Only a government with a profound indifference to the economic welfare of its citizens could contemplate voluntary alignment with the EU Emissions Trading System (EU-ETS). Yet here we are, with ministers preparing to saddle British households and businesses with punishing carbon costs at the moment when economic recovery demands the exact opposite.
The EU-ETS is the cornerstone of Brussels’ climate strategy, imposing a steadily rising price on carbon dioxide emissions. Current prices hover around €80-90 per tonne — significantly higher than the UK’s domestic carbon pricing. Alignment means importing these elevated costs directly into our economy, with electricity prices being the first casualty.
This is economic masochism on an industrial scale
When electricity generators face higher carbon costs, they don’t absorb them out of charity. These costs spread through the economy like a virus, infecting every sector from manufacturing to food production. The result? Higher prices for everything you buy, consume, or use.
This is economic masochism on an industrial scale. While the Treasury might view carbon charges as convenient revenue streams, businesses and consumers experience them as a stealth tax on existence itself. Energy is not a luxury good; it is the fundamental input for all economic activity and modern life.
But the real pain begins in 2027, when the EU’s sequel to its carbon pricing blockbuster arrives. EU-ETS2 extends carbon pricing to buildings and transport fuels. Translated from Brussels-speak, this means your home heating bills and the cost of driving your car will increase substantially as carbon charges are applied to household fuels. The “soft cap” on day 1 of €45 per tonne that ministers tout as some kind of protection will still add approximately 10p to every litre of petrol — around £100 annually per vehicle — and £84 per year to the average gas bill.
That’s just the beginning. EU projections, hardly known for understatement, suggest that carbon prices could reach a staggering €340 per tonne by 2030. At such levels, the impact on lower-income households will be devastating. These families already dedicate a disproportionate share of their income to energy costs. The regressive nature of these charges appears to have escaped the government’s attention entirely. Worse, they might simply not care.
The government’s justification for this self-inflicted economic injury centres on avoiding the EU’s Carbon Border Adjustment Mechanism (CBAM) tariffs, set to begin in 2026. This reasoning collapses under even modest scrutiny.
CBAM is fundamentally a tax paid by EU importers, not UK exporters. It aims to protect EU producers who pay carbon costs by levelling the playing field against imports from countries with lower or no carbon pricing. By aligning with EU-ETS to avoid CBAM, we’re forcing every household and business in Britain to shoulder higher energy costs to benefit a small subset of exporters to the EU.
The economic irrationality is breathtaking and outrageous
This is comparable to requiring everyone in the country to purchase Netflix subscriptions so a handful of viewers can watch shows without individual payments. It is like forcing the entire population to buy premium petrol so a few race car drivers can enter a European competition. The economic irrationality is breathtaking and outrageous.
What makes this particularly galling is that we’re voluntarily adopting a system that many within the EU itself recognise as deeply flawed. Several EU member states have expressed serious reservations about EU-ETS2’s impact on their citizens, already struggling with persistently high energy costs.
By aligning with EU-ETS, we’re effectively handing Brussels the keys to British energy pricing. A foreign power will determine what British households and businesses pay for their energy, with no accountability to UK voters. Brussels designed CBAM to protect their industries, not to help consumers. We are voluntarily submitting to their regulatory framework, surrendering our sovereign ability to set carbon prices according to our own economic circumstances. Truly, this is the worst of all possible worlds.
A rational approach would maintain our independent carbon pricing system at levels that align with our economic interests and industrial competitiveness, then provide targeted support for the small number of exporters potentially affected by CBAM. This would shield British consumers from unnecessary price increases while still supporting our industrial base.
Perversely, our alignment will actually benefit EU consumers at our expense. By joining their carbon market, our additional carbon credits will effectively lower the overall carbon costs within the system. We pay more so they can pay less.
Perhaps most troubling of all is the Prime Minister’s brazen misrepresentation of basic facts to justify this economic self-harm. Keir Starmer recently claimed: “Closer co-operation on emissions through linking our respective Emissions Trading Systems will improve the UK’s energy security and avoid businesses being hit by the EU’s carbon tax due to come in next year — which would have sent £800 million directly to the EU’s budget.”
This is, to put it plainly, a straightforward falsehood. The UK would never send a single penny to Brussels under CBAM. The Prime Minister either does not understand or deliberately misrepresents the fundamental nature of the Carbon Border Adjustment Mechanism. CBAM is an import tax paid by EU importers, not UK exporters. The EU has every right to collect €800 million in new taxes from its own companies if it wishes — that’s their prerogative. What Brussels cannot do is directly tax British companies or the British Treasury.
By repeating this £800 million fiction, the government attempts to frame voluntary alignment as some kind of clever tax avoidance strategy. In reality, it’s exchanging a hypothetical cost affecting a limited number of exporters for a very real, economy-wide burden shouldered by every household and business in Britain.
The current approach sacrifices the many for the few — it is poor economic policy masquerading as climate responsibility. Ministers appear to be so desperate to flaunt their climate credentials in front of their EU masters that they have forgotten that their primary duty is to the economic welfare of British citizens.
At minimum, the government must conduct a comprehensive cost-benefit analysis before proceeding with this alignment. The British public deserves transparency about exactly how much this voluntary carbon straitjacket will cost them, and what, if anything, they stand to gain from it.
If the government truly wants to implement effective climate policy, it must be done thoughtfully, with full consideration of economic impacts. Blindly following Brussels into a carbon pricing regime that will hammer households already struggling with the cost of living isn’t just economically illiterate — it is politically suicidal.
Climate action need not come at the expense of economic prosperity. Unfortunately, the current plan delivers all of the former’s costs with none of its supposed benefits.
