Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Carbon tax could add 10% to energy bills, report says

The UK’s tax on carbon could add 10% to energy bills, analysts at investment bank Macquarie believe.

Energy Live News reported that an equities research report by the bank suggests that from an “environmental, economic and taxation point of view” it is “counterproductive” and “therefore unsustainable”.

The carbon price support is effectively a tax levied by the Treasury on fossil fuels. Announced in the 2011 Budget, the price floor kicked in from 1 April 2013 and it puts a price on the emissions of large firms’ energy use. The bank report suggests the mechanism has “hardly affected” the UK power market at present but this could change in the next six years.

It states: “The carbon price support mechanism… will increasingly affect market behaviour by 2020. We see a £15-20/MWh difference between power prices with and without this floor – which is c.10% of the retail bill.” Future power links with the rest of Europe could make UK-based fossil fuel more expensive, argues the report, suggesting firms will buy cheaper, possibly more carbon-heavy energy from the continent thus making the carbon tax ineffective.”

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