Dr Paul Golby, chief executive of E.ON UK, has called for a cap to be put on the cost of carbon permits, and for the transport sector to be included in phase II of the EU emissions trading scheme.
Speaking at the Defra Business and Climate Conference in London, Dr 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.
Evidence from phase I of the EU scheme, where high gas prices have driven up CO2 costs, illustrates that we need to ensure that sufficient economic safety valves are in place. We must maximize 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. Mr Golby said.
Mr Golby added that all emitting sectors needed to be included in the trading scheme, particularly the transport and aviation sectors, and that a regulatory framework for the future development of carbon saving programs was lacking in the UK.
The E.ON UK boss suggested that the current climate would inspire the industry to develop cleaner technologies, however the current lack of regulatory progress would prevent the practical application of such developments.
In conclusion Mr Golby cautioned: Emissions trading can only operate successfully within a framework of sustainable CO2 reduction policies at national and international level.