Carbon price floor of £16 per ton by 2013

Paul Boughton
The UK Chancellor announced a carbon price floor of £16 per ton by 1st April 2013, stepping up to £30 by 2020, which will be gladly received by the energy companies funding new nuclear, according to energy experts at KPMG. 

Andy Cox, energy partner at KPMG, commented: “The private sector which is being asked to fully fund billions of investment to get new nuclear built and set the UK firmly on the road to low carbon energy generation will be pleased with today’s announcement. However, the delivery of these massive projects requires certainty and the industry will want to have a clear understanding of how the step up to £30 per ton by 2020 is made when committing major capital investment. Moreover, any substantive changes required by the safety review could well destabilise the precarious balance.

“Beyond nuclear, the carbon price floor also has an impact on other forms of energy generation.This announcement certainly feels weighted towards building new nuclear and will put upward pressure on prices. In coal, for example, our analysis shows that at a carbon price floor above £25, coal starts to look difficult. Of course the knock on impact of this policy change on investment into other technologies - such as offshore wind – remains unclear and will be better understood once the conclusions of the wider energy market reform are announced later this year.

KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff.  The UK firm recorded a turnover of £1.6 billion in the year ended September 2010. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 150 countries and have more than 138,000 professionals working in member firms around the world.

For more information, visit www.kpmg.co.uk/budget

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