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Power firms see bonanza in emissions windfall
Power companies in Britain could see their profits boosted by up to £850m under the European Union Emissions Trading Scheme, a consultancy firm said yesterday.
The windfall is likely to occur because of firms factoring in the cost of carbon dioxide emissions into the wholesale electricity price, even though in many cases the emissions will cost them nothing at all, according to IPA Energy Consulting.
The group, which carried out a study of the Emissions Trading Scheme for the Government, said as a result of the higher electricity price, energy firms could see their profits soar by up to 850m between 2008 and 2012 when the next phase of the scheme kicks in.
Under the scheme companies are given permits allowing them to produce a certain level of carbon emissions each year, with governments setting a limit on the total level of emissions that can be emitted by heavy industry and the power sector.
Companies are given the permits by the Government free of charge. However, if they don't need to use all of their allowance they can sell on the remainder of it to other firms. Carbon emissions are traded like a commodity and currently sell for some 16 euros (11) a tonne, after the price crashed from about 30 euros (21) a tonnes last week.
The cost of the emissions is factored into the wholesale electricity price regardless of whether or not companies are breaching their emissions levels.
In some cases firms are making money from selling off their surplus allocations.
A director at IPA Energy Consulting, Peter Bedson, said the main winners of the system would be gas and nuclear companies as those produced the lowest levels of carbon emissions, leaving the companies free to sell-off their excess limits to firms using high carbon fuels such as coal.
Environmental groups have criticised the scheme saying it does not do enough to reduce carbon emissions. They would like to see the permits auctioned, rather than being given away as a free asset by the Government.
Conservative environment spokesman Peter Ainsworth said: "The problem will not be sorted out until the market is made to work properly by forcing firms to bid for their permits instead of being allowed to lobby Government for them free of charge."
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Saturday 11 February 2012
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