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Carbon price floor could waste up to £1billion

Taxing emissions will do little to reduce carbon and could damage the reputation of climate change policy, according to the Institute for Public Policy Research (IPPR).

The Government’s Energy Bill was released today, and included plans to penalise power companies for high levels of carbon emissions.

However, the IPPR believes that a different approach to raising the carbon price is needed, and is calling for the creation of a European Carbon Bank to manage the price at an EU-level.

The IPPR supported the government’s ambition to to meet CO2 targets and ensure security of supply, they are critical of the Energy Bill, which has been beset with delays, and specific measures which could raise concerns over rising energy costs.

Will Straw, IPPR Associate Director said: “The Carbon Price Floor risks giving energy and climate change policy a bad name because it will do nothing to reduce carbon emissions while piling more cost on to the shoulders of already hard-pressed consumers in the UK.

“Because a floor price for carbon in the UK will depress the carbon price elsewhere in Europe, the UK will effectively hand over billions to European polluters. At a time of austerity and efficiency, wasting £1 billion is inexcusable. Instead, we should be pushing for an EU-wide carbon price floor.”

Modelling, published by IPPR last year, suggested that unilaterally introducing a floor price for carbon in Britain will undermine the economic efficiency of the EU Emissions Trading Scheme and could waste up to £1 billion. Because the market is Europe-wide, a higher price in the UK due to the carbon price floor will lead to a lower price elsewhere and to the same amount of carbon being emitted.

The scheme will be open to annual scrutiny and potential change through the annual Budget, in the same way as fuel duty. This means the Government’s claim that the scheme will help provide certainty for investors who want to build nuclear power stations or install renewable energy technology is undermined.

This was posted in Bdaily's Members' News section by Ruth Mitchell .