UK emitters to face high price despite carbon tax freeze

Bloomberg New Energy Finance has published its latest industry analysis. The key finding indicates the total cost of carbon paid by UK utilities through to 2018 will be in excess of the initial Carbon Price Floor. This is irrespective of the freeze on the carbon price support rate.

The publication shows the price could be in excess of the CPF by as much as £6.10 per tonne in 2016-2017. UK power companies would have to pay £35.05 for each tonne during this period. It had originally been estimated the cost would be £17.05 per tonne.

Jonas Rooze, lead European power analyst at BNEF said:

"The UK is not abandoning its Carbon Price Floor policy. The cap will stop the all-in UK carbon price from exceeding the price floor trajectory by as much as it otherwise would. But carbon costs may still overshoot that line, and UK utilities will still pay more than the government planned when it set the trajectory in 2011."

BNEF continued to explain that higher prices are as a result of two year forward pricing does not accurately capture the additional cost in light of the EU’s decision to “backload” carbon permits. The future for the CPR projections for 2020 is now under review.