LONDON (Reuters) - European Commission proposals to be published on Wednesday will force power generators to pay for carbon-emissions permits and could chop profits at companies which burn coal to produce electricity, analysts said on Monday. That in turn could re-open a debate about how Europe can safeguard its future energy supplies, especially as Germany plans to phase out nuclear power.
LONDON (Reuters) - European Commission proposals to be published on Wednesday will force power generators to pay for carbon-emissions permits and could chop profits at companies which burn coal to produce electricity, analysts said on Monday.
That in turn could re-open a debate about how Europe can safeguard its future energy supplies, especially as Germany plans to phase out nuclear power.
"For PPC (Public Power Corp) in Greece and Drax in Britain you could see a more than 50 percent cut in earnings," UBS analyst Per Lekander said.
Germany risks power supply shortages if it does not build more power stations and rethink its nuclear exit plan, the chief executive of German utility company EnBW, Hans-Peter Villis, said on Monday.
!ADVERTISEMENT!Villis pointed to coal fired power plant projects which had been cancelled as a result of expected tough emissions rules.
The European Union's carbon trading scheme limits emissions of the planet-warming gas carbon dioxide by giving heavy industry a fixed number of permits. It is the 27-nation bloc's main weapon against global warming.
Until now companies have received at least 90 percent of their emissions permits for free but Brussels will propose on Wednesday a drastic reversal whereby power generators will have to pay for them all.
The European Commission will propose to phase in 100 percent auctioning for utilities some time between 2013 and 2020, and "rather sooner than later," a European Commission source told Reuters on Monday, adding an exact date had not yet been agreed.
The proposal aims to make cleaner sources of power -- like nuclear, renewables and gas -- more competitive against dirtier fuels like coal and wipe out windfall profits that some of Europe's biggest polluters have made by charging electricity consumers for permits they got for free.
"A move towards full auctioning makes sense," said Michael Grubb, chief economist at Britain's Carbon Trust, referring to the power sector.
Power plants can pass on most of the cost of permits to consumers, which should dampen the impact of the tougher carbon scheme on company profits.
"The answer is rather complicated, the impact depends very much on the mix of fuels in generation," said Cambridge University economist Terry Barker. Coal would be hurt most if gas plants set the power price, he added.
