By Susanna Twidale
LONDON, April 16 (Reuters) – Britain’s carbon tax on electricity generation will be scrapped from April 2028, the government said on Thursday as it seeks to curb electricity prices for households and businesses.
Domestic energy prices are expected to soar from July following wholesale energy prices which have risen due to the Iran conflict and as the regulator’s price cap enters a new pricing quarter from July to September.
Britain introduced the tax, called the Carbon Price Support, on emissions from power plants in April 2013 as part of its efforts to meet climate targets, by making polluting fossil fuel power production, particularly coal, more expensive.
“The removal of the Carbon Price Support represents a positive step towards lowering retail electricity prices,” Pranav Menon, Senior Research Associate, Aurora Energy Research, said in an emailed statement.
The government had frozen the tax at 18 pounds ($24) per metric ton of carbon dioxide until April 2028, in last year’s budget.
“CPS has done its job and is no longer fit for purpose. Coal has been driven off the grid,” Dan Tomlinson, exchequer secretary to the treasury, said in a written statement to parliament announcing the change.
Britain’s last coal-fired power plant closed in 2024 and the government has been ramping up renewable power as it strives to meet a target to largely decarbonise its electricity sector by 2030.
“With our Clean Power 2030 mission, we are already reducing our electricity system’s reliance on volatile fossil fuels and we no longer need this additional tax to provide incentives in the system to decarbonise our grid,” Tomlinson said.
The tax is paid by fossil fuel electricity generators on top of costs under the country’s Emissions Trading System, where benchmark prices currently trade around 49 pounds per ton.
Analysts at Bernstein said the CPS adds around 7 pounds per megawatt hour to wholesale electricity prices with the scrapping of the tax equating to a cost saving of around 21 pounds per year on an average household electricity bill.
($1 = 0.7381 pounds)
(Reporting by Susanna Twidale; Editing by Toby Chopra, Emelia Sithole-Matarise and Andrew Heavens)
