HM Treasury has defended its plans for a carbon floor price saying it will establish the ‘polluter pays principle’ for emissions from fossil fuel power generation in a cost-effective way for business.
In its post-consultation response, issued on 30 March, it says the tax on fossil fuel in power generation will complement feed-in tariff options in the electricity market reform package.1
The plans were unveiled in December last year (ENDS Report 431, p 5?). Industry submissions to the consultation claimed the carbon floor price, through the carbon price support mechanism, would increase greenhouse gas emission reduction efforts in the UK. However, it would also free up EU allowances for use elsewhere in the EU emissions trading scheme (EU ETS).