Britain is threatening the future of EU climate change legislation after a ‘Brexit no deal’ clause was added to a bill being voted on in Brussels this week.
The clause would ban British industry from selling its carbon emission allowances on the market after Brexit in the event of no deal.
British representatives could back a Polish-led coalition of coal-addicted countries against members including Germany, France and the Netherlands to scupper the bill, which would delay reforms to the Emissions Trading System (ETS).
If the bill fails to pass, it would be the first time Britain has used its voting powers in the EU as an outlet for its frustrations with the deadlocked Brexit negotiations.
One EU source said: “Britain is threatening to vote against the bill. British officials are trying to find ways to avoid a stand-off but they are under political orders from London.
“This isn’t about climate, it’s about money, power and Brexit,” a second source said, “This is a crisis which could delay or wreck these vital reforms, years in the making, to drive up the carbon price by reducing allowances on the market.”
Each year the EU distributes carbon allowances to its members to sell to industry. Unused carbon permits, each equivalent to a million tonnes of carbon emissions, can be traded on the market as an incentive for polluting industries to go green.
The ‘Brexit clause’ would stop ‘British’ carbon allowances flooding the market in the event of a ‘no deal’, when Britain would leave the ETS, as this would further depressing the already low price per permit of around €7, which plummeted from a 2008 high of €30 after a glut of allowances were released.
On Friday in Gothenburg, Sweden, European Council President Donald Tusk warned Theresa May, who has already offered Brussels €20 billion to begin talks, that more progress was needed on the Brexit bill and Ireland to break the deadlock.
The same day, at a UN climate change conference in Bonn, Germany, Britain refused to budge after coming under sustained pressure from Germany, France, the Netherlands and the European Commission to cave over the clause.
If the reforms are voted down, the legislation would face a time-consuming “second reading” in the European Parliament and Council of Ministers, which must ultimately agree an identical text. Countries hostile to the reforms will be further emboldened by Britain’s defection to water down the new version of the bill.
One EU diplomat said efforts were underway to lure Bulgaria and Romania away from the blocking minority, while another told the Sunday Telegraph that he was “not surprised” by the British stance.
Britain, which has vowed to live up to its UN climate commitments under the Paris Agreement, has put forward an alternative proposal to push back the annual day for allowance distribution to after Brexit day. UK officials argue the Brexit clause will sap confidence in the market, which is based on the source of allowances remaining secret.