The United Kingdom has launched its own carbon market, with the first auction of government permits (more than 6 million UK allowances). The benchmark December 2021 UK Allowance (UKA) contract opened at £50.23/t (€58.25/t), while the December 2021 EU Allowance (EUA) contract was trading at €50.86/t. EU ETS prices, which recently reached record - around €57/t - declined by around 10% in mid-May 2021, partly due to the launch of the UK ETS. The UK ETS is not linked to the EU ETS though UK market players are also buying EU allowances (EUAs) as a reference price.
The new emissions trading system (ETS), that will charge power plants and industrial plants for each tonne of CO2 emitted through ICE, will replace the EU ETS that the United Kingdom left at the end of the Brexit transition period in December 2020. Around 83 million of allowances should be available for auction in 2021, which is more than half of the total UK ETS 2021 cap of around 156 million allowances. There will be approximately 40 million allowances allocated for free to stationary installations in 2021. Unlike the EU ETS, the UK ETS sets a minimum price for auctioned permits, at £22/t (€25.5/t), and includes a "cost containment mechanism" to auction more permits to avoid rapid price spikes.
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