Climate change imposes huge costs on society. Yet polluters are often not paying a fair price. This stands in direct contradiction to the ‘polluter pays’ principle that was recently enshrined through the UK’s Environment Act. Carbon pricing, largely through emissions trading schemes and carbon taxes, has long been seen as a way of rectifying this imbalance and encouraging a move away from a high carbon economy.

This report examines the track record of carbon pricing in the UK, its future potential and limitations and the role it should play alongside other policy measures to drive a low carbon, nature rich economy. We call on government to improve the current carbon pricing system by addressing existing shortcomings, set out a renewed vision for carbon pricing and its role in net zero, and use carbon pricing as part of a new, broader industrial strategy.