Great Britain introduced a tax, called Carbon Price Support, on carbon dioxide emissions in 2013. The result of imposing this extra expense has been a 92.5% drop in electricity generated from coal – falling from 40% to 3% over six years.
Academics at University College London (UCL) and the University of Cambridge, exposed these statistics along with other relevant information in a report called ‘The Value of International Electricity Trading‘. The purpose of this study was to examine cross-border electricity trading between Great Britain and connected EU markets. However, in the process, it revealed how imposing a tax on emissions works very well.
The report states that British electricity produced from coal power plants fell from 13.1 terawatt-hours in 2013 to 0.97 terawatt-hours in September 2019. It was replaced by less emission-heavy modes of generation, like gas. The decrease of coal-powered generation sped up substantially in 2015 due to a tax increase.
Professor Michael Grubb of 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 tax collected around £740m for the Treasury in 2018 by adding (on average) £39 to British household electricity bills. In 2015, the charge was increased to £18 per ton of carbon dioxide. This affected the revenue of electricity flows to connected countries through interconnectors (the large cables connecting the nations). From the moment the tax increased in 2018 coal-fired electricity generation fell from 28% to 5%. By September 2019, it had reached 3%.
Project lead Dr. Giorgio Castagneto Gissey of 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 of University of Cambridge, added:
The Carbon Price Support provides a clear signal to our neighbors of its efficacy at reducing CO2 emissions.
The tax, together with the price of EU Emissions Trading System permits, is something called the Total Carbon Price.
Report co-author Bowei Guo of 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.
The Carbon Price Support was introduced in Scotland, England, and Wales at a rate of £4.94 per ton of carbon dioxide-equivalent. Now, it’s capped at £18 until 2021.
