London, 14 December 2009 

Research shows that carbon prices are encouraging European power companies to build cleaner power stations:  According to a recent survey of European power companies by New Energy Finance, the European Emissions Trading Scheme is starting to change the way they make investment decisions, shifting resources towards cleaner generating technologies. 

Five years after the start of the EU ETS, carbon prices are being fully integrated into investment decisions in the European power sector. All power generators contacted in the survey factor a carbon price into their investment decisions, with most running several future price scenarios.

85% of European power companies only consider a future with a positive carbon price. For these companies, a “zero carbon price” scenario simply does not feature in their investment decisions. The 15% of firms that said they did run a zero carbon price scenario were based in Eastern Europe, and their responses more reflected a lack of familiarity with EU institutions and policy making than the EU ETS itself.

Although the carbon price (current and projected) is not sufficient in isolation to justify an immediate wholesale shift to lower CO2 emitting technologies – fuel prices, power prices and direct government support for renewable are also important – the carbon price is making power companies alter their investment focus to include more lower carbon technologies, such as combined-cycle gas turbines and high efficiency coal, in their future plant mix.

Guy Turner, director of carbon market research at New Energy Finance, said: “We have known for some time that the EU ETS is having a real effect on operational decisions in European power companies, but this is the first time we have been able to show how it is affecting capital investment decisions.

"The answer is clearly that European power generators see that the EU ETS is here to stay and that it is starting to affect how they make multi-billion euro investments in new generation capacity. By 2020 the European generating fleet will be materially cleaner than it is today.”

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