The British wind and solar farms exporting power to continental Europe could face CO2 fees from 2026 under the European Union’s Carbon Border Adjustment Mechanism (CBAM), even though they don’t produce any emissions. This has raised concerns among industry sources and analysts, who warn that the move could penalise clean power, increase EU power prices, and even lead to higher emissions.
The CBAM will impose a CO2 emissions fee on imports to the EU of steel, cement, aluminium, fertilisers, electricity, and hydrogen, unless the exporting nation has equal CO2 pricing policies. Under the current design, the CO2 fee for power would be calculated using a default value based on average and historic power generation emissions, which the British energy industry says will unfairly penalise renewables.
Adam Berman, deputy director of industry group Energy UK, described the issue as “a problem on both sides,” as it “disincentivises clean power in the UK at the moment in which we’re trying to ramp up provision of clean power, and it’s going to increase (power) prices in northern Europe.”
The extra cost of the charge could make it uneconomic to export excess clean power from Britain to Europe at certain times when demand is weaker, renewables generation is high, and power prices are low. Analysis from Aurora Energy Research suggests that as much as 3 gigawatt hours (GWh) of renewable power generation, enough to power up to 2,000 homes a year, could be curtailed by 2030 if the fee proves a disincentive to exporters.
The reduced access to cheap British electricity could increase wholesale power prices by up to 4% in markets like Ireland and Northern Ireland’s Integrated Electricity Market, which import a lot of power from the UK. If European countries boost coal and gas power generation to make up the shortfall, CO2 emissions could even rise by as much as 13 million tonnes a year, equivalent to the emissions of 8 million cars.
The UK government and the European Commission have acknowledged the issue and are in discussions to find a solution. The Commission has stated that renewable power exports will be able to avoid the CO2 fee if they can comply with certain criteria and prove their origin. However, industry figures say that could be challenging, as most of the electricity traded across interconnectors is done so anonymously.