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Government is set to freeze the carbon floor price from 2016 in a bid to keep prices down and appease heavy emitters, according to the Mail on Sunday.
“Whitehall sources” told the Mail the Treasury was preparing to halt the rise of the green tax. It adds £5 to the cost of emitting a tonne of carbon dioxide, rising to £18 in 2015/16.
Coal producers were due to lobby for the freeze in a meeting with energy minister Michael Fallon today.
Phil Garner, director general of Coalpro, argued the measure was expensive and ineffective.
“It penalises the use of cheap coal by doubling the taxation’ of coal year on year,” he said. “This is driving the early closure of existing coal-fired power stations, putting UK energy security at risk and driving up energy bills without encouraging investment in low-carbon technology or impacting global emission levels.”
The Treasury has previously resisted calls to scrap the tax, which is expected to haul in £2 billion in 2015/16.
Critics including major energy users, utility bosses, consumer watchdogs and even environmental groups, say the floor price pushes up prices for customers while failing to incentivise low carbon investment. Its status as a tax means it is more easily reversed than a subsidy contract, making it an unreliable basis for investment.
What’s more, the levy acts as a surcharge on the European carbon price, which is chronically depressed. That means UK industry pays more for pollution than its rivals on the Continent, putting it at a competitive disadvantage without necessarily saving carbon overall.
The Treasury said: “Establishing a minimum carbon price sends an early and credible signal to help drive billions of pounds of investment in low-carbon electricity generation.
“However, ensuring UK industry remains globally competitive is a priority and government acknowledges that rising energy costs is a key issue for many businesses. This is particularly true given the lower-than-expected European carbon price.”
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