French Power, EDF Shares Drop as Nation Dilutes Carbon Tax Plan

  • France adjusts domestic carbon floor plan of 30 euros a ton
  • EDF declines, seen as sensitive to moves in electricity rates

French power prices extended declines after the nation narrowed the scope of a planned domestic carbon tax to focus on curbing emissions at coal-fired power stations. Electricite de France SA shares fell.

Electricity for delivery in 2018 dropped as much as 2.3 percent after falling 3.2 percent Monday, according to broker data compiled by Bloomberg. France will introduce a floor price on emissions from coal stations starting in 2017, Environment and Energy Minister Segolene Royal said Monday, exempting less polluting natural gas-fired power plants.

French President Francois Hollande said in April that France would unilaterally set a carbon floor tax next year as the collapsing price of European Union carbon permits eroded the penalty for burning fossil fuels. The levy proposed at the time was 30 euros ($33) per metric ton of carbon dioxide, more than six times the value of EU allowances, which have slumped by more than 80 percent since 2008.

“France doesn’t have much coal capacity,” said Roland Vetter, the head of research at CF Partners in London . “If you add a burden to only these stations, the impact on French power prices is going to be limited. Much less than the previous 30-euro tax proposal, or if it was for both coal and gas plants.”

French power for 2018 dropped as low 31.30 euros a megawatt hour, before trading at 32 euros at 12:09 p.m. in Paris, the broker data show. EDF shares fell 1.3 percent after declining 0.3 percent Monday.

Negative Impact

“The carbon floor on a fully fledged basis would have supported power prices,” Vetter said. “Now it is diluted and EDF is very power-price sensitive. What came out yesterday is a negative and the shares reacted accordingly.”

France has five coal units with a capacity of about 3 gigawatts, according to grid operator RTE. They provided about 1.6 percent of the nation’s total production last year. One gigawatt is enough to power 2 million European homes.

Royal on Monday endorsed recommendations of a report led by Engie SA Chairman Gerard Mestrallet. The report also called for a EU-wide carbon floor price of 20 euros to 30 euros per ton from 2020 that would rise by 5 percent to 10 percent per year to boost investment in clean technologies and reduce greenhouse gas emissions blamed for climate change.

Benchmark EU carbon futures have fallen 44 percent this year to 4.65 euros a metric ton on ICE Futures Europe in London.

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