Britain risks missing out on gas price ‘lifeline’
Surging carbon taxes will keep energy costs high in UK and Europe, report warns Jonathan Leake Energy Editor
15 January 2026 12:12pm GMT
Related Topics
Britain risks missing out on an economic boost from collapsing gas prices as green levies keep energy costs high, a new report has warned.
A global glut of natural gas will see wholesale prices fall sharply across the UK and Europe, potentially almost halving by the end of the decade, according to leading energy consultancy Wood Mackenzie.
Analysts said falling prices offered “a lifeline” to UK and European heavy industry and “could provide material support”.
However, Britain and Europe risk missing out on the benefit because surging carbon taxes will keep energy costs high. The two main taxes on burning gas for power currently add about £25 per megawatt hour (MWh) to costs in the UK, and the levy is designed to ratchet upwards, potentially doubling by 2030.
Massimo Di Odoardo, vice president of gas research at Wood Mackenzie, said: “UK and European prices are set to almost halve compared to levels in 2025.
“However, lower wholesale gas prices will not fully translate into lower energy bills for industrial users across the EU and UK. Taxes and levies and the need to pay higher prices for carbon emissions will limit some of the reduction.”
The prediction will add to scrutiny of Labour’s net zero plan, which involves racing to eliminate gas from the energy system by 2030. Critics say the artificial deadline is creating high costs for homes and businesses.
Labour is also preparing to link Britain’s carbon taxes to the EU’s, a move that has already led to a jump in costs for industry.
Ed Miliband, the Energy Secretary, has argued that transitioning the UK to green energy will boost energy security and lower bills, but industry leaders warn that even if that happens, it will be too late.
Sir Jim Ratcliffe, chairman of the chemicals conglomerate Ineos, has warned that carbon taxes on oil and gas have left the UK unable to compete with rivals. Ineos shut down its Grangemouth Refinery last year and has warned that its neighbouring chemical works may follow.
The cost of gas and the associated carbon taxes have become a crucial issue for heavy industry. The output of industrial firms such as paper mills, steelmakers, glassblowers and pottery fell by a third between 2021 and 2024 due to high energy prices, according to a recent analysis by the Office for National Statistics.
Wood Mackenzie’s report warned: “The single most important obstacle to increasing European industrial competitiveness going forward is its ambitious decarbonisation agenda.
“Even as natural gas prices fall, industries could face higher overall energy bills.”
Wood Mackenzie’s gas price predictions are based on expectations that global supplies of liquefied natural gas (LNG) will grow faster than demand.
“LNG suppliers, particularly in the US and Qatar, have responded to high gas prices by investing massively in new supply,” its analysts wrote. “Consequently, traded gas prices in western Europe are set to tumble in the coming years as a new wave of LNG supply hits the market.”
Andreas Schröder, head of gas analytics at energy specialists ICIS, backed Wood Mackenzie’s findings. He said recent investment was “likely to result in periods of oversupply, which is broadly positive for European industry as it puts downward pressure on gas prices”.
American gas prices are currently far lower than Europe’s, but are expected to rise because export terminals being built along the US East Coast to export LNG will effectively turn the USA and Europe into a single market, equalising prices. It means US gas prices, which are now less than half those in the UK, are likely to surge 40pc by 2030.
A Government spokesman said its aim remained to cut the UK’s reliance on imported gas.
They said: “We are getting off the rollercoaster of fossil fuel markets controlled by petrostates and dictators, and with our record-breaking renewables auction round, we are taking back control of our own energy. The new renewables we are procuring are 40pc cheaper than new building and operating new gas – and will drive down wholesale prices.”
View this Telegraph (UK) article CLICK HERE
Media Air Base, LLC 
Leave a comment