Major energy companies have been given free carbon allowances worth more than £100m this year for closed or mothballed power stations – despite the fact that the plants are producing little or no emissions.
Centrica, GDF Suez/International Power and Scottish & Southern Energy are among the UK companies to have reduced or switched off capacity at older plants.
And despite ceasing to produce electricity, the energy companies still receive the carbon credits which they can trade on international markets – giving substantial windfalls.
All the named companies announced temporary or permanent shut-downs in recent weeks – just after this year’s carbon allowances were handed out by February 28.
Centrica has put four plants – Barry, Brigg, Peterborough and Kings Lynn – into “preservation mode”, which means they are not producing but ready to be switched on.
Meanwhile, GDF Suez has reduced output at its Teesside plant to almost nothing – with the station expected to produce just 45 megawatts out of its 1875 megawatt capacity.
Scottish and Southern Energy stopped generating at its Fife plant on March 31.
A spokesman for the Department of Energy and Climate Change said: “If an installation permanently closes then it will retain the full allocation for the year in which it closed down.
“It will receive no further allowances for future years of the European Union emissions trading scheme. For temporary and partial closure the installation carries on as normal.
“There are no adjustments to its allocation. It will be the decision of the regulator to decide if a closure is temporary or partial. However, installations can appeal a regulator decision.”
A spokesman for the Environment Agency said if there is operating activity during the year, companies are entitled to retain their allocation of free allowances. “The rules do not allow us to take allocations away,” he said.
It is understood that officials at the Department of Energy and Climate Change are not happy about the situation and are trying to work out a way for them to be reclaimed.
Centrica declined to comment, while Scottish & Southern and International Power confirmed they had received its allowances for their non-producing stations.
A source close to one of the companies said: “We don’t yet know the answer to [whether we’ll be able to keep allowances]. The arbiter of this decision will be the European Union emissions trading group at the Environment Agency and we have been told that they will issue guidance on this later in the year.”
It is not the first time that partial closure of plants has caused controversy in relation to unused carbon credits.
Last year, Ian Swales, now the Lib Dem MP for Redcar, called for clarification over what would happen to the 7m carbon allowances awarded for the year to Corus, before the plant was mothballed .
A Corus spokesman at the time insisted: “Any allegation that Corus has been motivated by the desire to profit from the mothballing via the emissions trading scheme is totally without foundation and insults the efforts of all those who have spent the past eight months desperately searching for a long-term viable future for the plant.”