Dáil Éireann Debate, Tuesday - 24 July 2018
2021. Deputy Eamon Ryan asked the Minister for Communications, Climate Action and Environment his plans for the introduction of a carbon floor price for electric sales similar to the one introduced in the United Kingdom; and if so, the price at which he plans to set same. [32415/18]
View answerI understand the Deputy is referring to the carbon price floor introduced by the United Kingdom (UK) in 2013 as a measure to support the EU Emissions Trading System (ETS). As implemented in the UK, the carbon price floor taxes fossil fuels used to generate electricity via carbon price support rates set under the UK Climate Change Levy. The rate of tax effectively tops up the EU ETS allowance prices, as projected by the Government, to the carbon floor price target.
The UK carbon price floor is currently set at a rate of £18 per tonne of CO2 emitted until 2021. The carbon price floor does not apply in Northern Ireland.
As in the UK, greenhouse gas emissions from power generation in Ireland are regulated through the EU ETS. Recently agreed reforms to the EU ETS for the 2021 to 2030 period will provide for a reduction in EU-wide ETS sector emissions to 43% below 2005 levels by 2030, as a contribution to the overall EU commitment to reduce emissions by at least 40% below 1990 levels by 2030. These reforms will result in significant changes to the operation of the ETS, some of which will begin to take effect from next year. These include changes to the market stability reserve to address the prevailing surplus of allowances within the ETS, and improvements in the resilience of the ETS to major price shocks by provisions for periodic adjustments to the supply of allowances to be auctioned. These reforms are already having an impact on the price of ETS allowances, with market prices currently in the region of €16 per tonne, up from just under €8 per tonne in January 2018, with some forecasts pointing to a price of €35 per tonne by 2030.
Given the upward movement in ETS allowance prices, the policy rationale to consider the introduction of a carbon price floor in Ireland has now diminished. It is also important to exercise caution in implementing additional measures at a national level that will have an effect on the price of ETS allowances for the power generation sector in Ireland. The desirability of a stable emissions price signal for the power generation sector needs to be balanced with the potential competitiveness impacts on the wider Irish economy from resultant rising electricity prices. Such adverse competitiveness effects would be more significant in light of the higher-than-average wholesale electricity prices, and limited interconnection, that exist in Ireland. In the context of the Single Electricity Market, the absence of a carbon price floor applying to power generation in Northern Ireland, and the need to plan for the potential impacts of Brexit, are additional considerations that I must take into account.
In terms of the desired outcome from the introduction of a carbon price floor in Ireland, I would also draw the Deputy’s attention to the commitments in the National Development Plan to transition the Moneypoint plant away from coal by the middle of the next decade and for the progressive reduction in the use of peat in power generation between now and 2030.
In light of the above considerations, therefore, I currently have no plans to introduce a carbon price floor for the ETS in Ireland.
