October 22, 2017 / 11:30 PM / 2 years ago

Four UK power firms call for carbon price floor extension

LONDON (Reuters) - Four British energy companies have urged the government to extend Britain’s carbon floor price to be extended into the 2020s, putting them at odds with industrial groups who want it scrapped.

UK power generators pay the floor on top of their obligations under EU’s Emissions Trading System, which forces companies to surrender one carbon permit for every tonne of carbon dioxide (CO2) they emit.

The UK floor price is set at 18 pounds ($24) per tonne until 2021. The EU carbon price is around 7 euros ($8) a tonne. British power companies pay the difference between the EU price and the UK price, currently almost 12 pounds per tonne.

Drax (DRX.L), SSE (SSE.L), VPI Immingham and InterGen wrote to the British Chancellor Philip Hammond on Monday, asking for more clarity on what will happen to the tax after 2021 in his Autumn budget statement on Nov. 22.

They asked for the same before the Autumn budget last year.

“At the moment the industry only has sight of the carbon price to April 2021,” the companies said in the letter.

“This is welcome but we now need to understand the trajectory of the UK’s carbon price into the 2020s, particularly as without it generators have less clarity as they seek to deliver a new generation of efficient gas plants in the next capacity market auction in February 2018,” they added.

Most British power companies support the carbon price floor, which they say encourages them to invest in low-carbon power generation. But industrial groups have called for abolishing it, saying it has made electricity prices in Britain uncompetitive.

Other countries such as France and the Netherlands are looking at replicating Britain in having a carbon price.

Reporting by Nina Chestney

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