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Traders, Steel, Green Groups Oppose U.K. Carbon Tax
Feb. 15 (Bloomberg) --Emissions traders, steel makers and environmental groups are opposing the carbon tax that the U.K. proposed to pay for new power sources and cut greenhouse gases.
Britain, seeking private financing for nuclear stations and other forms of low-carbon generation, proposed last year a CO2 charge when the price of European Union permits falls below a set level. The environmental groups WWF and Greenpeace said the plan may result in a “windfall” of as much as 3.4 billion pounds ($5.5 billion) for existing nuclear power stations, most of them owned by EDF SA and Centrica Plc.
The International Emissions Trading Association, a Geneva- based trading lobby, said the CO2 floor proposal showed a “serious lack of trust” in the EU’s emissions program. A carbon tax would be less effective than the EU’s cap-and-trade system in encouraging companies to reduce emissions, according to a risk manager at Summit Energy Inc. in Waregem, Belgium.
“With a fluctuating carbon market price, a company needs to take the best hedging to achieve its objective and manage its carbon exposure,” Summit’s Sebastien Terryn said today in an e- mail. “The current system creates the best incentive to reduce carbon emission on a global level.”
Europe’s emissions trading system limits greenhouse gases from more than 11,000 factories and power stations and allows them to trade permits to comply with the restrictions. EU permits for delivery in December fell 0.3 percent to 14.84 euros a metric ton as of 4:20 p.m. on London’s ICE Future’s Europe exchange. The contracts have gained 4 percent from the end of last year.
‘Costly Tax’
The U.K. “failed completely” to recognize the harm that more CO2 fees would do to energy-intensive industries, according to the London-based association for steel makers.
“The imposition of yet another new and costly tax will make it increasingly difficult for U.K. steel makers to compete,” Ian Rodgers, director of U.K. Steel, said by e-mail today. “We are as keen as the government to green the economy, as these new technologies will require large amounts of steel.”
The U.K. outlined three scenarios starting in 2013 that would effectively set the floor price of carbon at 20 pounds to 40 pounds a metric ton. A carbon price of 40 pounds by 2020 would “result in windfall profits of 3.43 billion pounds between 2013-2026,” according to a joint statement from WWF and Greenpeace sent by e-mail yesterday.
‘Seems Crazy’
“At a time of fiscal austerity and rising energy bills, it seems crazy to be introducing a policy that gives huge windfall profits to the existing nuclear generators, especially when this sector has been bailed out by the taxpayer on several occasions,” Nick Molho, head of energy policy at WWF’s U.K. unit, said in the statement.
The fee would be a consumer levy that would raise costs for generating electricity from coal and natural gas. The U.K. would implement this by shifting taxes to high-emitting generators to give long-term incentives for low-carbon alternatives. The increased cost for carbon would likely be passed along into electricity bills. The tax shift will be part of legislation later this year.
The plan was outlined last May by the Conservative-Liberal Democrat coalition. Lawmakers support the idea because it will provide revenue for the government in addition to reducing emissions, according to Tim Yeo, chairman of Parliament’s Energy and Climate Change Committee.
No New Taxes
“I think there is still support for a carbon floor.” Yeo, a member of the Conservative party, said in an interview today at Westminster. “A carbon floor gives some of the benefits a carbon tax would give. I don’t think there’s much appetite for a new tax right now either here or elsewhere, but a carbon floor does help to address that.”
The region’s carbon market was valued at 80 billion euros ($108 billion) last year, according to Bloomberg New Energy Finance. The U.K. policy may “undermine market confidence and will impact on supply and demand balances” in the EU system, according to IETA.
“The government should find ways to prevent these windfall profits, and use the revenue to help householders reduce their energy needs,” Molho said. The environmental groups suggested the money be channeled into the government’s Green Investment Bank. The windfall figure is based on an average number of operational hours for existing atomic stations and takes into account when stations are due to close, the statement said.
To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net
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