveness.
HM Government remains committed to maintaining the Single Electricity Market (SEM UK) project on the island of Ireland and understands the importance of carbon pricing to this market. In a ‘no deal’ scenario the UK would aim to ensure that carbon pricing does not hinder the effective operation of the market.
Furthermore, this section of legislation applies to any permit holder (or linked third party) of a UK-based stationary installation, including:
