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France to finalise carbon floor price mechanism plan next week
October 7, 2016 / 2:31 PM / a year ago

France to finalise carbon floor price mechanism plan next week

PARIS, Oct 7 (Reuters) - France’s plan to introduce a carbon floor price mechanism will involve either charging coal-fired power plants a flat rate for emissions or imposing a flat tax on power facilities, according to an official document seen by Reuters.

The plan, which will be finalised by next week, will target only coal power plants initially.

France said in April it will unilaterally set a carbon floor price for electricity producers, a move aimed at curbing coal-fired power generation and boosting renewables in the absence of a concerted European effort to strengthen carbon pricing.

The proposals outlined in the document, signed by the French economy, finance, environment and budget ministers in September, will be finalised and submitted next week for inclusion in a revised 2016 budget bill to be adopted by November. They could come into effect in January.

The first option would remove tax breaks on carbon used in power production, and charge the power producer a flat rate for its carbon dioxide (CO2) emissions.

The rate would take into account the cost of the European Trading System (ETS) carbon allowances, whose prices have tumbled to around 5 euros per tonne from 30 euros a decade ago due to a glut of permits.

The proposal suggests that at the current ETS allowance price of around 5 euros, the price floor imposed would be at least 30 euros per tonne of CO2.

Such a move however, could entail legal risks vis-a-vis French and European Union laws, the ministers said in the document.

There are five coal-fired plants still in operation in France with a total installed capacity of 2.9 gigawatts owned by state-controlled utility EDF and Uniper, a German energy generation and energy trading company.

The other option would be to impose a flat tax on power production facilities based on their level of carbon dioxide emissions, although the document did not provide details.

The government will also look at compensation measures that could be put in place so as not to put French consumers at a disadvantage.

The plan will target only coal power plants initially to avoid broader disruptions to the power system.

“Evaluations during the last months have shown the risks associated with a unilateral implementation of a carbon floor price on the entire electricity production chain, notably in terms of security of supply and job losses,” the document, signed by the French economy, finance, environment and budget ministers in September, said.

Industry experts came up with the latest proposals after an advisory committee created by Environment Minister Segolene Royal recommended in July that France increase taxation on coal power plants, or set stiffer carbon emissions standards on power producers. ($1 = 0.8977 euros) (Reporting by Bate Felix; Editing by Susan Fenton)

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