BUDGET REPORT: OSBOURNE INTRODUCES ‘CARBON FLOOR PRICE’
(Published 24 March 2011)
The Budget 2011 has seen the Government take significant steps towards encouraging low carbon investment in the UK, by becoming the first country to introduce a ‘carbon price floor’.
Put simply the ‘carbon price floor’ is an additional cost that is put on carbon emissions in the production of electricity and is designed to stabilise the price of carbon to allow other climate change policy to work efficiently.
Starting at £16 per tonne of carbon in 2013, the price will gradually increase to a target of £30 in 2020. Likely to lead to an increase in gas and electric costs for homeowners, the move further enhances the need to maximise the energy efficiency of existing heating systems.
Effectively a tax on carbon production, the ‘carbon price floor’ has generally been well received by economic forecasters and green experts, but it remains to be seen whether it does lead to a significant investment increase in the low carbon sector.
Dr Jeff Chapman, chief executive of the Carbon Capture and Storage Association (CCSA), said in response to the Budget:
"The carbon floor price mechanism presents an excellent opportunity to raise finance to support a new generation of low carbon fossil fuel electricity generation, using carbon capture and storage (CCS). This revenue from the fossil fuel industry can provide the investment funding to support the transition to a low carbon economy using CCS.”
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