Isra-Mart srl: Energy giants warn efficiency gain could undermine carbon price

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Five of Europe's leading energy companies have this week warned that the EU's planned Energy Efficiency Directive could inadvertently destabilise the bloc's emissions trading scheme (ETS), undercutting the price of carbon and weakening the investment case for low-carbon projects.

The group, which includes Scottish and Southern Energy (SSE), Dong Energy, Dutch firm Eneco, Italian utility Sorgenia and Greek energy giant Public Power Corporation, issued a statement yesterday calling on the European Commission to act now to ensure its soon to be published Energy Efficiency Directive does not have a dampening effect on the price of carbon.

"We are deeply concerned that energy savings resulting from the implementation of the measures proposed in the Energy Efficiency Directive will have the unintended consequence of causing the collapse of, or tremendous decline in, the carbon price, thereby undermining the central market-based driving force behind the transition to a prosperous, low-carbon European economy," the group states.

It adds that the Commission should set aside carbon allowances during the next phase of the EU ETS, in line with the emissions reductions it expects to deliver through its various efficiency measures. It would then be able to release the additional allowances for sale if the efficiency directive fails to deliver promised savings, ensuring a relatively stable carbon price.

"We entirely support energy efficiency measures," a spokesman for SSE told BusinessGreen. "But we fear the carbon price will go down if we consume less energy due to efficiency gains. This poses a risk for investors in low-carbon projects."

The Energy Efficiency Directive is currently in the draft stage and still has to pass through the European Parliament and Council of member states. However, it is expected to include a wide range of measures designed to enhance energy efficiency across the bloc, including new standards for electrical devices and initiatives to accelerate the development of greener buildings.

The statement came as the UK employers' body, the CBI, called on the government to ensure energy-intensive firms are offered exemptions from the carbon floor price the British government is planning to impose.

CBI director general John Cridland warned that without some form of compensation, energy intensive companies would be forced to leave the UK to escape the higher energy bills that will result from the carbon floor price.

Energy minister Charles Hendry promised that the government would bring forward proposals later this year to ensure that energy intensive firms are protected from rising energy prices at the same time as being encouraged to enhance their energy efficiency.