11 Mar 2011 09:03:03

Carbon floor price proposals 'will not build investor confidence'

Current proposals surrounding the carbon floor price are not likely to instil confidence in investors, a new report suggests.

The study by Climate Change Capital (CCC) advises that the carbon floor price be included within a contractual obligation, rather than be implemented through the tax system as current proposals recommend.

Under the system, a Carbon Price Support Guarantee (CPSG) would be signed which would see the Treasury underwriting the value of the carbon floor price.

Rupert Edwards, head of policy and market analysis at CCC, said investors are unsure about the current system "because it is a tax-based mechanism subject to annual votes in parliament", which financial backers would need to lead to an increase in carbon price support until 2030.

"This CPSG would increase certainty, reduce the incentive for investors to 'wait and see' and lower costs for investors and the economy," he added.

The publication of the report follows the release of research from npower, which found 57 percent of businesses have serious concerns about the effect the carbon floor price could have on their energy bills.