EU reforms on CO2 emissions set to see electricity costs rise

THE cost of electricity will increase under proposals for a huge reform of the EU’s CO2 emissions trading scheme, due to be announced today.

While the Government currently hands out free polluting permits to companies generating electricity, in the future EU member states would have to auction these.

Ireland has been one of the few EU countries that sold off some of its allocation of CO2 permits, but this amounted to less than 2% of the total and raised just enough money to pay to administer the Kyoto Protocol scheme.

Under the country’s present scheme, the amount to be auctioned will increase up until 2012 but under the new EU plan, a fifth of a country’s allocation will have to be sold in 2013 and this will gradually increase to 100% by 2020.

Other industries to be affected by this will be Aughinish Alumina — the largest bauxite processing plant in Europe and a major user of power, cement manufacturers and chemical plants, which under the EU proposals must reduce their emissions by 21%.

The money raised from the auctions will go to each member state and 20% of it must be used towards new technology to reduce harmful emissions.

Another part of the package of proposals being unveiled today will deal with the use of renewable energy and countries will be allowed to give state aid subject to rules to companies.

The cost of implementing the raft of new rules to help in the fight against climate change is estimated at an average of 0.6% of GDP.

Finance Minister Brian Cowan said that the package and the drive to reduce harmful emissions would be a challenge but also an opportunity to create new jobs.

“We need to have a policy that does not put at risk the existence of the planet.

“The Government is already committed to a 20% reduction by 2020 on the 2005 figures,” he said.

The proposals will be debated and negotiated over the next two years between the member states and the European Parliament before the final results will be finalised.