Carbon traders reject EDF Energy’s price floor calls

In a speech last week at the EDF Energy nuclear supply chain forum, de Rivaz identified the need to address carbon price volatility before the company can move forward with its plans to build four new EPR nuclear plants in the UK by 2025. He called for “mechanisms that provide a robust carbon price with a realistic floor, which would be paid for by fossil fuel generators who continue to emit carbon dioxide”.

De Rivaz said the price cap would not be a subsidy for nuclear or any other technology, but a cost payable by carbon emitters. “It is no longer about should we build new nuclear plants in the UK, or even when. It is now about how but we will not press ahead regardless,” he said.

However Patrick Birley, chief executive at European Climate Exchange (ECX), says that any fixing of prices in the carbon market is inappropriate. “The market is designed so that the regulatory government sets the supply level and the market defines the price; that’s cap and trade and any false floor or ceiling on the price would be unhelpful in the long term,” he says.

Louis Redshaw, head of environmental markets at Barclays Capital, says a price floor would be disruptive. “In this context I think it is difficult to justify a price floor on carbon if you are not also calling for a floor on gas or electricity prices,” he says. “The danger of providing a floor price is that the government is attempting to pick a winner and that disrupts the functioning of markets to the ultimate cost of all consumers.”

Redshaw says the most important point is emissions reduction targets rather than price floors. “If the concern is that the price will be too low for nuclear and the view is that nuclear is required to meet the targets, then the price won’t be too low,” Redshaw explains. “If the view is nuclear may not be needed for the targets, EDF would probably be better off arguing for a tighter target than for a price floor.”