Ahead of Chancellor Philip Hammond’s Autumn Budget next month, a number of organisations involved in the energy sector have called on the Government to strengthen a carbon tax that has driven a dramatic collapse in coal power generation, saying that it is essential for the shift to cleaner energy.
SSE, the second largest energy supplier in the UK, three other energy businesses and an environmental group have written to the Chancellor warning him that they need clarity on his approach to taxing carbon emissions if they are to invest in a new generation of gas-fired power stations.
The letter said that a “robust and strong carbon price” was the best way to meet government goals to combat climate change without further regulation and with fewer state subsidies.
Last year the Government said that the level of the carbon price floor, which is the minimum price for greenhouse gases emitted by power generators, would be frozen until 2020, but this disappointed those who had expected to see long-term plans.
At the moment, the industry only knows the carbon price to April 2021 but the letter says it needs to understand the trajectory of the price into the 2020s, particularly as, without it, generators have less clarity as they seek to deliver a new generation of efficient gas plants in the next Capacity Market Auction in February 2018.
The letter comes after a recent report warned that, without a commitment to a strong carbon price, coal could enjoy a ‘last hurrah’ in the early 2020s. However, energy intensive industries who pay the tax, such as the chemicals sector, would like to see the tax abolished or watered down.
