Isra-Mart srl : Britain May Raise Its Carbon Tax to Maintain EU Premium, Citigroup Says

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The U.K. government may raise its carbon tax to ensure a premium over European Union emissions permits that will give revenue, according to Citigroup Inc. (C)

“It is clear that the setting of each year’s tax rate is subject to ministerial discretion,” analysts including Meg Brown in London said in an e-mailed report yesterday. “So the government does have the option to set it at a premium to the EU carbon price regardless of where that price is. Without a premium there is no tax revenue for the government.”

Chancellor George Osborne fixed March 23 the carbon tax at 4.94 pounds ($7.94) a metric ton in 2013. That’s based on a 16 pound floor, using 2009 prices, which rises to 30 pounds by 2020. The Treasury will publish details of the tax next week in its response to a carbon price support consultation that ran in the two months through Feb. 17.

European Union permits for December 2013 pared this month’s gains, falling 2.3 percent to 18.43 euros ($26.10) a metric ton yesterday on London’s ICE Futures Europe exchange.