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The Price We All Pay For The Emissions Trading Scheme


By Paul Homewood

More on the Emissions Trading Scheme, or ETS:

A typical CCGT plant would emit about 374 kg of carbon dioxide per MWh, assuming 53% efficiency. With ETS allowances currently priced at £84/tonne of CO2, that adds a cost of £31.42/MWh.

Wholesale power prices, which are effectively based on CCGT generation, are about £140/MWh at the moment, so that ETS element accounts for nearly a quarter of the market price.

As this cost surcharge is reflected in the price of all electricity sold on the market regardless of source, except for CfD generators which account for about 20 TWh a year, it means that energy users are paying about £10 billion a year extra as a direct result of government policy.

As I have noted previously, carbon prices rocketed from around £15/tonne three years ago. This was deliberately engineered by the UK government, in tandem with the EU, by restricting the number of free allowances handed out.

To make matters worse, the ETS is operated under the auspices of the four governments, that is the UK, Scottish, Welsh and N Ireland Governments. Therefore any changes, such as flooding the market with new permits to bring prices down, would need the consent of all four.

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