Carbon Price Floor - Commons Library Standard Note

Published 08 February 2013 | Standard notes SN05927

Authors: Elena Ares

Topic: Climate change, Coal, Energy, Environmental protection, Nuclear power, Oil, petrol and natural gas, Renewable energy, Taxation

Fluctuations in the price of carbon in the form of EU ETS allowances have resulted in uncertainty for investors in low carbon technologies. This has contributed to a lower level of investment in these technologies, below what is required to meet UK carbon reduction and renewable targets.

To address this Coalition Government committed to introduce a floor price carbon and published a consultation on carbon price support in December 2010. Following this it announced in the March 2011 Budget that it would be introducing price support via the Climate Change Levy and fuel duty with a target price of £30 per tonne of carbon dioxide in 2020. The floor price will start at about £16 per tonne. At the time of the announcement the trading price was around £15 per tonne, but by January 2013 it had fallen to under £4.

Detailed proposals for the carbon price floor where published by HMRC in December 2012 as part of the draft Finance Bill 2013.

Background on the Climate Change Levy is available in Library Standard Note SN/BT/235

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