Following its recent consultation on the future of carbon pricing in the UK the UK government has released a draft order for the establishment of a UK emissions trading system (UK ETS).  The intention is for such a system to be operational for the end of the post-Brexit transition period on 31 December 2020.

Reflecting the conclusions of the consultation, this UK ETS very closely mirrors the EU ETS and the accompanying information memorandum states that duties  under the order are not "significantly more onerous than those imposed by the EU ETS" nor do they "require participants in the UK ETS to adopt significantly different patterns of behaviour".

This is likely connected to the subsequent statement in the memorandum that, "Securing a link with the EU ETS remains the UK Government’s preferred policy position" - a link which will presumably be easier to negotiate where there is minimal divergence between EU and UK ETS.

However, time to the end of the transition period is growing short, and the government has not abandoned its contingency plan for a carbon tax instead of a UK ETS.  Yesterday the UK government announced a consultation to explore how this tax might work.

The consultation does not pose the question of whether or when a carbon tax should be preferred to a UK ETS: the first, and perhaps strongest, indicator for this question will be whether a link with EU ETS can be negotiated.