UK climate pledge faces stiff test amid carbon tax drive

UK Prime Minister Theresa May’s commitment to tackling climate change faces a stiff test as energy companies launch a lobbying drive ahead of the Autumn Statement to protect a contentious carbon tax blamed for hurting the steel industry and other power-hungry businesses.

In a letter seen by the FT, a group of energy companies including SSE and Drax, owner of the UK’s biggest power stations, have urged Philip Hammond, the chancellor, to maintain the three-year-old carbon price floor until at least 2025.

The previous chancellor, George Osborne, said in March the levy, expected to raise about £1bn this year, would stay until the end of the decade with its subsequent fate set out in the Autumn Statement, due on November 23.

The companies say pricing carbon emissions is “central to the UK’s efforts to decarbonise its electricity system”. By weakening the investment case for coal, the dirtiest fossil fuel, the price floor had helped deliver significant, cost-effective cuts in carbon pollution, they add.

Some of the companies lobbying Mr Hammond, such as Drax, still burn coal but they all use either gas or renewables as well, which the carbon price floor is supposed to bolster.

The measure is supposed to work as a top-up tax to buttress the EU’s 11-year-oldemissions trading system, which requires many companies to buy permits to emit carbon.

Permit prices slumped so much after the 2008-09 financial crisis that critics said the scheme would never drive enough green investment. In 2013, the UK became the first EU country to introduce a carbon price floor, now set at £18 a tonne — more than four times the value of an EU carbon permit today.

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