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Floor price for the EU emissions trading scheme ‘risks being seen a new carbon tax’

Published: 19th September 2012

Article from Energy in Buildings & Industry Magazine – July/August 2012

Introducing a floor price for the EU emissions trading scheme (EU:ETS) risks being seen as a carbon tax, according to the head of climate change policy in the European Union.  As a new tax, it would require endorsement by every government before it could be enacted across Europe.  Instead allowances may need to continue to be given away, rather than auctioned.

This stark warning has come from Jos Delbeke, director-general for climate change – and the original promoter of the European Commission’s ill-fated $10 per barrel carbon tax 20 years ago.

The floor price option, set to be introduced unilaterally in the UK next April, would also be deemed a “direct price intervention”.  The European Commission is keen to avoid such a move.

Instead, Delbeke prefers the concept of setting a specific longer-term (2030) emissions reduction target, so as to provide greater market certainty.

He has also set up a review listing possible structural changes to the trading scheme.  This may well begin with a decision to delay the auctioning of some allowances for energy intensive industry from 2013 until the latter part of the decade.  Such a major change would not, he argued, require formal endorsement from Ministers, but solely via a specialist committee.

Continuing to give away allowances would greatly affect the income anticipated by national governments, which would otherwise have occurred from auction sales due to begin next January,  It has been estimated that the UK government is due to receive around £4bn each year for the next 15 years from EU;ETS auction receipts, and from carbon floor price taxation, Delbeke’s new plan would place such resources in considerable jeopardy.

 

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