The Government will scrap the Carbon Price Support (CPS) that places a levy on fossil fuel power stations for emissions as the cost of energy continues to rise and places the UK at a competitive disadvantage as well as driving up energy poverty.

The levy should cease from April 2028, having ’done its job’ by helping close all the UK’s coal powered stations, but as energy prices soar the potential of reducing costs two years in the future may not win universal accolades with struggling businesses.

Commenting on the announcement Tom Cantillon, senior analyst at the Energy and Climate Intelligence Unit (ECIU), said: "The Carbon Price Support has been a quiet success story of UK carbon pricing, driving coal from generating nearly 40 per cent of UK electricity generation to zero in a little over ten years. The question now is one of sequencing. Remove the CPS before UK-EU ETS linkage is in place, and British electricity exports will be subject to EU carbon charges at the border. That means carbon revenues flowing to EU coffers."

The EU has also been considering watering down its own emissions tariffs.

Meanwhile, Rachel Reeves, also spooked by high energy costs, has been talking of ditching the link between electricity and gas prices at an IMF meeting in Washington, but exactly how wholesale electricity would be then priced is unclear.

Currently the UK, like most of the Continent, prices its generation on the highest cost of operational production that would be needed to meet demand, usually this is gas when considering extra emissions taxes (see above for possible changes there) and ignores capital expenditure.

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