More on that minimum carbon price: it just won\’t work

At least, I can\’t see how it could possibly work.

The permits for CO2 emissions are an EU thing, the EUTS.

OK, fine.

But that means we\’re not allowed to distinguish between English and French carbon, Polish and Latvian. Which is something of a problem if one country unilaterally decides to try and have a minimum price for carbon.

So, the UK says carbon is £15 a tonne and not a penny less. But the other countries allow the market to do its thing and decide the price. Say, € 9.

So anyone in the UK needing a permit can go and buy it at €9. They don\’t need to pay £15. Similarly, anyone elsewhere with a permit to sell would like to sell it in the UK at £15 rather than the € 9 they can get for it elsewhere.

And no, we\’re not allowed to stop anyone doing this, free trade within the EU remember?

So how can this possibly work? No one will ever buy UK permits unless the price is over £15….which makes the floor irrelevant anyway. And no one will ever buy a UK permit if the market price is below £15.

Unless, unless, the UK government steps in and acts as a market maker with a minimum guaranteed price of £15. Which would be truly insane as every permit in Europe would immediately be sold to the UK government as soon as the market price was below £15.

Is there anyone out there who can explain to me how this is going to work? Please?

7 thoughts on “More on that minimum carbon price: it just won\’t work”

  1. It may not haver been designed to work, it just formed in what passes for a mind in Osborne’s head, but working. Never even thought about that, “Doh, Eccles, what is working? Ahh Bluebottle, I dunno, whats that?”

  2. Easy. The permit doesn’t have to cost a minimum price, you can employ a top up tax to make the cost of emissions rise to the level you want.

    There are other problems with this, of course.

    Tim adds: And now that I’ve been sent the document explaining it, this is exactly what they’re doing.

  3. Okay, as someone who trades carbon I think I can explain (although only as well as the Treasury, so not very). The government has calculated its minimum price for CO2 at £16 (in 2009 pounds, so adjust for inflation).

    The floor is implemented by a modification of the current Fossil Fuel Levy which means coal and gas will have an extra levy based on their CO2 emissions per unit of electricity and the expected average price of CO2 over the year.

    The Treasury haven’t actually given many more details about the scheme which probably means they haven’t actually thought about how it’ll work in practice. Which is badly, obviously.

  4. My thoughts are that this is not at all joined up. You levy extra taxes on the North Sea fields, which will help the Saudis and wreck a valuable UK industry. You push in this carbon floor which encourages the coal-burners tom shut down and encourages EDF (a French company) to keep producing nuclear power in clapped-out reactors while not renewing the infrastructure.

    The question is, when is the first brown-out in the UK? Does anyone remember 1973? It was not much fun – fecking cold winter as I recall, un heated classrooms, no light to read by….And then the feckin train drivers went on strike…which is why I can never pass a train-driver without wanting to kill him . Forty years of stoked-up hatred of people who drive trains.

  5. My grandfather drove a train. He disagreed with the union on principle over a proposed strike and they sent him to Coventry. All of his mates were on the trains too, so his social life collapsed. Lots of whispered “sorry mate, I can’t risk me job, nippers to feed and all that.” The union had so much control over positions and postings that they could enforce any arbitrary shit they wanted to. It drove him to drink.

    So if you qualify your statement by appending “unionist” to your train driver opinion, I’m fine with that. Otherwise be careful who you express that opinion in front of or you might end up spitting teeth instead.

  6. 15 quid per tonne? I’ve said it before on these pages, lets say it again –

    “It will take a carbon price of more than 1000 GBP per tonne to make big changes in our consumption of fossil fuels.”

  7. The Pedant-General

    @JB,

    It will indeed take a carbon price of >GBP1000 to make a difference to consumption OF FOSSIL FUELS, but it sure a sh*t only needs to be GBP16 to cause massive disruption in absolutely everything else as people divert resources that they would have used on everything else to pay for the higher priced energy.

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