<article><section><p>Environment analysis: Simon Tilling and Stephen Lavington, partner and senior associate respectively in Burges Salmon’s environment and climate change team, discuss the government’s recent carbon emissions tax consultation</p><h2>What is the background leading up to this consultation?</h2><div><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">The </span><a id="ORIGHIT_6" name="ORIGHIT_6" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_6" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">Carbon </span><a data-sf-ec-immutable="" id="ORIGHIT_7" name="ORIGHIT_7" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_7" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">Emissions </span><a data-sf-ec-immutable="" id="ORIGHIT_8" name="ORIGHIT_8" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_8" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">Tax (CET) was first announced in the 2018 budget as a contingency measure in the event of a no-deal Brexit. Had the UK left the EU with no deal it would have immediately ceased participation in the EU </span><a data-sf-ec-immutable="" id="ORIGHIT_49" name="ORIGHIT_49" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_49" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">Emissions Trading Scheme (EU ETS). In those circumstances, the UK </span><a data-sf-ec-immutable="" id="ORIGHIT_50" name="ORIGHIT_50" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_50" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">government would have implemented CET to ensure the continuity of </span><a data-sf-ec-immutable="" id="ORIGHIT_51" name="ORIGHIT_51" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_51" style="font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;"></a><span style="background-color:transparent;color:inherit;font-family:inherit;font-size:inherit;text-align:inherit;text-transform:inherit;white-space:inherit;word-spacing:normal;caret-color:auto;">carbon pricing across the UK.</span><br></div></section><p>In accordance with the EU-UK Withdrawal Agreement, the UK will remain part of EU ETS until the transition period for leaving the EU ends on 31 December 2020. The <a data-sf-ec-immutable="" id="ORIGHIT_52" name="ORIGHIT_52"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_52"></a>government has already stated its intention to continue <a data-sf-ec-immutable="" id="ORIGHIT_53" name="ORIGHIT_53"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_53"></a>carbon pricing (which forms an essential part of meeting its ambitious 2050 <a data-sf-ec-immutable="" id="ORIGHIT_9" name="ORIGHIT_9"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_9"></a>net<a data-sf-ec-immutable="" id="ORIGHIT_10" name="ORIGHIT_10"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_10"></a>-<a data-sf-ec-immutable="" id="ORIGHIT_11" name="ORIGHIT_11"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_11"></a>zero target) and so will need to implement a replacement regime.</p><p>As outlined in the 2019 <a data-sf-ec-immutable="" id="ORIGHIT_54" name="ORIGHIT_54"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_54"></a>consultation, on ‘The Future of UK <a data-sf-ec-immutable="" id="ORIGHIT_55" name="ORIGHIT_55"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_55"></a>Carbon Pricing’ and the <a data-sf-ec-immutable="" id="ORIGHIT_56" name="ORIGHIT_56"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_56"></a>government response document published on 1 June 2020, the preferred alternative to the EU ETS is a UK <a data-sf-ec-immutable="" id="ORIGHIT_57" name="ORIGHIT_57"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_57"></a>emissions trading scheme (UK ETS).</p><p>If it is not possible to put a UK ETS in place (either on a standalone basis or linked with the EU), the current intention of the <a data-sf-ec-immutable="" id="ORIGHIT_58" name="ORIGHIT_58"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_58"></a>government is to implement CET. This <a data-sf-ec-immutable="" id="ORIGHIT_59" name="ORIGHIT_59"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_59"></a>consultation paper details the <a data-sf-ec-immutable="" id="ORIGHIT_60" name="ORIGHIT_60"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_60"></a>government’s proposals for the operation of CET, building on the legislative framework for the <a data-sf-ec-immutable="" id="ORIGHIT_61" name="ORIGHIT_61"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_61"></a>tax already contained in the <a data-sf-ec-immutable="" href="https://www.lexisnexis.com/uk/lexispsl/energy/docfromresult/D-WA-A-AWW-AWW-MsSWYWD-UUA-UZEYAAUUW-U-U-U-U-U-U-AZUAYBCVZA-ACEEVAZWZA-ZADUBYZW-U-U/1/linkHandler.faces?psldocinfo=Incentivising_net_zero_an_analysis_of_the_government_s_carbon_emissions_tax_consultation&linkInfo=F%23GB%23UK_ACTS%23num%252019_1a_Title%25&A=0.629263770940773&bct=A&risb=&service=citation&langcountry=GB" target="_parent">Finance Act 2019</a> (<a data-sf-ec-immutable="" href="https://www.lexisnexis.com/uk/lexispsl/energy/docfromresult/D-WA-A-AWW-AWW-MsSWYWD-UUA-UZEYAAUUW-U-U-U-U-U-U-AZUAYBCVZA-ACEEVAZWZA-ZADUBYZW-U-U/1/linkHandler.faces?psldocinfo=Incentivising_net_zero_an_analysis_of_the_government_s_carbon_emissions_tax_consultation&linkInfo=F%23GB%23UK_ACTS%23num%252019_1a_Title%25&A=0.06223705701359439&bct=A&risb=&service=citation&langcountry=GB" target="_parent">FA 2019</a>).</p><h2>What provisions have already been made in FA 2019 with regard to the <a data-sf-ec-immutable="" id="ORIGHIT_12" name="ORIGHIT_12"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_12"></a>carbon <a data-sf-ec-immutable="" id="ORIGHIT_13" name="ORIGHIT_13"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_13"></a>emissions <a data-sf-ec-immutable="" id="ORIGHIT_14" name="ORIGHIT_14"></a><a data-sf-ec-immutable="" _.hitnav="Y" name="HIT_14"></a>tax?</h2><p><a data-sf-ec-immutable="" href="https://www.lexisnexis.com/uk/lexispsl/energy/docfromresult/d-wa-a-aww-aww-msswywd-uu data-sf-ec-immutable="" href=""></a data-sf-ec-immutable="" href="https://www.lexisnexis.com/uk/lexispsl/energy/docfromresult/d-wa-a-aww-aww-msswywd-uu></p></article>
Source: LexisNexis Purpose Built
Incentivising net zero—an analysis of the government’s carbon emissions tax consultation
