The short answer: there is more than one carbon price
A carbon price puts a cost on each tonne of greenhouse gas released, so that polluting costs more and cleaner options become cheaper by comparison. In the UK several prices sit side by side.
| Price | Who pays | Latest official figure |
|---|---|---|
| UK ETS allowance (UKA) | Power stations, heavy industry, airlines, larger ships | £63.94 monthly average, October 2026 |
| Carbon Price Support | Fossil fuel power generation in Great Britain | £18 per tonne of CO2, until April 2028 |
| EU ETS allowance (EUA) | Covered emitters in the EU, Iceland, Liechtenstein and Norway | €82.32 CBAM certificate price for Q3 2026, based on EU auctions |
| UK CBAM | Importers of aluminium, cement, fertiliser, hydrogen, iron and steel | Illustrative rates only, £1.45 to £9.79 per tCO2e (HMRC, 16 October 2026); starts 1 January 2027 |
| EU CBAM | EU importers of the same goods plus electricity | Tied to the EU ETS price |
The UK ETS allowance price
The UK Emissions Trading Scheme started on 1 January 2021, when the UK left the EU ETS. It caps emissions from covered sectors and divides the cap into allowances, each worth one tonne of CO2 equivalent.
Allowances are sold at fortnightly auctions on ICE Futures Europe and then traded. No auction can clear below the £28 auction reserve price, which rises to £29.01 on 1 January 2027. Businesses that emit more must buy more allowances, and those that cut emissions can sell spares.
The UK ETS Authority publishes an official monthly average price, based on UKA December futures. It rose from £39.46 in March 2026 to £63.94 in October 2026. The next update is due on 10 December 2026.
Carbon Price Support for power stations
Carbon Price Support (CPS) is a tax on fossil fuels used to generate electricity in Great Britain. It was introduced in 2013 to push the carbon price for power above the trading price. It does not apply in Northern Ireland.
CPS is set at the equivalent of £18 per tonne of CO2. On 16 April 2026 the Treasury confirmed it will be removed from April 2028. It said CPS has done its job, as coal is off the grid and the UK ETS has matured.
The Treasury said removing CPS will also help offset the cost to billpayers of the British Industrial Competitiveness Scheme. That scheme will cut electricity bills for some manufacturers.
The EU carbon price
The EU ETS was the world's first carbon market, launched in 2005. It covers about 40% of EU greenhouse gas emissions, and its cap falls every year in line with EU climate targets.
It operates across the EU plus Iceland, Liechtenstein and Norway, and has been linked to Switzerland's system since 2020.
A simple official guide to the EU price is the CBAM certificate price, which is the average of EU ETS auction prices each quarter. It was €75.36 in Q1, €75.28 in Q2 and €82.32 in Q3 2026.
UK allowances have been trading below EU allowances. ClearBlue Markets put the gap between the two futures prices at about €13.5 a tonne on 6 October 2026. At the next day's high it was about €10.6. The UK and EU are negotiating to link their systems; our UK-EU ETS linking guide explains what that could mean for prices.
Carbon border prices: UK and EU CBAM
A carbon border adjustment mechanism (CBAM) charges importers for the emissions embedded in carbon-heavy goods. It stops foreign producers gaining an edge simply because they face no carbon price at home.
- EU CBAM: in its definitive period since 1 January 2026. EU importers pay a price linked to the EU ETS for steel, aluminium, cement, fertiliser, hydrogen and electricity, including goods from the UK.
- UK CBAM: starts on 1 January 2027 for aluminium, cement, fertiliser, hydrogen, and iron and steel. HM Treasury will set quarterly sector rates based on UK ETS auction prices, reduced for free allocation.
Compliance allowances versus voluntary carbon credits
UK ETS allowances are compliance units: covered businesses are legally required to surrender them. Voluntary carbon credits are different. Companies buy them by choice to support projects that reduce or remove emissions, often to back climate claims.
Voluntary credits cannot be used to meet UK ETS obligations. The UK ETS Authority has said it is not considering including avoided emissions or offsets in the scheme. It is instead working to bring certain greenhouse gas removals into the UK ETS.
Quality in the voluntary market varies. The Integrity Council for the Voluntary Carbon Market (ICVCM) is an independent non-profit body. It sets 10 Core Carbon Principles and lets approved credit categories carry a CCP label.
