David Prosser: Carbon prices are going the wrong way
Outlook: The sooner the carbon price rises very significantly the better
Tuesday 09 February 2010
The Confederation of British Industry says it is not convinced that a minimum price for carbon in the European Union Emissions Trading System would necessarily encourage greater investment in low carbon energy. Perhaps it needs to talk to more of its members from within the energy industry, which insists that the low price of carbon is one of the biggest issues it faces as it ponders whether to invest in low carbon electricity generation facilities.
Right now, the carbon price is heading in the wrong direction. The House of Commons Environmental Audit Committee said yesterday that £88 per tonne was the lowest price necessary for investment in green technologies to become economic. In the EU scheme, the price for the right to emit one tonne of carbon dioxide is currently £13, having fallen back from closer to £20 since the middle of last year.
There have been two reasons for this decline. First, the free emissions allowances for the scheme were set prior to the recession: in a slowdown, emissions fall, so there has been less demand for additional allowances than was anticipated. And second, with the failure in Copenhagen to secure an international agreement on emission reductions, one crutch for the carbon price – that fewer free allowances might soon be available – was kicked away.
One of the few positive effects of the global recession has been lower-than-expected emissions. But the gain from that benefit will be more than wiped out by higher future emissions if the result is that the low carbon price makes it impossible for private-sector organisations to justify committing themselves to investing the huge sums necessary to build renewable energy plants with scale, or nuclear facilities.
The theory of the ETS is sound. By making it expensive to emit carbon, those that are able to afford to cut back will do so. Moreover, there is, for the first time, a will on a global scale to make these schemes work, with countries such as the US and Australia considering their own versions.
In practice, however, European Union governments, including our own, have not yet created the conditions in which the free market of the ETS will really encourage a shift to low carbon technologies.
As the CBI points out, there are schemes to encourage greater investment in some greener initiatives – certain renewables and clean coal, say – already in existence. But this is no substitute for a carbon market with prices that take much more of the uncertainty out of the decisions being made now by large companies about their investments over the next two decades. The sooner the carbon price rises very significantly – probably to more than the EAC suggests as a bare minimum – the better, and that will require direct intervention.
- 1 Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
- 2 Expert urges cat lovers to own just one animal each
- 3 Sainsbury's '50p challenge' poster telling staff to encourage customers to spend more placed in shop window instead of staff room
- 4 Yes, the iPhone 6 is a miracle, but it's Apple's tax affairs that deserve a double take
- 5 Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Sainsbury's '50p challenge' poster telling staff to encourage customers to spend more placed in shop window instead of staff room
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
The Osborne Ultimatum: Chancellor’s benefits freeze bombshell will affect ten million households
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Should gay sex be illegal? 16% of Britons think so
Mark Reckless becomes second Tory MP to defect to Ukip in a month
- < Previous
- Next >
iJobs Money & Business
£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...