Coal power to be priced out of UK market?

According to an Argus Media report, the UK government announced in its March 21, 2013 budget that it will set the carbon price support rate for the 2015-16 financial year at £18.08/t CO2, up from an indicative price of £12.06/t CO2 given in last year's budget.

The tax is designed to top up the price of carbon emissions incrementally to £30/t by 2020. But prices of carbon emissions allowances on the EU emissions trading scheme (ETS) have dropped substantially since the tax was announced in 2011, falling to record lows in recent months on an oversupplied market. The December 2013 allowance was trading at around €18.80/t CO2 equivalent (CO2e) at the time of the March 2011 budget, when the 2013-14 tax rate was set at £4.94/t. But the 2013 allowance closed at just €3.52/MWh yesterday, with the 2015 allowance closing at €3.84/t CO2e.

The sharp rise in the carbon tax is fuelling increasingly vocal objections from some sectors. Some fear it will provide a windfall for wind and nuclear generators, others note the increasing gap between carbon costs for industry in the UK and other European countries that pay only the EU ETS. The treasury told Argus recently that it remained committed to the tax.

The Treasury said that the government will continue to provide support to energy intensive industries in 2015-16 to compensate for the indirect cost of the tax, further details of which will be announced at the next spending round.

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