The head of one of the UK's big six calls for measures to be in place to limit carbon prices and promote both clean coal and new nuclear generation

Dr Paul Golby, chief executive of E.ON UK, has called for a cap to be put on the cost of carbon to act as a buffer in the face of an unexpected event.

Speaking at a conference in London, Golby called for ‘safety valves’ to be put in place to ensure that external factors did not adversely affect the trading scheme by driving prices to levels where government might be forced to intervene to protect the economy. Such an intervention might come about if an unexpected event such as a drought or extremely high temperatures caused carbon free generation such as hydro or nuclear to stop producing. That could then force up the price of carbon permits across Europe and so put European industry at a disadvantage on the world stage.

According to Golby, evidence from Phase I of the EU Emissions trading scheme (EU ETS), where high gas prices have driven up CO2 costs, illustrates the need to ensure that sufficient economic safety valves are in place.

“We must maximise the opportunity to generate CO2 permits through investments outside the traded sector since this provides a market response to high CO2 costs. In addition, it may be necessary to impose a cash out price or long-term cap on CO2 cost, thereby imposing a clear ceiling to the economic costs,” Golby said.

In a reference to nuclear and clean coal generation Golby also called for more rapid progress in the development of a regulatory framework that makes investment in nuclear power or carbon capture and sequestration a commercial option.

“In simple terms, will the EU Emissions Trading Scheme lead to the deployment of low carbon technology? I would say yes but not without international agreement being reached on new CO2 targets post 2012,” he concluded.