Isra-Mart srl: New French carbon tax to cost EDF €35m, sources say

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France's recently introduced one-off carbon tax, which will be payable from the start of 2012, may cost incumbent electricity generator EDF around €35m, according to sources close to the utility.

The tax, which applies to generators that have received emissions allowances covering more than 60,000 tonnes of CO2 in phase II of the EU emissions trading system, may force companies such as EDF to sell more allowances on the market to fund their ramped-up state contributions, according to Barclays Capital carbon market director Trevor Sikorski.

The resulting increase in supply could then place added bearish pressure on a system that has been over-supplied for some time.

According to ICIS Heren data, the carbon spot OTC EUA has fallen by more than 30% over the past year to its closing value on Tuesday of €10.20/tonne of CO2 equivalent.

The current economic climate means demand levels are expected to remain low for the foreseeable future.

Sikorski likened France's new policy to an income tax, adding: "It just feels like they [the French government] could have levied it on anything."

The tax will be levied at a rate of between 0.08% and 0.12% of a company's total pre-tax turnover.

The French government may use the tax revenue to buy additional EUAs needed to replenish its dwindling new entrants reserve.

EDF declined to comment on the matter, but did confirm that the company "will apply the letter of the law on the matter"