Britain's green credibility gap

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UK Prime Minister Sir Keir Starmer has announced his resignation. Although nominations for the next leader are due by 9th July, the absence of any meaningful competition means that former mayor of Greater Manchester Andy Burnham, is almost certain to become the seventh UK leader in the past 10 years.

The immediate concern for UK carbon market participants was always going to be whether a leadership contest would have any ramifications for the EU-UK summit. It's here where the two sides were expected to confirm a formal link between the two emissions trading systems. ETS linkage is part of a broader package of measures including agreements on food standards, steel tariffs, and a Youth Mobility Scheme.

Only last week the summit was postponed from 13th July to 22nd July. However, in light of yesterdays resignation announcement, Antonio Costa the President of the European Council, has now stated that the event will be postponed (date TBC). The Labour Party's electoral rules has thrown a spanner in the works. The most likely outcome is that Burnham will be the only MP with enough nominations (88% implied probability at the time of writing). If that's the case then he will probably become Britain's next Prime Minister on around the 16th or 17th July.

On a day when the EUA price jumped 1% to more than €81, the UKA price fell 2% to £58.50 (€67.80) as traders digested the latest bout of political uncertainty. It means that the UKA-EUA discount has widened from 14% (~€11) on Friday to 17% (€13.70) at the close on Monday evening.