The UK’s carbon price is trading at £ 50 as the market opens for the first time

The price of carbon in the UK has risen to £ 50 when Britain launched its post-Brexit emissions credit scheme on Wednesday, suggesting that large pollutants will cost more than EU companies without government intervention.

The long-awaited start of UK carbon trading is designed by the government to put a unit cost of CO2 emissions and replace the shareholding that UK companies have established in the EU’s carbon trading system. £ 50.23 per tonne, before falling slightly to £ 50 per tonne.

This price is almost 5 pounds higher than the EU equivalent, as it was marketed on Wednesday morning at 52.40 euros (£ 45.25 per tonne).

It is well above the 44.74-euro threshold set by the UK government to intervene to cool prices if it were to negotiate above that level for more than a few weeks.

Ingvild Sorhus, chief analyst at Refinitiv Carbon Research, said initial “high prices” showed confidence in UK carbon allowances as “attractive assets”, but warned that she expected “nervousness” from market participants because there was “so little supply”.

Even if prices in the UK start above EU prices, “it won’t necessarily stay that way,” he added.

The number of future trades on the platform operated by the London Intercontinental Exchange was relatively small, with only 26 contracts changing hands in the first 30 minutes.

The UK will hold its first bonus auction on Wednesday, but market participants have warned that a smaller market could be more volatile than its EU equivalent.

Carbon prices have risen in recent months as governments have stepped up their emissions reduction targets, from the EU Emissions Trading Scheme of around € 30 per tonne in December last week to € 55 per tonne.

The big gains have made it difficult to launch the UK’s own carbon scheme after leaving the EU in December.

According to the so-called ETS in the UK, which has a detailed model of its European counterpart, it provides a precise setting for large pollutants such as power plants and manufacturers to cover CO2 and other greenhouse gas emissions. If they pollute above that level they have to buy more or if they cut the pollution they can sell it for profit.

Many companies, such as EU steel producers, have warned that the pace of rising carbon prices has been too high in recent months, putting them at a competitive disadvantage against companies outside the scheme.

The EU is looking at a carbon tax, which would ensure that goods imported from countries that do not have a carbon-equivalent price do not put their manufacturers at a disadvantage.

The EU ETS has played a major role as prices have risen in recent years as coal is dumped on the electricity grid, making lower and renewable carbon fuels more attractive.