European Union plans to make energy companies buy their emission permits at auctions from 2013 would delay investments in the power sector and put networks at risk, Czech power utility ČEZ said on Tuesday.
CEZ sales chief Alan Svoboda told the Reuters Central Europe Investment Summit that the new CO2 rules would lead to a jump in wholesale power prices to help utilities cover higher costs. “We argue that this policy might be counterproductive,” he said. “It will require much higher power prices before companies are ready to invest and therefore also the investment will be delayed holding risks that the system will be fragile at times.” Europe’s emissions trading scheme, the EU’s cornerstone in fighting climate change, puts a cap on carbon emissions by industry and power generators by imposing on them a fixed quota of permits.
Companies at present get most of their permits free but the European Commission announced plans in January to force them to buy all of them at auctions from 2013, which would raise revenues for governments and increase utilities’ costs. European utilities are at present making billions of euros annually in extra profits directly as a result of the carbon trading scheme, by passing on to electricity consumers the costs of emissions permits they get for free.
Governments in eastern Europe, worried about a backlash and already crippling fuel and food inflation, have joined forces to oppose the Brussels plan and protect companies and voters whose incomes are still well below those in the West. EU leaders are hoping to reach a deal on the new climate policy, including the auctions of pollution permits, at a summit in December.
Energy prices in former communist countries in central and eastern Europe, where CEZ is one of the leading power suppliers, were subsidized and kept artificially low for decades. Svoboda said capping end-user prices was against EU rules and would also lead to investment delays in the region, hitting smaller energy companies in particular. “This coupled with the very difficult access to cash at the moment... (will lead to) a significant delay of new projects announced,” he said. “Pretty much none of the smaller companies can risk taking such investments. Only the very big players will invest.” Central and Eastern Europe, which relies mainly on coal and nuclear for its power, needs billions of euros to replace ageing Soviet-era plants, upgrade grids and build new generators. (Reuters)