Within all the myriad of speculation of what will be in the Budget later today, I hear that government might use compliance with the revised Energy Taxation Directive, which is due to enter into force from 2013, as an excuse for introducing the Carbon Price Floor tax on the generation of electricity in the same year.
Surely the Chancellor can't use this as justification of introducing a unilateral UK carbon tax as they are mutually exclusive.
The Energy Taxation Directive proposes an EU wide minimum tax of €20 per tonne of CO2 on direct emissions, levied at the end user. But crucially emissions covered under the EU Emissions Trading Scheme are excluded from this tax. Yet it is these emissions that are targeted by the proposed Carbon Price Floor. The Treasury proposed to levy this tax upstream on the electricity generators on the fuels they use to generate electricity. These emissions are also caught by the EU Emissions Trading Scheme and therefore excluded from the Energy Taxation Directive.