Press Story

A tax on the emissions of power companies contained in today's Energy Bill will do nothing to reduce carbon and threatens to damage the reputation of policies aimed at tackling climate change, according to IPPR.

IPPR argues for a different approach to raising the carbon price and raising certainty for investors that would see the creation of a European Carbon Bank to manage the price at an EU-level.

Will Straw, IPPR Associate Director, said:

"While the ambition to meet CO2 targets and ensure security of supply is correct, the Energy Bill has been beset by delays while specific measures within the package could raise voters' concerns about their number one issue, rising energy costs.

"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.

Notes to Editors

The Carbon Price Floor is part of the draft Energy Bill, published today: http://www.decc.gov.uk/en/content/cms/news/pn12_062/pn12_062.aspx

Analysis by IPPR on the Carbon Price Floor is contained in 'Hot air' by Dominic Maxwell, which is available to download from: http://ippr.org/publication/55/7629/hot-air-the-carbon-price-floor-in-the-uk

Forthcoming research from IPPR, 'Europe's Next Economy,' argues for a European Carbon Bank. A central Carbon Bank could have a simple goal of ensuring that emissions reduction targets were being met, with the auction of ETS allowances as its instrument. If prices were seen as too low to achieve the goal, the Carbon Bank could hold back allowances. By contrast, it could issue allowances if the market got over-heated with the price rising too high.

Contacts

Richard Darlington, 07525 481 602 / r.darlington@ippr.org

Tim Finch, 07595 920 899 / t.finch@ippr.org