24 June 2004 | David Arminas
Purchasers face double-digit energy price hikes when the carbon emissions trading scheme comes starts on 1 January, according to a new report from consultancy Ernst & Young.
It concluded that gas prices could rise more than 20 per cent and electricity prices by over 15 per cent.
Coal-fired generators, one of the main producers of carbon dioxide, will have to invest heavily in scrubbers and filters to reduce their emissions, but will pass this cost on to buyers of electricity.
To offset this cost, governments will issue tradeable credits to generators and other energy- intensive users such as steel mills and chemical makers that reduce their carbon emissions.
Ian Dobson, chairman of the CIPS energy committee, told SM: "If generators spend money on equipment or buy cleaner burning coal, the price of their electricity will cost more.
"To offset the equipment costs, they can sell their carbon credits to companies that haven't cleaned up their emissions, so there is an element of balance."
Dobson urged openness in the carbon credit selling market so that generators revealed what the net balance was, and didn't raise electricity prices to cover the cost of equipment without taking into consideration what they received from selling credits.
The survey of more than 200 large energy generators and users also showed that 40 per cent did not believe the scheme would start on time.Feature: Tipping the balance of power