Dáil Éireann Debate, Tuesday - 13 October 2009
9 Deputy Joe McHugh asked the Minister for Communications, Energy and Natural Resources his plans to address the issue of windfall profits being made by electricity generators on the back of charging consumers for the cost of carbon; and if he will make a statement on the matter. [35596/09]
Amharc ar fhreagraThe current EU Emissions Trading Scheme (ETS), which runs until the end of 2012, requires a free allocation of carbon credits to electricity generators. The North/South Single Electricity Market Committee, which is statutorily responsible for the operation of the all-island electricity market on the island of Ireland, decided that from 2008 all electricity generators must include the full opportunity cost of their carbon allocations when bidding into the Single Electricity Market.
The enterprise community in particular is concerned that this increases the wholesale cost of electricity and gives rise to windfall gains being earned by electricity generators. The cost impact of carbon and the related windfall gains for generators fluctuates with the price of carbon which is currently at approximately €13 a tonne. The Government decided last July to work to progress the introduction of legislation to recover carbon windfall gains from electricity generators up to 2012.
My Department, in consultation with the Department of Finance, is currently examining the complex issues inherent in designing a legislative scheme, which could recover carbon windfall gains from electricity generators. There are many considerations to take into account and a variety of potential implications inherent in any particular approach to the carbon windfall issue. The potential impact on the rules and operation of the all-island Single Electricity Market, which straddles the two jurisdictions, North and South, must also be taken into account. I will be reverting to the Government with the outcome of our analysis as soon as possible. In this context the House should recall that ESB contributed over €300m this year to reduce electricity prices for all consumers, of which ESB's carbon benefits accounted for a significant portion.
For the future and in the context of the European Union's ambitious plans for carbon emissions and cap and trade after 2012, my personal view is that the allocation of carbon credits, which is the basis for trading, should be done by auction rather than free allocation. I strongly favour a scenario post 2012 in which all carbon permits should be bought on the open market and producers can compete on the basis of carbon costs. This will eliminate any windfall gains for electricity producers and promote competition between generators as to who can produce electricity using the least carbon. In my view this is an essential development, which will be good for the environment and good for the consumer.
