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ARTICLE · 22 MARCH 2013

The Big Carbon Stick

MacRoberts
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The UK government's low-carbon strategy is a carrot and stick approach: the carrot being subsidies for renewable and other low-carbon generation, the stick being taxes on high-carbon generation.

United KingdomEnergy and Natural Resources
Michael Murphy
Michael Murphy
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If you didn't pick this up in the news, you will in your electricity bills.

The UK government's low-carbon strategy is a carrot and stick approach: the carrot being subsidies for renewable and other low-carbon generation, the stick being taxes on high-carbon generation. With effect from 1 April 2013, a big carbon stick is being introduced that will affect all consumers: the Carbon Price Floor.

Although it sounds counter-intuitive, the Government needs to support high carbon prices in order to encourage investment in low-carbon technology. The price of electricity from fossil-fuel generation dictates the market price for all electricity, because of its scale and its flexibility in turning off and on to meet fluctuations in demand. High fossil-fuel generation costs support a high market price, and a high (and certain) market price supports investment in renewable generation.

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