Carbon tax must be scrapped before it makes energy from Germany cheaper than home supplies, say City analysts
Brainchild: Chris Huhne
The carbon tax should be scrapped before it makes energy imported from Germany cheaper than domestic supplies, according to City analysts.
The City believes the green measure – championed by former Liberal Democrat energy minister Chris Huhne – is the easiest target for the Government to axe as it attempts to reduce household energy bills.
The tax on coal and gas was introduced earlier this year and is designed to provide power operators with an incentive to invest in low carbon dioxide generation.
It adds an average of £5 to annual household bills, but this is expected to rise sharply in the future.
The levy is a uniquely British invention slapped on bills in addition to the cost of the European Union’s emissions trading scheme, which licenses energy companies producing carbon emissions.
City bank Macquarie said the longer terms effects of the carbon tax would be to push up the price of British power compared with that in Germany, for instance.
Macquarie said: ‘The carbon price support mechanism has hardly affected the UK power market at present, but will increasingly affect market behaviour by 2020.
‘We see a £15 to £20 per megawatt hour difference between power prices with and without this floor – which is about 10 per cent of the retail bill.’
The bank described the tax as ‘counterproductive from an environmental, economic and taxation point of view and therefore unsustainable’.
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