Energy bill update as UK households could face '£200m hike'

A deal between the UK and could add over £200million per year to electricity bills, an energy expert has said. Prime Minister Sir Keir Starmer said on Monday (May 19) that his Government's Brexit "reset" will benefit businesses, consumers and tourists.

Under the , the UK and EU agree to work towards establishing a link between their respective carbon markets through existing emission trading schemes. These are where polluters are required to pay for their planet-warming greenhouse gas emissions.

Firms that emit have to obtain permits from other firms or governments, which can auction them or give them away for free. Companies that think they won't have enough permits have to buy more or cut back on their emissions.

Greenhouse gas-intensive sectors include electricity and heat generation, steel, oil refineries, cement, chemicals, paper, and commercial aviation.

Carbon permits can increase energy bills by raising the cost of generating electricity. The increase then gets passed on to consumers.

The UK Government has insisted closer cooperation on emissions by linking UK and EU Emissions Trading Systems (ETS) will improve Britain's energy security.

It maintained tighter links will help businesses avoid being hit by an EU carbon tax due to come in next year which would have sent £800million directly to the EU's budget.

EU Commission President Ursula von der Leyen said a larger, integrated system would be a "big step forwards" in efforts to decarbonise and create "a level playing-field".

Independent energy consultant, Kathryn Porter, told the move could push up bills. She said that since Sir Keir announced his intention to harmonise the UK and EU ETS, carbon prices in Britain have increased significantly.

Ms Porter added: "Full harmonisation could end up adding more than £200m per year to electricity bills." She said UK carbon prices have been lower as a result of a surplus of permits due to de-industrialisation.

The expert added: "It's hard to see how we will benefit from harmonisation. The 'level playing field' sounds like a mechanism to remove the UK allowances surplus with no benefits to UK consumers."

Energy analyst Andy Mayer from the Institute of Economic Affairs thinktank said: "The smarter strategy would be to retain control of our own carbon policy and cut it drastically to compete with the EU, encouraging jobs and growth, including in low carbon technologies also impacted by high energy prices."

After Brexit, the UK launched its own ETS in 2021 to replace participation in the EU ETS.

Under the UK ETS, the price per tonne of carbon dioxide equivalent for the year beginning January 1, 2025, is £41.84. This compares to £59.75 for current EU ETS permits, according to figures from Trading Economics.