Government should resist the urge to scrap the carbon price support (CPS) mechanism and instead reform and retain it until the mooted 2025 coal phase-out, according to Policy Exchange.
The think tank suggests that approach could save £12.5bn out to 2030 in a new report.
While the CPS has largely failed to incentivise low carbon generation, says the report, it has priced coal off the system, reducing the UK’s power system emissions.
Once coal is phased out, the CPS should be scrapped so that European and UK carbon prices are aligned. This would both reduce the wholesale price of power and the need for electricity imports, the report argues.
A decision on the future of the CPS is expected to be contained within the Autumn Statement on Wednesday. Owners and operators of coal-fired power plant would be glad to see it scrapped.
See the Policy Exchange report here.