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EMISSIONS: EU CBAM May Overcharge UK Fossil Fuel Generators

EMISSIONS
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EU-UK power trading may be at risk with the introduction of the EU’s CBAM due to the UK’s high fossil fuel tax not being exempt from CBAM, Barclays said in a note, cited by Bloomberg. 

  • The bank said total emissions-related costs for UK power sector will rise above those in the EU if the UK’s Carbon Price Support (CPS) policy remained at £18/ton CO2e. CPS is a tax for fossil fuel generators, in addition to the UK ETS.
  • Over the past two years, the average UKA discount to EUA was at £18.8/ton CO2e, suggesting UK fossil fuel generators with ETS and CPS obligations were already paying EU ETS equivalent prices.
  • Barclays estimates an increase in total emissions cost of £40/MWh, which would raise power prices by £10/MWh.
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EU-UK power trading may be at risk with the introduction of the EU’s CBAM due to the UK’s high fossil fuel tax not being exempt from CBAM, Barclays said in a note, cited by Bloomberg. 

  • The bank said total emissions-related costs for UK power sector will rise above those in the EU if the UK’s Carbon Price Support (CPS) policy remained at £18/ton CO2e. CPS is a tax for fossil fuel generators, in addition to the UK ETS.
  • Over the past two years, the average UKA discount to EUA was at £18.8/ton CO2e, suggesting UK fossil fuel generators with ETS and CPS obligations were already paying EU ETS equivalent prices.
  • Barclays estimates an increase in total emissions cost of £40/MWh, which would raise power prices by £10/MWh.