In November 2024 the UK government published six principles for voluntary carbon and nature markets. They include using credits on top of ambitious cuts in your own value chain, using high integrity credits and making accurate green claims.
Why carbon prices move
- Supply: caps shrink each year. The European Commission says a declining cap signals the long-term scarcity of allowances, while the price itself is set by the market.
- Price controls: the £28 auction reserve price sets a floor at UK auctions. The Cost Containment Mechanism lets the Authority act if prices stay very high.
- Policy news: rule changes and political decisions shift expectations. After press reports of a UK-EU linking deal on 7 October 2026, UKA futures rose 4% above the previous day's settlement, according to ClearBlue Markets.
Prices can swing sharply. The official UK monthly average fell to £39.46 in March 2026, then climbed back to £63.94 by October 2026.
How carbon prices affect bills and businesses
Gas-fired power stations in Great Britain must surrender UK allowances for their emissions and pay Carbon Price Support. The government recognises that these costs have a knock-on effect on wholesale electricity prices and raise retail electricity prices in the short to medium term.
Some energy-intensive businesses can claim help. A government compensation scheme gives eligible firms relief for the indirect UK ETS and CPS costs passed on in their electricity bills.
- Operators in the UK ETS must surrender one allowance per tonne emitted by 30 April each year.
- Importers of CBAM goods will owe UK CBAM from 1 January 2027 once their imports reach £50,000.
- UK exporters of steel, aluminium, cement, fertiliser and hydrogen to the EU face customer requests for emissions data under EU CBAM.
Questions
What is the current carbon price in the UK?
The latest official figure is the UK ETS Authority's monthly average UKA price of £63.94 for October 2026. The November figure is due on 10 December 2026.
What is a UKA?
A UK Allowance, the unit traded in the UK Emissions Trading Scheme. Each one lets the holder emit one tonne of CO2 equivalent.
Is the UK carbon price the same as the EU carbon price?
No. The UK and EU run separate systems and UK allowances have traded below EU allowances. The two sides are negotiating a link between the systems, which had not been officially agreed as of 10 October 2026.
What is Carbon Price Support?
A tax of £18 per tonne of CO2 on fossil fuels used to generate electricity in Great Britain, paid on top of the UK ETS. The Treasury has confirmed it will be removed from April 2028.
Can carbon offsets be used in the UK ETS?
No. Voluntary carbon credits cannot be used to meet UK ETS obligations, and the UK ETS Authority has said it is not considering including offsets.
Does the carbon price affect my electricity bill?
Yes, indirectly. The government says UK ETS and Carbon Price Support costs feed into wholesale electricity prices and raise retail prices in the short to medium term.
Who pays the UK carbon price?
Mainly power stations, heavy industry, airlines and larger ships covered by the UK ETS. From 1 January 2027, importers of some carbon-heavy goods will also pay through UK CBAM.
Sources
- UK ETS Authority: UK ETS policy overview (updated 7 September 2026) (checked 10 October 2026)
- UK ETS Authority: Taking part in the UK ETS markets (updated 10 November 2026) (checked 11 November 2026)
- UK ETS Authority: CCM trigger prices and average monthly prices, full table (updated 10 November 2026) (checked 11 November 2026)
- UK Parliament: Written statement HCWS1519, Carbon Price Support (16 April 2026) (checked 10 October 2026)
- HMRC: Excise Notice CCL1/6, a guide to Carbon Price Floor (checked 10 October 2026)
- DESNZ: Compensation for the indirect costs of the UK ETS and the CPS mechanism, guidance for applicants (checked 10 October 2026)
- European Commission: About the EU ETS (checked 10 October 2026)
- European Commission: Price of CBAM certificates (checked 10 October 2026)
- HMRC: UK CBAM policy summary (updated 9 September 2026) (checked 10 October 2026)
- HMRC: Illustrative CBAM rates and worked example, 16 October 2026 (checked 24 October 2026)
- UK ETS Authority: Integrating greenhouse gas removals in the UK ETS, consultation (May 2024) (checked 10 October 2026)
- ICVCM: The Core Carbon Principles (checked 10 October 2026)
- UK government: Principles for voluntary carbon and nature market integrity (15 November 2024) (checked 10 October 2026)
- ClearBlue Markets (press): UKAs rally 4% on reports of a UK-EU ETS linkage deal, 9 October 2026 (checked 10 October 2026)
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