Turner adds voice to calls for a 'floor price' on carbon permits

Chairman of the UK's Committee on Climate Change adds an influential voice to calls for a minimum price for carbon pollution permits

A minimum price for carbon pollution permits should be considered to stop current low trading prices scaring off investment in cutting emissions, the government's top climate change adviser urged today .

The steep drop in the price of carbon under the European Emissions Trading Scheme (ETS) - from about €30 (£26.75) a tonne last summer to €8 (£7.13) last month - has recently prompted calls for a "floor" price.

Today, Lord Turner, the chairman of the Committee on Climate Change, added an influential voice to calls for the move to be considered, though the committee said more evidence was needed to be sure if current low prices would continue. The recent prices compare poorly to an projected price of £40 per tonne of carbon dioxide in a report by Turner's committee last year, which led to the UK committing to cut greenhouse gas emissions by 80% by 2050.

"We have concerns [that] if the carbon price continued at its present level it would not send the signals which are required [to investors]," Turner told MPs on the energy and climate change select committee. "I'd think, given the fall in the carbon price this year, that's something that should be considered. It would, of course, need to be considered at European level."

In January the European commission appeared to rule out intervening to prop up the falling price of carbon, and Ed Miliband, the UK climate change secretary, told the Financial Times he was "not convinced that a floor is particularly necessary".

Carbon trading is a key mechanism by which countries will seek to reduce emissions in a global climate deal to be negotiated in Copenhagen in December.

Concerns about a price floor in the ETS include the threat to EU businesses competing against rivals outside the trading scheme, and that it would make it more difficult to link the European system to other markets around the world, something high on the agenda for the Copenhagen talks.

A planned-for reduction in the allocation of carbon credits under the next phase of the European scheme, reducing by 1.7% each year from 2013 to 2020, would push up the price of carbon and so mean a floor was "not needed", said Endre Tvinnereim, a senior analyst for Point Carbon, independent experts in energy and carbon markets.

However Richard Gledhill, head of carbon market services for PriceWaterhouseCoopers, said there was growing interest in the issue: "Given where carbon prices are, and the scale of the challenge, I think we should look at this very seriously."

Today, the ETS price recovered to nearly €12 during morning trading.

Source: The Guardian