CCC says carbon floor price may need to be considered – 9 March 2009

Calls for a “floor price” on carbon allowances received influential backing yesterday when Lord Turner, Chairman of the CCC suggested this issue may need to be reviewed, particularly given recent developments in the carbon market. The price of carbon credits under the EU emission trading scheme (ETS) has collapsed from €31 last summer to about €8 last month, prompting calls for a ” floor price” to be imposed that would provide firms with greater confidence that investments in low carbon infrastructure will deliver long term returns.

Speaking at a hearing of the Energy and Climate Change Select Committee, Lord Adair Turner told MPs that the EU should give serious consideration to the proposal, arguing that if the price of EU allowances (EUAs) remain at their current level it will remove the incentive for firms to invest in low carbon technologies:

“We have concerns [that] if the carbon price continued at its present level it would not send the signals which are required [to investors],” he said. “I’d think, given the fall in the carbon price this year, that’s something that should be considered. It would, of course, need to be considered at European level.”

David Kennedy, the CCC’s Chief Executive confirmed that the committee will not be revising greenhouse gas emissions targets set as a result of the credit crunch but said that the CCC would be keeping a close eye on the financing available for renewable energy projects to ensure that the recession does not have a negative impact on investment in building a low-carbon economy.

Watch Lord Turner and David Kennedy’s evidence on Parliament TV