In parliament: The carbon price floor - a bungle too far?

7th April 2014

Related Topics

Related tags

  • Management ,
  • Retail and wholesale ,
  • Manufacturing ,
  • Carbon Trading ,
  • Energy


Gregory Middleton

Alan Whitehead MP criticises the changes to carbon price floor announced in the 2014 budget

There are two instruments in the UK to price carbon – the EU emissions trading scheme (ETS) and the carbon price floor (CPF). I’m a strong supporter of the ETS, but less keen on the CPF. Nonetheless, if the CPF exists it should be related properly to the European carbon price.

In my column last July, I drew attention to the astonishing rises in the indicative future levels of CPF set out by the chancellor in his 2013 budget. In his latest budget (p.5), the chancellor decided to remove some of the proposed rises in the CPF.

The CPF now looks, as it did in 2013, like a ham-fisted piece of financial opportunism in the wake of the troubles of the ETS. Indeed, the reality of the CPF has been the exact opposite of its stated aim of encouraging “further investment in low-carbon generation by providing greater support and certainty to the carbon price”.

Personally, I’m not crying buckets over the freeze in the CPF at £18 a tonne of CO2 to 2019/20. What I think is worrying, however, is the way that the chancellor’s indecision on the price will destabilise investment in energy infrastructure.

Renewable energy projects have been built based on the assumption that the price of carbon will rise on a trajectory that no longer exists. Even investment in new gas-power plants is based on higher coal prices as a result of the carbon price.

New energy investment – particularly in low-carbon technologies – requires reasonably stable conditions over the long-term. The terms of investment do not necessarily have to be great – it just needs to be foreseeable and reliable.

The chancellor’s short-term games with the CPF will further destabilise the investment environment. And that is what will count, long term, for the low-carbon investment policy that the price support mechanism was originally intended to support.

Transform articles

IEMA reacts to UK government's Net Zero Strategy

IEMA has raised concerns around a lack of funding for proposals outlined in the UK government's Net Zero Strategy, which was published earlier this week.

21st October 2021

Read more

Demand for fossil fuels will peak by 2025 if all national net-zero pledges are implemented in full and on time, the International Energy Agency (IEA) has forecast.

15th October 2021

Read more

Climate change remains one of the top issues most concerning the UK public, despite the economic turmoil experienced over the last 18 months, a poll commissioned by IEMA has found.

15th October 2021

Read more

Almost one-third of Europe's largest companies have now set net-zero emissions targets, but far less are set to deliver on their ambitions.

7th October 2021

Read more

A group of world-leading climate scientists has today warned that carbon pricing is currently too low to deliver a just transition to a net-zero economy, and that "urgent reforms" are needed.

30th September 2021

Read more

The Royal Botanic Gardens (RBG) in Kew has today unveiled a new strategy to tackle biodiversity loss and develop sustainable nature-based solutions to some of humanity’s biggest global challenges.

28th September 2021

Read more

How to Save Our Planet is call to action that aims to equip everyone with the knowledge needed to make change. We need to deal with climate change, environmental destruction and global poverty, and ensure everyone’s security.

23rd September 2021

Read more

Hannah Lesbirel and Beccy Wilson speak to IEMA members about climate anxiety

23rd September 2021

Read more

Seven of the UK's 17 key industry sectors are still increasing their emissions year-on-year, and most will miss their 2050 net-zero targets without significant government action, new research suggests.

23rd September 2021

Read more

Media enquires

Looking for an expert to speak at an event or comment on an item in the news?

Find an expert