Carbon permit funds may go to poor

By Jim Pickard and Ed Crooks
Published: August 23 2008 02:06

Energy companies would have to pay up to £1bn for carbon permits to pay for help for vulnerable customers this winter under a plan proposed by Gordon Brown’s fuel poverty tsar on Friday night.
Derek Lickorish, newly appointed head of the Fuel Poverty Advisory Group, told Channel 4 News that the government could use the money raised through the sale of permits in the European Union’s emissions trading scheme to help the poor in the coming winter.

He said: “That could raise this winter somewhere between, say, half a billion and a billion pounds. That would be a substantial sum in order to deal with the issue for this winter.”
The cash should be spent on “customers who are vulnerable or in receipt of certain benefits who will have difficulty in paying their energy bill this winter”.
The auction process for the second phase of the EU’s emissions trading scheme, which runs until 2012, has already begun, with up to €2.4bn ($3.6bn, £1.9bn) likely to be raised over the period.
More of the permits will be bought in the first two years of the scheme and Mr Lickorish on Friday night seemed to suggest this front-loading could raise a one-off sum to tackle fuel poverty.
The government is also considering making electricity generator companies buy 10 per cent of the permits rather than the current 7 per cent.
Ministers were looking at a payment to 7m families receiving child benefit as part of the economic recovery package, it emerged earlier this month. They are looking at up to £150 per family, a sum that would leave the taxpayer with a £1bn bill.
Raising the cash to fund that from the auction of emissions permits would avoid some of the problems potentially associated with a windfall tax, such as the risk that North Sea oil and gas production would be hit. It would affect all generators, not just the energy retailers, and would bear most heavily on those with the highest carbon dioxide emissions.
The latest round of energy price rises has revived calls for stronger measures to help vulnerable customers.
Scottish & Southern Energy and Eon this week became the latest energy suppliers to raise bills – by averages of 25 and 22 per cent respectively.
EDF Energy and Centrica, owner of British Gas, have raised the cost of fuel after rises in wholesale gas and electricity prices.
Energywatch, the consumer watchdog, estimated that more than 5m people would be pushed into fuel poverty, defined as spending more than 10 per cent of their disposable income on energy bills.
Copyright The Financial Times Limited 2008