Reported in yesterday’s Guardian:
Two of Britain’s biggest energy companies have called on Philip Hammond to strengthen a carbon tax that has driven a dramatic collapse in coal power generation, arguing it is essential for the shift to cleaner energy.
The carbon tax they’re referring to is the carbon price floor, which currently stands at £18 per tonne of CO2 emitted. The carbon price floor was brought in in 2011 by then chancellor George Osborne, due to the fact that the EU Emissions Trading Scheme (EU ETS), of which the UK is a member, was proving to be ineffective at setting a price high enough to incentivize the switch to cleaner forms of energy generation. Introducing the policy, Osborne said
investment in green energy will never be certain unless we bring some stability to the price of carbon
Which is exactly what these energy companies are now calling for.
We urge you to ensure the UK has a robust and strong carbon price
they’ve told Hammond, and though the government has said it will shut down the last coal fired power stations by 2025, a new report warns that without a robust and strong carbon price, coal could enjoy a resurgence. When introduced, the intention was for the carbon price floor to rise to £30 a tonne in 2020, but it was frozen at £18 in 2015
It’s not just the size of the carbon tax that concerns these companies, they also want to know what’s going to happen to it. Will it remain frozen at £18 or will it rise to the £30 originally planned, or beyond? Drax recently applied for planning permission to convert two of its coal fired units to gas, with gas emitting considerably less CO2 than coal.
At the moment the industry only has sight of the carbon price to April 2021. This is welcome but we now need to understand the trajectory of the UK’s carbon price into the 2020s, particularly as without it generators have less clarity as they seek to deliver a new generation of efficient gas plants in the next Capacity Market Auction in February 2018