UK coal decline due to carbon tax, report finds

17th February 2020 | Commercial Energy

The UK’s sharp decline in coal use is largely down to the coal carbon tax, according to researchers at University College London (UCL) and the University of Cambridge. British electricity generated from coal fell from 13.1 TWh (terawatt hours) in 2013, to 0.97 in 2019, and in June last year, (2019), the UK went without coal-fired power for a record-breaking 18 days and 6 hours.

According to the report “The Value of International Electricity Trading” the researchers say that this decline is largely due to the Carbon Price Support coal tax that was introduced in 2015. The tax was introduced at a rate of £4.94 per tonne of CO2 and is now capped at £18 per tonne until 2021. The tax is one part of the Total Carbon Price, which also includes the price of EU Emissions Trading System permits.

Carbon tax

Following the price increase, the share of coal-fired electricity generation fell from 28% to 5%, reaching a low of 3% by September 2019. In the report, the researchers also show that the tax added on average £39 to British household electricity bills, collection around £740m for the treasury in 2019.

Increased electricity imports from across Europe reduced the price impact on the UK and meant that some of the cost was paid through a slight increase in continental electricity prices, mainly in France and the Netherlands. Project leader Dr Giogrio Castagneto Gissey, from UCL, said, “Should EU countries also adopt a high carbon tax w would likely see huge carbon emission reductions throughout the continent, as we’ve seen in the UK over the last few years.”

Professor David Newbery, University of Cambridge, said, “The Carbon Price Support provides a clear signal to our neighbours of its efficiency at reducing CO2 emissions.” These findings were part of wider research to examine cross-border electricity trading between UK and EU markets, the report was commissioned by the energy regulator Ofgem to inform its annual State of the Energy Market report.

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