The unpopular carbon floor price is expected to be frozen from 2016 by the Treasury in a bid to keep prices down.
According to The Mail on Sunday the Government are planning to stop the rise of Green Tax, which adds £5 to the cost of emitting a tonne of carbon dioxide , rising to £18 in 2015/16.
Energy minister Michael Fallon was due to meet coal producers today who were lobbying for the freeze.
Phil Garner, director general of Coalpro, argued the measure was expensive and ineffective.
“It penalises the use of cheap coal by doubling the taxation’ of coal year on year,” he said. “This is driving the early closure of existing coal-fired power stations, putting UK energy security at risk and driving up energy bills without encouraging investment in low-carbon technology or impacting global emission levels.”
Utility bosses, major energy users, consumer watchdogs and environmental groups are critical of the floor price, saying that it increases the price for customers but fails to create an incentive for low carbon investment. It’s an unreliable basis for investment as it’s more easily reversed than a subsidy contract.
The levy also acts as a surcharge on the European carbon price which means that UK industry pays more for pollution than it’s rivals on the Continent, meaning its’ put at a competitive disadvantage but not necessarily saving carbon.
The Treasury said: “Establishing a minimum carbon price sends an early and credible signal to help drive billions of pounds of investment in low-carbon electricity generation.
“However, ensuring UK industry remains globally competitive is a priority and government acknowledges that rising energy costs is a key issue for many businesses. This is particularly true given the lower-than-expected European carbon price.”