What is the current UK carbon price?

The UK ETS allowance price fluctuates with market conditions. As of 2024, it has ranged between approximately £30 and £80 per tonne of CO₂e. The UK government also maintains a carbon price floor for the power sector. Check the ICE exchange for current UK ETS prices.

Does the UK have a carbon tax?

The UK does not have a broad-based carbon tax. It uses the UK ETS (a cap-and-trade market) for covered sectors and the Climate Change Levy (CCL) for business energy use. The Carbon Price Support rate applies to fossil fuel electricity generation. Together, these create carbon pricing signals, though not a single unified tax.

Carbon Price

A carbon price is the cost assigned to emitting one tonne of CO₂e, established through compliance markets, carbon taxes, or voluntary market transactions.

What is Carbon Price?

Carbon pricing is a policy tool that puts a direct cost on greenhouse gas emissions, creating a financial incentive to reduce them. The two main mechanisms are emissions trading systems (ETS) and carbon taxes. In an ETS, the government sets a cap on total emissions and allows companies to trade allowances — the market price of an allowance is the carbon price. In a carbon tax, the government sets the price directly per tonne of CO₂e.

The UK has a carbon price through the UK ETS (covering industrial installations and domestic aviation) and the Carbon Price Support (a floor price mechanism for the power sector). As of 2024, the UK ETS price has fluctuated between £30 and £80 per tonne. Globally, over 70 carbon pricing initiatives are in operation, covering approximately 23% of global greenhouse gas emissions.

For businesses, carbon pricing affects energy costs, material costs (for carbon-intensive inputs like steel and cement), and strategic decisions about investment in low-carbon alternatives. Even organisations not directly covered by an ETS or carbon tax may face indirect carbon costs passed through supply chains.

Practical Examples

A UK manufacturer faces a carbon cost of £3 million per year under the UK ETS, incentivising investment in process electrification to reduce allowance purchases.

A construction company sees the price of cement rise as carbon costs under the EU ETS are passed through by suppliers, making lower-carbon alternatives more cost-competitive.

A company models three carbon price scenarios (£50, £100, £200/tCO₂e) in its financial planning to stress-test the business against potential regulatory tightening.

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