The British government announced on Thursday that it will abolish the Carbon Price Support (CPS) tax from April 2028. The move is designed to lower electricity bills for households and businesses as domestic energy prices prepare for a sharp increase this July, driven by wholesale market volatility linked to the Iran conflict.
Introduced in April 2013, the CPS was a cornerstone of Britain’s climate policy, designed to make fossil fuel power generation—particularly coal—financially unviable. The tax was previously frozen at £18 per metric ton of carbon dioxide, a rate that fossil fuel generators paid in addition to costs incurred under the UK’s Emissions Trading System (ETS).
With the closure of Britain’s last coal-fired power plant in 2024, ministers argue the tax has fulfilled its primary objective.
“CPS has done its job and is no longer fit for purpose. Coal has been driven off the grid,” said Dan Tomlinson, Exchequer Secretary to the Treasury, in a written statement to parliament. “With our Clean Power 2030 mission, we are already reducing our electricity system’s reliance on volatile fossil fuels and we no longer need this additional tax to provide incentives in the system to decarbonise our grid.”
Industry analysts suggest the removal of the tax could have a tangible impact on retail prices. According to data from Bernstein, the CPS currently adds approximately £7 per megawatt hour to wholesale prices. Scrapping the levy is expected to save the average household roughly £21 per year on their electricity bills.
“The removal of the Carbon Price Support represents a positive step towards lowering retail electricity prices,” noted Pranav Menon, Senior Research Associate at Aurora Energy Research.
The decision comes as the government intensifies its focus on the Clean Power 2030 mission, aiming to largely decarbonise the electricity sector through a rapid expansion of renewable energy sources.
