Uniper slams potential German carbon price floor policy

Source: Heren

2019/05/03

LONDON (ICIS)--A carbon price floor in Germany would be “neither helpful in terms of climate nor energy policy”, utility Uniper told ICIS on Thursday.

A spokeswoman for the company said that nation-specific measures would undermine the European emissions trading system (ETS) and have a limited positive effect on climate protection.

The utility added that should complementary instruments be necessary from a policy perspective in European countries, they would need to be agreed at an EU level.

A spokeswoman from RWE also said that a carbon price would not aid the energy sectors as pricing is already effectively carried out via the ETS.

“A minimum carbon price should therefore only be introduced in the other sectors. This would keep sector coupling and thus the use of increasingly low-carbon electricity more competitive,” the RWE spokeswoman said.

The EU’s ETS is a market-based mechanism that forces generators to purchase allowances to emit carbon. The price of these allowances has more than tripled over the past fifteen months, making more polluting forms of electricity generation significantly more expensive.

Gas-fired generation is expected to play an increasingly important role in the German power mix over the coming years due to its lower carbon emissions.

A debate surrounding a carbon price floor has intensified in recent weeks with German chancellor Angela Merkel stating that the policy is in discussion and a decision would likely take place after the upcoming European elections at the end of May.

Renewables support price floor

In contrast, renewables associations have welcomed the spotlight given to a potential domestic carbon floor as a means of incentivising carbon reduction in all sectors.

“This carbon price has to increase steadily by design. If so, it offers the potential to incentivise investment decisions into futuristic green technologies, such as wind energy, storage solutions and power-to-gas facilities,” Wolfram Axthelm, CEO at BWE, a large wind power group, told ICIS.

He added that the association did not call for a specific price as this should be decided by the ruling coalition in Germany.

The BSW, a pro-solar group, welcomed recent political discussions regarding a potential carbon price system saying the country will miss both its 2020 and 2030 climate targets if a price floor is not introduced.

Price impact

The introduction of a carbon price floor would be significantly bullish for German power. The country’s generation mix in 2018 was comprised of around 40% hard coal and lignite-fired generation, two emission-intensive fuel sources.

In addition, carbon prices are expected to rise consistently up until 2026, according to ICIS analyst modelling.

Whether a domestic carbon policy mechanism will be introduced in Germany and what form it might take remains uncertain, with clarity on the debate expected over the next few months.