Go-it-alone UK Carbon Price Floor could harm industry and consumers

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The Government’s decision to set a unilateral Carbon Price Floor could have a ‘devastating effect’ on UK industry and will artificially raise electricity prices for consumers, while having no overall impact on emissions – MPs on the Energy and Climate Change Select Committee have warned.

Tim Yeo MP, Chairman of the Committee, said:

“The Chancellor was right to say we won’t save the planet by putting the UK out of business.

“Ironically, however, it is the Treasury’s decision to set a Carbon Price Floor that could result in industry and electricity production relocating to other EU countries.

“Unless the price of carbon is increased at an EU-wide level, taking action on our own will have no overall effect on emissions other than to out-source them.

“A revenue-raising exercise disguised as a green policy won’t help anybody— the price of carbon has to be increased at an EU level to kick start investment in clean-energy.”

Energy generators and heavy industry could be subject to an ‘exorbitant’ top-up tax of up to £25 per tonne of CO₂ under current plans, because the price of carbon in the rest of the EU is so low. Electricity prices will increase as the price floor keeps the cost of carbon higher than in other countries, effectively subsidising other Member States at the expense of the UK consumer. This will cut emissions in the UK, but may not reduce them overall – as electricity production and industries may simply relocate to other Member States resulting in ‘carbon leakage’.