E.ON calls for carbon tax if back-loading fails
The European Emissions Trading System (ETS) should be scrapped and replaced by a carbon tax scheme akin to the one planned in the UK if the bloc's politicians cannot agree on measures to "fix" it, German energy giant E.ON's CEO Johannes Teyssen said on Wednesday.
The so-called fixing requires member states to agree on the Commission's proposal to back-load 900m EU allowances (EUAs) in phase III in a bid to slash the ETS oversupply and boost the price.
Teyssen said during a speech, given at an industry meeting in Berlin, that he had already called on European politicians to "fix" the ETS years ago but that they had failed to do so to date.
"We need a fundamental reform of the ETS," Teyssen said. "If that won't come then we should introduce a tax." A possible model for such a tax could follow the UK example, where the tax is the difference between the target price and the real price of emission certificates, Teyssen said.
"If volume control doesn't work then we need a price control," Teyssen said.
Only a carbon price close to €30/tonne CO2 equivalent (tCO2e) would make gas-fired power plants profitable, according to the CEO. On Tuesday, the EUA benchmark contract closed at €5.40/tCO2e, only a fraction of the price foreseen by Teyssen. He added that some of E.ON's high efficient hard-coal plants are currently profitable.
To the critical voices, in particular from the energy intensive industry, Teyssen responded that compensation should be considered to avoid companies moving abroad.
Meanwhile, Environment Minister Peter Altmaier said that the price drop of EUAs below €5.00/tCO2e had been alarming to him. The spot contract dipped to €4.85/tCO2e on 21 January on the back of disappointing auction results.
Altmaier said that if the price had gone through the roof he would equally have pressed for an intervention.
The environment minister stressed that Germany needs to find a common position on the back-loading proposal this spring.
The country's economy and environment ministers aim to solve their current disagreement about Germany's position towards the potential back-loading, which analysts have identified as the biggest risk to passing the proposal if it is not resolved soon. MD
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