Keep carbon tax, say green and nuclear energy chiefs

The levy, announced in the 2011 Budget, came into effect last year and sets a minimum price for each tonne of carbon dioxide emitted. It is due to rise steeply each year, punishing polluting coal plants and theoretically encouraging new green plants to be built.

The Chancellor is said to be considering a freeze at 2015-16 levels, at which stage analysis by CF Partners suggests it will account for £23 on a typical household energy bill, up from £6 currently. Without a freeze it would rise to £43 per household, it calculates.

EDF is understood to have privately urged the Chancellor to ensure that, if there must be a freeze, it lasts no more than two years, is inflation-linked and then resumes toward the planned 2020 levels.

Critics such as E.On argue that the freeze has not achieved its aims of encouraging investment, as wind farm and nuclear developers are being offered separate subsidy contracts, and is a "stealth poll tax" that on consumer bills that hands a windfall to existing wind and nuclear owners such as EDF.

EDF owns 80pc of Britain's existing nuclear fleet and stands to profit from a rising carbon price because it will push up the market price for power.

But Mr de Rivaz insists the policy is working because it is "tipping the balance away from coal to lower carbon gas" and it is "encouraging spending on new low carbon power generation like wind, biomass and nuclear".

He suggests that the Government should look elsewhere if it wants to bear down on costs on energy bills.

"Householders are under pressure.... and more can be done [to help them]. But of all the environmental measures, the Carbon Floor Price, among a wider set of policies, is the most cost effective way to cut emissions."

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