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Cashing in the carbon

Posted by Richard Saturday, April 23, 2011


A couple of days ago, we wrote about Teesside Power Station owned by International Power, which was being partially mothballed, reducing capacity from 1,875 megawatt (MW) to a mere 45MW from 1 April. But the idea of this company closing down the bulk of its operation, in order then to purchase nuclear energy from France seemed to us to be more than a little bizarre.

Needless to say, we should have guessed that there was another agenda at work. As with the Corus steel works milking the system, it seems that International Power is one of the companies which will be sharing a bonanza of £100m in free carbon allowances, that it will not need to use because of its plant closedown, as its CO2 emission will drop dramatically.

Amongst other beneficiaries are Centrica, and Scottish & Southern Energy. Despite ceasing to produce electricity from some of their plants, the energy companies still receive the carbon credits which they can trade on international markets – giving substantial windfalls.

Centrica has put four plants – Barry, Brigg, Peterborough and Kings Lynn – into "preservation mode", which means they are not producing but ready to be switched on. Scottish and Southern Energy stopped generating at its Fife plant on 31 March.

DECC confirms that an installation which permanently closes retains the full allocation for the year in which it closed down. For temporary and partial closure the installation carries on as normal. There are no adjustments to its allocation. Ready customers for these credits might be the airline industry, with Lufthansa just about to start trading in CO2 permits, as the EU emissions trading scheme starts to apply to commercial flying.

Soon enough, we will be seeing fare hikes to pay for this absurdity, but customers will doubtless be comforted by the thought that they are increasing the profits of firms such as International Power, which has put 100 men on the dole to gain its extra credits. Clearly, the benefits of the EU just keep multiplying. Why on earth would we ever want to leave?

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