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A Conservative government would penalise electricity production from fossil fuels to stimulate investment in renewable and nuclear power, under plans set out today by David Cameron. Speaking at the launch of the party’s energy policy proposals, Mr Cameron called for the introduction of a carbon tax on electricity generated from coal and gas-fired power stations.

He said that the changes would be made through reforms to the Climate Change Levy (CCL), a tax on electricity production that is imposed at present on all forms of electricity production, excluding renewables such as wind and solar power.

The reforms would effectively place a floor under the price of carbon on the European Emissions Trading Scheme (ETS).

At about €13 a tonne, this is considered too low to support the estimated £200 billion of investment in alternative energy required for the UK to meet its goal of cutting carbon emissions by 34 per cent by 2020.

“A credible and sustainable price for carbon is vital if we are to see adequate and timely investment in new electricity generation,” the party said in the report, dubbed Rebuilding Security, which is expected to form the basis of Conservative legislation on energy if the party is elected.

“Whatever the carbon content of electricity generated, operators considering new investments in plant with a life of several decades need to know where they stand.

“This is especially true for investments such as renewables and new nuclear power stations where the bulk of the lifetime costs are sunk in advance of generting any electricity at all.”

The levy would be put in place for 25 years and would be set at a gradually rising rate determined by the Treasury.

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