A tax on carbon dioxide emissions in Great Britain,
introduced in 2013, has led to the proportion of electricity
generated from coal falling from 40% to 3% over six years,
according to research led by UCL.
British electricity generated from coal fell from
13.1 TWh (terawatt hours) in 2013 to 0.97 TWh in September 2019,
and was replaced by other less emission-heavy forms of generation
such as gas. The decline in coal generation accelerated
substantially after the tax was increased in 2015.
In the report, ‘The Value of International
Electricity Trading’, researchers from UCL and the
University of Cambridge also showed that the tax – called Carbon
Price Support – added on average £39 to British household
electricity bills, collecting around £740m for the Treasury, in
2018.
Academics researched how the tax affected electricity
flows to connected countries and interconnector (the large cables
connecting the countries) revenue between 2015 – when the tax was
increased to £18 per tonne of carbon dioxide – and 2018.
Following this increase, the share of coal-fired electricity
generation fell from 28% in 2015 to 5% in 2018, reaching 3% by
September 2019. Increased electricity imports from the
continent reduced the price impact in the UK, and meant that some
of the cost was paid through a slight increase in continental
electricity prices (mainly in France and the
Netherlands).
Project lead Dr Giorgio Castagneto Gissey (Bartlett
Institute for Sustainable Resources, UCL) said:
“Should EU countries also adopt a high carbon tax we
would likely see huge carbon emission reductions throughout the
Continent, as we’ve seen in Great Britain over the last few
years.”
Lead author, Professor David Newbery (University of
Cambridge), said: “The Carbon Price Support
provides a clear signal to our neighbours of its efficacy at
reducing CO2 emissions.”
The Carbon Price Support was introduced in England,
Scotland and Wales at a rate of £4.94 per tonne of carbon
dioxide-equivalent and is now capped at £18 until 2021.The tax is
one part of the Total Carbon Price, which also includes the price
of EU Emissions Trading System permits.
Report co-author Bowei Guo (University of Cambridge)
said: “The Carbon Price Support has been instrumental in driving
coal off the grid, but we show how it also creates distortions to
cross-border trade, making a case for EU-wide
adoption.”
Professor Michael Grubb (Bartlett Institute for
Sustainable Resources, UCL) said: “Great
Britain’s electricity transition is a monumental achievement of
global interest, and has also demonstrated the power of an
effective carbon price in lowering dependence on electricity
generated from coal.”
The overall report on electricity trading also covers
the value of EU interconnectors to Great Britain, measures the
efficiency of cross-border electricity trading and considers the
value of post-Brexit decoupling from EU electricity
markets.
The report annex focusing on the Carbon Price Support
was produced by UCL to focus on the impact of the tax on British
energy bills.
The findings from UCL and the University of Cambridge
were part of wider research to examine cross-border electricity
trading between Great Britain and connected EU markets,
commissioned by energy regulator Ofgem to inform its annual
flagship State of the Energy Market report.
