UK government introduces carbon floor price

23 March 2011

The UK has become the first country in the world to introduce a carbon price floor for the power generation sector. Chancellor George Osborne announced in his budget speech today that the government will introduce a floor price for carbon from 1 April 2013, aimed at "driving investment in the low-carbon power sector." He said that the price floor will start at around £16 ($26) per tonne of carbon dioxide and follow a linear path to £30 ($49) per tonne in 2020. Osborne said that the government intends to introduce relief for carbon capture and storage and combined heat and power (CHP), and remove an existing exemption in the climate change levy for electricity CHP plants supply indirectly to an energy consumer. The carbon floor is expected to generate revenues of £740 million ($1.2 billion) in 2013-14, £1.07 billion ($1.74 billion) in 2014-15, and £1.41 billion ($2.29 billion) in 2015-16. Vincent de Rivaz, CEO of EDF Energy, commented: "It is important that the UK maintains momentum for investment in secure, low-carbon and affordable energy including nuclear, renewables and carbon capture and storage." He added, "Investment in low carbon energy will provide a massive boost to the UK economy, creating billions of pounds of business opportunities and thousands of jobs." De Rivaz noted, "For nuclear, helping to restore the carbon price to what was originally intended is important to encourage investment in existing plants and in new build."

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