Britain raises planned floor price for carbon permit auctions

LONDON (Reuters) - Britain will set a 22 pounds ($30.36) a tonne floor price when it begins auctioning permits under its domestic Emissions Trading System (ETS) this year, the government said, an increase of nearly 50% on the level first announced in its ETS plans.

Britain left Europe's ETS at the end of 2020 and has launched its own scheme to put a cost on carbon pollution and encourage companies to reduce the greenhouse gases they emit.

The ETS is part of Britain’s plan to reach a net zero carbon emissions target by 2050 and auctions of permits under the scheme are expected to begin in the second quarter of the year.

"The UK ETS will have a transitional Auction Reserve Price (ARP) of £22, which establishes a minimum price for which allowances can be sold at auctions," the Department for Business, Energy and Industrial Strategy (BEIS) said in an update to its plans.

The government had previously indicated a floor of 15 pounds a tonne would be set.

But since Britain first laid out its plans last June, carbon prices in Europe's ETS have risen more than 50%, hitting a record high above 40 euros a tonne this week.

The British ETS will also include a cost containment mechanism to prevent price spikes.

($1 = 0.7247 pounds)

(Reporting by Susanna Twidale; Editing by David Goodman)